JIT - Just-In-Time
Updated: Aug 30
Procurement is one of the most essential strategic responsibilities of a company. Because companies have to make purchases to produce goods and services that will meet customer needs. Procurement constitutes a large part of the monetary expenditures of many firms. For example, approximately 60% of the costs in industrial enterprises are materials. After all, there are responsibilities carried by the departments that carry out purchasing activities, which are so important.
These responsibilities are brief;
Determination and evaluation of the goods and service resources that the company needs
Ensuring good business relations with these resources on quality, delivery, payment, and replacement
Research and evaluation of new materials, products, and potential resources
Purchasing the material required for the company at the best price by the quality requirements
Establishing and maintaining effective communication between departments within the company, with suppliers and potential suppliers outside the company
Informing the top management about the cost of company acquisitions, changes that will affect the company's profit and market share
Cost reduction programs, value analysis, “buy or produce” studies, and market research
Just-in-time purchasing philosophy; It is defined as the receipt of high-quality products from a small number of vendors in small quantities and exactly when needed to achieve the goals of “zero stock” and “zero defect.” In this context, it is necessary to thoroughly review the buyer-seller relations and regulate them in line with new principles.
Just-in-time purchasing philosophy; It identifies inventories as the most crucial waste item, as they both cause high costs and hide the sources of inadequacy. For this reason, it has been adopted as a continuous goal to reduce stocks within the framework of just-in-time purchasing.
Reducing stocks in a production inventory system can only be achieved by eliminating the reasons for stock holding.
Holding stocks means tying money and capital to reserves. For this reason, companies want to allocate as little capital as possible by keeping less stock. So they try to use the money and funds elsewhere. However, it is also necessary for the company to have sufficient stock in order not to disrupt its production and marketing functions. Therefore, a balance should be established in stock management.
Factors affecting stocks in Businesses;
A. Factors affecting raw material stock
B. Factors affecting the stock of semi-finished products
C. Factors affecting product stock
A. Factors affecting raw material stock;
1. The amount of raw material planned to be produced. The stock will also increase as the planned quantity of finished goods increases.
2. The seasonality of raw material supply. In some seasons, the stock of raw materials will increase.
3. Minimum stock quantity. The need to keep production to avoid being interrupted in future periods due to lack of raw materials.
4. Large purchases sometimes allow companies to save significant amounts of money. For example, large purchases provide significant discounts or savings on transportation costs.
5. Expectations about raw material prices. The probability of a price decrease causes less raw material stock, and the likelihood of a price increase causes more raw material stock.
6. Efficiency in internal purchasing and stock control affects the raw material stock positively or negatively.
7. Raw material durability time
8. Cost of holding stock
9. The breadth and cost of financial opportunities
10. Storage capacity of the enterprise
B. Factors affecting the stock of semi-finished products;
1. The technical nature of the manufacturing process and the length of its duration. The longer the manufacturing process, the higher the stock of semi-finished products.
2. Added values created during manufacturing. As the added value created grows, the stock of semi-finished products increases.
3. Continuity of production activity. Disruption of the continuity of production activity increases the stock of semi-finished products.
4. Production quantity. As the amount of production increases, the stock of semi-finished products also increases.
C. Factors affecting product stock;
1. Sales volume: It is directly proportional in the long run. It is about organizing production according to sales in the short run.
2. Seasonality of demand: Stocks increase when demand is stagnant and decrease when demand is lively.
3. Seasonality of raw material purchase: Production must increase significantly during the raw material purchase season. This increases the stock of finished goods.
4. Competition conditions in the market: Intense competition increases the amount of product stock.
5. Number and dispersion of sales regions: As sales regions increase, product stock increases.
6. Production to order or for the market: In make-to-order production, there is little need for a stock of finished goods. Businesses producing for the market need finished goods stock.
7. The product's physical characteristics and the risk of keeping stock: Risks such as deterioration, fashion, and price drop create a tendency to keep less stock.
8. Production variety: As production variety increases, product stocks also increase.
9. The cost of keeping stock and the firm's financing possibilities: As the cost increases and the financing possibilities narrow, the stock of finished goods to be held decreases.
10. Storage possibilities of the business: As the storage possibilities narrow, the stock of products decreases.
Seven types of waste that do not create value in a business process (Nebol, et al., 2014 January p. 76);
2. Waiting time
4. Transaction processes
A forward point of this is JIT 2. At this point, an official from the supplier is positioned at the customer's location to collect the relevant orders (Nebol, et al., 2014 Jan. p. 107). The customer transfers the responsibility of being out of stock entirely to the supplier.
Some benefits of Just-in-Time;
Significantly reduce additional stocking costs due to idle stock
Minimizing financing opportunity costs due to idle stock
Prevention of damage caused by relatively long stock holding and exhaustion of performance life
Revealing hidden errors and deficiencies in processes
Supporting the continuity of quality improvement processes
Developing supplier relationships
Reducing production errors by improving processes
Nebol, Erdal, Uslu, Tanyeri ve Uzel, Ezgi. 2014 Ocak. Tedarik Zinciri ve Lojistik Yönetimi. 3. İstanbul : Beta Basım A.Ş., 2014 Ocak. s. 372. ISBN 978-605-377-055-4.