JIT in Honda

Essay by dipzgargUniversity, Master's March 2007

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ABOUT THE CASEThe case stresses the importance of the famous management technique called JIT (Just In Time) and its use in one of the most well known company "HONDA". The case extensively discusses the features, importance, implementation, and the various problems of Just in time. JIT was first implemented by Toyota and the technique is very commonly used in many Japanese companies and HONDA is one of them.

The main purpose of developing this case study is to understand JIT as an operation management technique in the business world and the problems associated with it.

WHAT IS JIT?Just In Time (JIT) is an inventory strategy implemented to improve the return on investment of a business by reducing in-process inventory and its associated costs. The process is driven by a series of signals, or Kanban, that tell production processes to make the next part. Kanban are usually simple visual signals, such as the presence or absence of a part on a shelf.

When implemented correctly, JIT can lead to dramatic improvements in a manufacturing organization's return on investment, quality, and efficiency.

New stock is ordered when stock reaches the re-order level. This saves warehouse space and costs. However, one drawback of the JIT system is that the re-order level is determined by historical demand. If demand rises above the historical average planning duration demand, the firm could deplete inventory and cause customer service issues. To meet a 95% service rate a firm must carry about 2 standard deviations of demand in safety stock. Forecasted shifts in demand should be planned for around the Kanban until trends can be established to reset the appropriate Kanban level. In recent years manufacturers have touted a trailing 13 week average as a better predictor than most forecastors could provide.

A related term is Kaizen which...