BIZ-OMICS · 3D Learning · Operations

Just-in-Time 3D

Volta Bikes builds about ten bikes a day, and every bike needs one crate of parts. Run the factory with just-in-time or just-in-case stock, then hit it with a supplier delay, a demand surge or a model change. Both systems face exactly the same days, so the scoreboard is a fair test.

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Crates in stock each day

Just-in-timeJust-in-caseDay with lost sales

The two approaches

Just-in-time (JIT) means stock arrives just as it is needed, so the business holds little or no buffer. Each time a bin of parts is used, a kanban card signals the supplier to send exactly that amount. JIT is a key part of lean production, made famous by Toyota.

Just-in-case (JIC) means holding buffer stock so production can continue if deliveries are late or demand jumps. Stock is reordered in large batches when it falls to a reorder level.

After the 2011 earthquake in Japan, Toyota began keeping extra stock of hard-to-source parts such as semiconductors. When chip shortages hit carmakers in 2021, that buffer helped it keep building for longer than many rivals.

Weighing up JIT

Advantages

  • Lower holding costs: less warehouse space, insurance and security.
  • Less cash tied up in stock, which helps cash flow.
  • Less waste from damaged, stolen or out-of-date stock.
  • Problems in the process are exposed quickly, which pushes up quality.

Disadvantages

  • Production stops if a supplier is late, so reliability is vital.
  • Hard to meet a sudden rise in demand.
  • Many small deliveries cost more, and bulk-buying discounts are lost.
  • Needs close supplier relationships and good communication.

JIT works best when

  • Suppliers are reliable and close by.
  • Demand is stable and easy to forecast.
  • Staff are flexible and multi-skilled.