This essay has a total of 1329 words and 6 pages.


The just-in-time (JIT) inventory system was developed in Japan after World War II, in an
effort to control costs during fiscally challenging economic times (Waguespack and Cantor,
1996). The challenge that faced many Japanese companies in the post-War era was to find a
way to meet the needs of customers and businesses while utilizing as few resources and as
little capital as possible. The Japanese developed these set of techniques in order to
control production, limit unnecessary products and reinvest the valuable capital left from
the savings back into the business structure (Waguespack and Cantor, 1996). Much of the
success of many Japanese corporations over the past four or five decades has been was
linked to the principles of JIT (Chhikara and Weiss, 1995).

Premise for JIT
The basic premise for JIT is fairly simple: a company only produces an item when there is
a need, or just-in-time for a company or individual to purchase it (Manoocherhi, 1988).
The theory of JIT also accepts that there may be a need for an item at another work
station and this would also create the need for production. Rather than utilizing the
common practice of mass production and attempting to sell and distribute the products
after they are created, JIT waits until there is a defined need that must be met. By doing
this, JIT systems allow companies to decrease the level of production, decrease the
necessary manpower hours utilized in mass production modes of supply, and eliminates the
waste inherent in over-production. These techniques are especially effective for small
companies, who are far less able to absorb the impact of unsold products. JIT has been
shown to significantly impact reductions in overhead costs that reduce re-investments, and
encourage stabilizing business practices(Manoocherhi, 1988).

JIT Utilization
In order to relate the most comprehensive picture of the effects of JIT, it is necessary
to look at the way in which businesses utilize JIT systems. JIT has also developed an
off-shoot theory called JIT II, and information and comparison of these two differing
structures will be presented.

One example of the utilization of JIT principles has been within the business operations
of oil refiners. The push to reduce inventory costs has led oil refiners to develop JIT
techniques within their process (Waguespack and Cantor, 1996). Rather than carrying the
cost of over production and storage of oil, the refiners have chosen to utilize JIT
principles and only produce what is needed to meet the day to day requirements of supply.
Although this example has caused much concern within the oil industry because of the sharp
decline in oil inventories, the long-term effects of utilizing these techniques could
sharply reduce the price of oil (Waguespack and Cantor, 1996).

Another example is the use of JIT structures in Japanese companies currently developing
business structures in the United States. The auto industry is one area that could
significantly benefit from the limited production methods of JIT and current Japanese
companies are utilizing these techniques to better compete with American auto makers. The
results of JIT are not simply realized in the push towards lowering overhead, but they
also incorporate the system of re-investment, that increase business capital, and create
more stable business operations.

JIT Principals
The JIT principles in larger companies effectively link plant and floor operations in
order to provide supplies for the product lines (Anonymous, 1996). In other words, JIT
does not diminish the production of supplies necessary for the continued creation of
additional products. If a company creates radios, for example, they may also create a
number of the intricate mechanical parts necessary for the creation of the final product.
The utilization of JIT systems recognizes the continual need to address supply issues with
the company structure in order to fulfill the order requirements necessary to successful
complete the JIT cycle (Anonymous, 1996). This link between pant and floor operations is
one of the basic premises of JIT operations.

Critics have argued that the financial gains of JIT systems are limited because of the
lack of focus on the financing and operational decisions necessary for this system to
succeed. Chhikara and Weiss visited and OEM (Original Equipment Manufacturer) supplier and
recognized the changes implemented under JIT systems (1995). The representative from the
company explained that empty inventory shelves were a direct result of the newly
implemented system and that the company currently does not hold more than a days worth of
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