Introduction
The just-in-time (JIT) system was first introduced in Japan as a manufacturing philosophy aimed at improving production efficiency. The system was created at Toyota and contained the following elements: “consistent enhancement, disposing of waste, great housekeeping, setup time decrease, leveled/blended generation,” and others (Mukwakungu et al., 2019, p. 1271). JIT can be defined as a management strategy based on providing the proper piece or element at the appropriate time in the proper quantity and place by reducing wasteful activities (Taghipour et al., 2020, p. 43). Many businesses, including tech manufacturers, automobile manufacturers, retailers, and fast food and restaurants, use JIT to minimize inventory costs, reduce waste, increase flexibility and, consequently, maximize profits. One such business is McDonald’s, a fast-food restaurant that successfully uses the JIT system as a part of its inventory management. Despite some disadvantages, the JIT system helps McDonald’s reduce inventory costs, eliminate waste, and regulate the orders of raw materials.
The objectives of the JIT system
The main objectives of the JIT system are related to the production processes. Thus, according to Al haraisa (2017), companies use JIT to involve activities aimed at avoiding overproduction and achieving a competitive advantage (p. 159). McDonald’s utilizes this strategy, starting to cook a meal only when a customer orders it. The objectives of this system are as follows:
- Produce only the products the customer wants and needs
- Produce products only on the customers’ demand
- Produce with the shortest lead time
- Produce products of an excellent quality
- Produce products with only those characteristics the customer wants
- Produce with no waste of time, labor, equipment, and raw materials
In McDonald’s case, these objectives are successfully fulfilled, but the JIT system is new in its inventory management. Earlier, the company used a different strategy, pre-cooking a batch of hamburgers placed under special heat lamps, where they waited until customers bought them. As a result, clients could not enjoy fresh meals, and many hamburgers were spoiled and discarded. Therefore, McDonald’s reconsidered its product management, moving to the JIT system. The new strategy enabled the company to cook burgers only on the customers’ demand, reducing wastage and increasing customers’ satisfaction.
Benefits of the JIT system
The just-in-time system of inventory management in McDonald’s has several benefits. The first advantage is lower inventory levels: the company does not produce an excessive quantity of products, avoiding wastage of raw materials, waste of labor, and equipment. Lower inventory levels are associated with lower direct and indirect costs (Nemtajela & Mbohwa, 2017, p. 702). Another benefit of the JIT system is a shorter service and production cycle time. For example, the company uses artificial intelligence (AI) to make ordering processes faster and more efficient (BBC, 2019). A computer accepts an order and sends it to the cook immediately so that there is no delay between order placement and delivery. However, these are not the only benefits of the JIT system.
In addition to the advantages mentioned above, the JIT system allows McDonald’s to improve product quality and attain better labor use. Since hamburgers are not cooked in advance, products remain fresh longer, and there is minimal risk of wastage. Moreover, customer service is also improved because burgers are made only after the order is placed, so special orders are no longer an issue. McDonald’s uses time and labor efficiently, drastically reducing waiting time. Instead of overproducing burgers, the company keeps equipment and raw materials ready. Consequently, the waste of overproduction is eliminated, and the corporation benefits from it.
Disadvantages and limitations of JIT
Despite all these benefits, the JIT system has some limitations. First, JIT relies on the organization’s forecasting and relationships with suppliers. If a company cannot predict the number of orders at busy hours or has problems with its key suppliers, there will be losses because of the absence of other products and service options. For example, if a supplier cannot deliver raw materials on time, especially at busy hours, a company will not have extra stock to satisfy customers’ needs. It will result in financial losses, as well as the loss of customers.
Moreover, if something happens to the AI system, and there are no workers who can accept orders, the whole process of order placement and delivery will be disrupted, which will result in losses. Undisciplined staff may also be an issue affecting the JIT system of inventory management. Those who are not on board with the system can influence productivity and quality. Despite these disadvantages and limitations, the JIT system is an effective inventory management strategy that can help businesses maximize profits and reduce wastage.
Conclusion
Having analyzed the JIT system based on the example of McDonald’s, one can conclude that this strategy is effective and has more advantages than disadvantages. JIT helps reduce space because companies do not need to order excessive raw materials. Besides, products remain fresh longer because they are cooked only when customers request them. The chance of wastage and damage to raw materials is also minimized. Customers’ satisfaction increases because they receive fresh products instead of pre-cooked ones. Still, JIT has some disadvantages companies need to consider before implementing this strategy. For example, it is essential to have reliable suppliers and forecast the demand for produced items. Moreover, the number of employees should also be considered so that if one employee does not appear at work, they will be easily replaced by another. If businesses take these disadvantages into account, they will succeed with the JIT system of inventory management.
References
BBC. (2019). McDonald’s uses AI for ordering at drive-throughs. Web.
Al haraisa, Y. E. (2017). Just-in-time system and its impact on operational excellence: An empirical study on Jordanian industrial companies. International Journal of Business and Management, 12(12), 158-167. Web.
Mukwakungu, S. C., Mabasa, M. D., Mankazana, S., Mzileni, X., & Burakeye, S. A. (2019). The impact of just in time (JIT) in inventory management – Perspectives from two case studies in a South African environment. Proceedings of the International Conference on Industrial Engineering and Operations Management. Bangkok, Thailand. Web.
Nemtajela, N., & Mbohwa, C. (2017). Relationship between inventory management and uncertain demand for fast moving consumer goods organizations. Procedia Manufacturing, 8, 699-706. Web.
Taghipour, A., Hoang, P., & Cao, X. (2020). Just in time/Lean purchasing approach: An investigation for research and applications. Journal of Advanced Management Science, 8(2), 43-48. Web.