The term “inventory” is the place where all the goods are held for sale in the market. If an inventory is not handled properly, it can cost financial statements because too much inventory takes up more space.
So, to prevent this, inventory management becomes important to balance too little and too much inventory.
In the market, there are innumerable tools available that help to tackle these kinds of situations. For a company that sells products and goods, inventory management becomes critical.
To optimize inventory levels, there are two popular systems available, and they are JIT and Kanban.
- JIT (Just-In-Time) is a manufacturing philosophy that emphasizes producing products at the right time, in the right quantity, and with the right quality. Kanban is a scheduling system that aims to improve efficiency by limiting the amount of work in progress.
- JIT focuses on reducing waste, while Kanban focuses on balancing the work and capacity of the system to increase throughput.
- JIT is a push-based system, whereas Kanban is a pull-based system that uses visual signals to indicate when more work can be started.
JIT vs Kanban
Just-in-Time, also known as lean manufacturing, is a methodology used in production to minimize waste and improve efficiency. The goal of JIT is to produce products only when they are needed, in the required quantity. Kanban is a methodology used in production to manage and control inventory levels. The goal of Kanban is to maintain optimal inventory levels by replenishing materials only when they are needed.
JIT (Just in Time) is a concept of manufacturing workflow methodology. Its main aim is to reduce time flow and cost within the production system.
Also, it aims for zero inventories among the supply chains of the organization. It maximizes ROI (Return on Investment), and organizational capabilities are fully utilized.
This system was successful in Japan.
Kanban, which means the sign is a Japanese word. It is used in Just in Time to control inventory by helping to track production and order new shipments.
Its main goal is to limit the excess buildup of inventory at the production line. It was developed by an industrial engineer, namely Taiichi Ohno of Toyota.
Visual cues are used to prompt the action which is required for the process flowing.
|Parameters of Comparison
|JIT is an abbreviation of Just In Time
|“Kanban” is a Japanese word that means a visual card
|In the 1970s
|In early 1940s
|It is a management strategy that aligns raw-material orders by suppliers with production schedules.
|It takes the help of colored cards for a name that orders new shipments and tracks production.
|To reduce time flow and cost within the production system.
|To limit the excess buildup of inventory at the production line.
|Kind of system
|Inventory control system
What is JIT?
JIT is an abbreviation of Just in Time. JIT is a management method of inventory in which the required amount of goods is supplied from suppliers.
This method is useful in increasing inventory turnover and reducing holding costs. It can improve the organization’s competitiveness by minimizing waste and by improving product quality.
JIT is a process of manufacturing management. Toyota manufacturing plants were the first to develop and apply it.
The Father of JIT (Just in Time) is Taiichi Ohno of Japan. With the help of this management approach, Toyota met its challenges for survival.
This approach will be successful if an organization’s staff is involved and committed to it.
Advantages of Just in Time includes the elimination of waste, minimum level stocks holding costs, level of minimum reordering can be set, less working capital needed, higher customer satisfaction,
the better relationship among production chains, and the elimination of overproduction.
It also emphasizes the concept of the right first time, high-quality products derived, greater efficiency, ROI can be high and works on the basis of demand-pull.
Disadvantages of Just in Time include high reliance on suppliers, production line idling, not meeting the increase in orders that are unexpected, production downtime, and costly transportation.
The transaction costs are high, frequent deliveries led to the consumption of fossil fuels, and no buffering led to an effect on the production process.
What is Kanban?
Kanban can also be spelt as “kambon” and can be translated into “billboard” by Japanese.
It is a simple concept that is related to Just in Time (JIT) and lean. It is used in the scheduling system in which it tells about what, when, and how much to produce.
It visualizes the workflow and the actual work which are passing through that process.
As Taiichi Ohno was the introducer of Kanban, but it was applied firstly to software development, knowledge work, and IT by David J.
Anderson in 2004. Debit built on tasks with others, such as Eli Goldratt, to define the Kanban method. He successfully launched his book, namely “Kanban: Successfully Evolutionary Change for Your Technology Business” in 2010.
The process of the Kanban method includes improving whatever you do. It can be anything, such as IT, recruitment, software development, marketing, and sales.
If Kanban method principles are applied to any business function, it will be going to benefit for sure. The knowledge of the Kanban body has benefited and abstracted from the works of thought leaders.
The benefits of Kanban consist of increased productivity, increased team focus, improved efficiency, prevention of team overburden, better visibility, reduced waste, improved collaboration,
more predictability, increased team focus, flexibility, and improved company culture.
Whereas its disadvantages are quality miscues, less effectiveness in shared resource situations, the product mix may cause problems, does not eliminate variability and production flow problems.
Main Differences Between JIT and Kanban
- The philosophy of JIT is to produce or procure the right items at the right time in the right amounts. On the other hand, Kanban is a production system that is developed to achieve Just in Time.
- When it comes to advantages, JIT helps in the production of waste, needed space reduction, and small investments. While Kanban improves flow, increases output and in production provides flexibility.
- To prevent costs related to inventory, JIT uses Kanban, as Kanban is one of its elements. On the other hand, Kanban is a scheduling system with the type of demand or pull in the form of bins, cards, boxes, or palettes.
- JIT is an inventory control system to upgrade a manufacturing firm’s return on every investment. In contrast, Kanban is a scheduling system rather than an inventory management system. It tells what, when, and how much to produce.
- In terms of disadvantages, there is a risk of running out of stock in JIT, the requirement of more planning, and dependency on suppliers. On the flip side, Kanban lacks timing, the inability for an iteration, and cannot be used independently.
Last Updated : 16 August, 2023
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Chara Yadav holds MBA in Finance. Her goal is to simplify finance-related topics. She has worked in finance for about 25 years. She has held multiple finance and banking classes for business schools and communities. Read more at her bio page.