Page 3: Just-in-time production
Just-in-time is perhaps the best known method utilised within a lean production environment. It is a process which aims to reduce the costs of holding stocks. Finished goods, work in progress and raw materials are kept to a minimum level by ensuring that stocks are only produced when they are needed. Holding stock adds to business costs in a number of ways:
- Firms have to pay for the storage space where stocks are held.
- Cash is tied up in stored stocks rather than allowing working capital to be used more efficiently.
- Regulations or customer requirements may change which could render current stocks unusable.
- Any defects in large quantities of stock may cause costs of rework.
With just-in-time, the demand for new buildings 'pulls' supplies through the system. This is a very important business principle. When demand increases Portakabin orders and builds new component supplies, rather than having these in stock 'just in case'. For example, the Portakabin Ultima range consists of high quality workplaces for up to 1,000 people. In order to meet the demand from businesses for these buildings Portakabin only holds the stocks it needs for orders in process. This reduces costs and ensures that the components ordered specifically meet the requirements of the individual businesses.
Detailed information technology systems are used to manage the flow of production. These record supplies at every stage of production to ensure components are available exactly when required. Good relationships with suppliers are also necessary as any delay in delivery of raw materials can hold up the entire production process. JIT also helps the internal Portakabin production process by providing components only when needed by the next stage of production.