Invertory of Macdonalds in China

Just-in-Time (JIT) inventory is the big thing right now in operations.  This, along with lean operations and six-sigma are the buzz words being talked most about.  But what exactly is the deal with JIT operations?

First of all, JIT is a form of providing supplies for customers, as the name suggests, just in time.  For example, Dell, whom I wrote about, has become famous for its JIT model which involves not even being in possession of the raw materials needed to fulfill an order until that order is placed and yet they are still capable of filling orders in a short period of time.

McDonald's is another example of a JIT system wherein McDonald's doesn't begin to cook (well, I should probably say reheat and assemble what may or may not be actual food) its orders until a customer has placed a specific order.

What used to be the case was McDonald's would pre-cook a batch of hamburgers and let them sit under heat lamps.  They would keep them for as long as possible and eventually discard what couldn't be sold.  The only way to get a fresh hamburger under the old system was to make a special order.  Now, due to more sophisticated burger-making technology (including a record-breaking bun toaster), McDonald's is able to make food fast enough to wait until it's been ordered.

What both of these firms do is they provide a customer with their order as fast as possible while having the finished product sitting in inventory for as short as possible.

What are the benefits for McDonald's?

The major benefits for McDonald's are better food at a lower cost.

Let's stop here for a second to drive home a very important point: Whenever you can implement something that allows you to raise quality AND lower costs, you should definitely look into implementing that practice.  Unless illegal, immoral, socially irresponsible, or likely to drive down demand (which is unlikely considering quality is being improved), you are probably going to want to implement this practice.  Back to...