Traditional versus JIT production systems: A cost comparison model

Abstract

A fundamental difference between traditional and just-in-time (JIT) strategies lies in the approach taken in the intermediate stages of production. The traditional approach adopts a functional organization designed to minimize manufacturing costs for the particular component. A JIT system organizes the intermediate processes to respond directly to demands from later stages of production. This distinction can be referred to as the difference between 'cost-push' and 'demand-pull'. This paper presents a simple conceptual model of a manufacturing process to compare the costs and benefits of the two methods. The JIT strategy is generally preferred unless the manufacturing economies associated with the traditional approach are significant and/or the cost to change systems is large. A specific application of the model is presented as an example of the cost comparison process.