JIT is the development trend of inventory management

JIT is the development trend of inventory management

Source: industrial real estate network investment promotion department time: 20:07:41

Abstract: The defects of traditional EOQ inventory management and the advantages of JIT in inventory management are analyzed, which means that JIT will replace EOQ in inventory management.

Keywords: Inventory Management Economic Order Batch real-time supply

There is a general shortage of liquidity in Chinese enterprises. The reason is not only the triangular debt which has been formed for many years, but also the high inventory funds of enterprises. According to relevant information, the average inventory capital usage of an enterprise is 40%-50% of the total current assets. Therefore, in order to alleviate the shortage of liquidity and improve the utilization rate of capital, enterprises must adopt advanced and scientific inventory management methods to strengthen inventory planning and control.

1. Traditional EOQ inventory management Defects

The so-called EOQ, that is, the economical order batch, is to use a mathematical method to obtain the order batch at the minimum storage cost and order cost in a certain period of time. The defect of this method is that it does not realize that inventory management is essentially a process of processing large amounts of information. The assumption of traditional inventory management is:

1. 1 material requirements are continuous

Traditional inventory management assumes that the demand for materials is stable. Therefore, the demand for each material is smaller than the total number of orders. In the traditional production mode, the production quantity of enterprises according to the plan is generally not fluctuating, so the demand for materials is even. In modern enterprises, enterprises are market-oriented, customer-oriented, and the production volume is changing. Therefore, the demand for materials is uneven and unstable, demand for inventory is intermittent. In fact, according to the EOQ • ordering method, the ordering time is often relatively early, resulting in a backlog of materials, which not only results in a large amount of invalid capital occupation, but also increases inventory costs. In addition, due to unbalanced production requirements, inventory shortage sometimes occurs, which causes serious losses to production.

Requirements for various materials are relatively independent

The traditional EOQ inventory management method does not consider the relationship between material items. The ordering points of various materials are determined separately. However, in actual production, the quantity of each item must be reasonably equipped to make the product. Because the traditional EOQ ordering method is for a single part, the ordering of various materials is independent, rather than the entire final product, therefore, material quantity mismatch may inevitably occur during production and assembly.

1. 3 inventory can be replenished in time after inventory consumption

In traditional EOQ inventory management, once the inventory is lower than the order point or consumption, an order is issued immediately to ensure a certain amount of inventory. This kind of non-demand approach is not only unnecessary, but also unreasonable. Under the conditions of intermittent demand, it will inevitably cause a large inventory backlog.

In short, due to changes in the business environment, the authenticity of many assumptions established in the EOQ model is getting worse and worse. Therefore, the use of EOQ inventory management not only does not help enterprises provide reliable data, on the contrary, it will mislead enterprises in inventory management. This means that the birth of a new inventory management system is necessary.

2 JIT Management System

JIT is short for just in time ". If it is associated with production management and inventory management, it means "arrive on time ". the JIT Management Method is a world-famous advanced management system developed by Toyota in the late 1970s S. By 1989, Japan's manufacturing industry has widely used JIT Management Systems of different degrees. More than 40% of American industrial enterprises have used this method. The adoption of JIT Management Systems has been seen as the key to the success of world-leading enterprises.

2. 1 Basic JIT Principle

One of the goals of JIT is to reduce or even eliminate inventory throughout the entire process from raw material input to finished product output, and establish a smooth and more effective production process. In the JIT system, the product is to be delivered to the customer upon completion of the product; similarly, materials, parts, etc. arrive at a production process when the process is ready to begin production. No unnecessary materials are purchased for warehouse receiving, no unnecessary finished products are processed, and all "inventories" are stored on the production line, thus minimizing the inventory.

2. 2 Key Points of JIT implementation

It takes a long time to establish a JIT Management System. It requires a huge change in corporate culture and management methods, which is not easy to implement. However, enterprises adopting JIT Management Systems will gain huge benefits, improve market competitiveness, and survive. The following are several aspects that should be paid attention to when establishing the JIT Management System:

2. 2. 1

Implements comprehensive quality management. Comprehensive Quality management mainly includes the establishment of a quality assurance system: in terms of resources, the quality assurance of raw materials and purchased parts should be emphasized, and suppliers should be carefully selected; in terms of design, the JIT Management system requires that the product to be designed be highly flexible. Some high-tech enterprises have successfully combined JIT and Flexible Manufacturing Systems (FMS), and adopted standard parts to reduce the complexity of JIT production systems, emphasize the quality of work and the sense of responsibility for product quality; pay attention to quality process control during processing. Only in the role of comprehensive quality management can the quality be well off in every aspect of the JIT system, so that it is possible to achieve "zero defect", in order to achieve "zero inventory ".

2. 2.

All employees participate in management. In order to continuously improve product quality and production efficiency, enterprises need to establish a cross-job training and a dedicated workforce. Re-organized according to the production principles of product classification to form several teams. The employees of each team should be responsible for the raw materials and product quality of the department. At the same time, enterprises also need to reform the labor, personnel and distribution system to form an incentive mechanism and a working atmosphere of continuous innovation.

2. 2. 3

Control production preparation and storage costs. The introduction of advanced machine equipment and computer control and operations have minimized the time consumed in the production preparation phase, thus greatly reducing the preparation cost. Select several reliable suppliers and establish a long-term ordering relationship with them. The procurement business is only conducted by fax or telephone, greatly reducing the procurement cost. Suppliers with good reputation should be selected to deliver materials on time, by volume and by quality. Therefore, the inventory of enterprises can be minimized, and the storage cost can be reduced to the lowest level.

2. 2. 4

Use Kanban management to ensure smooth logistics in the production management process. Panel management is a demand-driven production management method, which is different from supply-driven management. In traditional industries, production is produced in the order of processing, batch production, and production instructions are issued step by step. Each instruction only produces containers with limited parts, and there is no backlog or delay. This demand-driven production management effectively forms a closely linked production chain and a fast-paced production schedule, reducing the inventory of products in process and the corresponding workload of handling, metering and recording.

2.2.5

Continuously improve the system. The JIT system is a process that requires continuous improvement. The goal of the ideal JIT system is "Zero machine adjustment time", "zero defect", "zero inventory", and "Zero equipment failure". Therefore, JIT is a process that never stops.

The Application of JIT will bring a lot of benefits to enterprises. It is not only limited to improving the inventory management efficiency-saving inventory Capital Occupation and warehouse space occupation, and the reduction of related custodians, including the loan interest expenses reduced due to the occupation of liquidity, or the return on other investments made by the enterprise with the funds, to reduce the opportunity cost, the most important benefit is to achieve the goal pursued by JIT, that is, to eliminate the value-added activities and consumption in the whole process of production and operation. The final result is that production costs are greatly reduced, labor productivity is improved, product quality is improved, and customer needs are better and faster.

All in all, the application of JIT Management System is the way enterprises seek to benefit from management, so as to enhance their competitiveness.