Question

Why did automakers like Honda implement Just-in-Time (JIT) manufacturing? What is JIT? According to the class materials, what are the benefits/advantages for both the buyer and the seller? What are the challenges or potential disadvantages for both the buyer and the seller? What types of products is JIT likely to be most useful for?

Answer 1

Why did automakers like Honda implement Just-in-Time (JIT) manufacturing?

Companies like Honda implement Just in Time manufacturing as it gives a better and cost-effective method manufacturing and holding inventory. The major purpose solved by JIT is that we do not need to hold a lot of stock at any particular point in time and it saves cost and reduces waste.

What is JIT?

JIT or Just in Time refers to an inventory system which in the management strategy of the company wherein the product is only created to meet the demand and not to produce a surplus or hold for future demands. This means that a company implementing JIT will only product produce a product when its demand by a buyer arises.

What are the benefits/advantages for both the buyer and the seller?

Advantages for the buyer:

1. The reduced cost of the seller can be reinvested to improve the quality of service for the buyer

2. The buyer is able to demand and receive the goods at a very short notice

3. The buyer always gets the freshly prepared material.

Advantages for Seller:

1. JIT leads to fewer space requirements as we do not hold any inventory. This saves our holding cost.

2. There is a less requirement for the investment will leads to lower payable/ debt and interest costs.

3. The JIT leads to waste reduction and further improves the efficiency for the seller

What are the challenges or potential disadvantages for both the buyer and the seller?

Disadvantages for Buyer:

1. Since the goods are made just in time, the quality of goods may not be as good as cited, if the JIT is not executed properly

2. Since a lot of planning is required by the firm to execute JIT, it may not always deliver in time

3. Sellers which rely purely on JIR may encounter contingency problems and delivery to the buyer may get affected

Disadvantages for Seller:

1. The JIT may increase the risks of going out of stock and an important stock may not be available when required immediately. This can lead to customer loss.

2. Since all the product is being done post receiving the demand order, a proper control may not be available in a small time frame.

3. A very highly specialized skilled employee is required to execute which leads to high salary cost