The concept of “just-in-time” (JIT) isn’t limited to inventory management or logistics. It can be a strategy embraced by almost any midsize business.
Having exactly the right materials, capabilities, and manpower to meet customer demand can save money, preserve cash flow, and avoid waste. But JIT is often mistaken for simply cutting resources to the bone and hoping for the best. By taking a more considered approach based on lean-management concepts, you can make your organization more efficient in just about any area. Here’s how:
- Define value. The goal of any streamlining should be to create value for the customer, whether that is someone you sell to or the end user of an internal process, explains Bob Forshay, vice president of Transformance Advisors in Denver. “Focusing on customer value will help you zero in on the right answers rather than going off in directions based on flawed or incomplete assumptions,” he says. As you define value and build it into your strategy, it’s also important to communicate it to everyone in the organization so that they understand their role in creating value. “The more your employees understand what your strategy is and what you’re trying to accomplish, the more they can feel like they can give it their all,” notes Joseph Broschak, associate professor at the University of Arizona’s Eller College of Management.
- Map the value stream. Next, examine your processes to identify individual “value streams,” and map the steps along the way toward creating customer value. For example, a manufacturer could map the process of creating a single item for sale, from sourcing the parts through assembling the finished product. With these value streams visualized, it should become clear which steps do not create value and so can be eliminated or streamlined. “Just starting with the low-hanging fruit will yield results,” Forshay says. What should also be clear, however, are the effects, both positive and negative, that any change may have upstream or downstream. For example, re-stocking inventory with smaller, more frequent orders could put pressure on suppliers that cause quality issues, delays, and cost increases that negate any positive effects. In that case, the better approach would be to work with suppliers’ processes to drive improvement.
- Create flow. Once everything that does not add value has been removed from the value stream, the process should flow more efficiently. The next step is to locate more complex issues or bottlenecks and relieve them by tracking down and addressing root causes. Take the case of staffing pressure due to fluctuating demand. Contingency staffing, such as part-time workers and independent contractors, offers a solution, but simply increasing headcount at the last minute can create unforeseen costs and repercussions. “The organizations who get the most benefit out of just-in-time staffing are thinking about the long term,” Broschak says. “Those that don’t get as much out of it are the ones who think of it as a disposable resource.”
- Establish pull. The final stage is to link supply as directly to demand (or “pull”) as possible. “Now we come at it from the downstream side, from the customer side,” Forshay explains. “We look for ways to link our newly improved supply process to the customer demand cycles. We want to match our supply to the consumption. It’s an ideal that you can reach for but never fully achieve.” One familiar way to accomplish this is to anticipate demand based on historical performance, but demand can also be regulated with incentives such as discounts to motivate faster turnover, larger blanket orders, and other efficiency measures.
- Seek perfection. This last element simply links back to the beginning in a process of continuous improvement. “It is important to illustrate that this is not a one-time process,” Forshay says. “It’s not that we’re expecting to finish or to achieve perfection. We’re going to continually drive toward that direction.”
Creating a just-in-time organization is a worthy goal, but it requires careful planning, incremental change, and continuous improvement. If your company is up to the challenge, get ready to reap the rewards.
