Question

Under the concept of just-in-time, waste is considered as any activity which does not add value to an operation.

(i) Describe two (2) types of waste and explain how they can be eliminated or reduced.         

    (ii) Describe two (2) benefits of just-in-time manufacturing

Answer 1

(i) Two types of waste and their elimination or reduction via JIT are as follows:

1. Overproduction: The major contributor to the overall waste in a company is overproduction of goods. Overproduction leads to excessive storage of goods making up huge inventories. Thus increasing storage costs. Moreover, goods in excess may get damaged or obsolete further adding to goods cost. Also the capital is being locked in excess unsold goods which otherwise would have been utilized for growth of the company.

Elimination: JIT helps in establishing a system where production is limited exactly to fulfill the demand. Thus leaving no space for overproduction.

1. Inefficient Transportation: Transportation is a non value adding activity in the product value chain. Thus costs related to transportation should be kept minimum. However, in absence of JIT inventory is high which means more transportation and hence more costs. Also plant location, supplier location and warehouse location are not chosen strategically which leads to unnecessary travelling causing increased transportation costs.

Elimination: JIT reduces inventory, so the cost of transportation. Also JIT necessitates the strategic location for manufacturing unit, warehouse and supplier so that they are in close proximity to each other in order to increase responsiveness. This reduces the overall travelling distance leading to increased transportation efficiency.

(ii) Two benefits of just-in-time manufacturing are as follows:

1. Reduced Inventory Cost: JIT as name suggests produces goods just in time to fulfill demand. Thus avoiding stocking of raw material, in process work material and finished goods. Thus significantly reducing the inventory level and hence costs associated with inventory.
2. Reduced Manufacturing space: In JIT raw material is procured just before processing, work in process inventory is kept minimum and finished goods are transported to warehouses soon after production. Thus reducing the necessity of large manufacturing space.