What Is a Just-in-Time (JIT) Supply Chain?
30 Apr 2021
In today’s article, we’ll focus on one of the types of supply chain-Just-In-Time (JIT). A just-in-time supply chain is a type of inventory and material movement that takes place right before the material is needed for manufacturing. With the help of this method, businesses can reduce their storage. It means that there is no need of keeping massive levels of materials in warehouses. Simply use the JIT supply chain method instead. It will work best due to its operational synchronization. Let’s discover more about this supply chain method and see how to apply it in your business.
What is Just-in-Time Supply Chain?
The Just-In-Time (JIT) is a well-known concept within the field of manufacturing workflow. JIT is a major point of SCM software. This supply chain software includes technologies that aim to reduce costs and flow times inside the production systems and material distribution.
The very first time that concept was used and became popular was in the 1970s. The manufacturing company of Toyota thought out a method that will help meet consumer demands with minimum delays. The core of attention were people, plants and systems.
The initial goal of JIT is for zero inventories. It uses organizational capabilities and improves a company ROI. This system was very successful in Japan. And soon, many US companies copied this experience.
Nowadays, the just-in-time supply chain aims mainly to lower product delays via the use of artificial intelligence in supply chains. Affected by well-organized timing, this, in its turn, will cause cost decreases. The final goal is reducing the chance of having more and less on-hand materials than needed. Thus all the related processes become organized smoother. It also reduces costs for product storage. And finally, the solution of just in time supply chain management accelerates a better understanding of businesses.
How does the Just-in-Time Supply Chain work?
Any kind of supply chain as a significant point of workflow aims at delivering their customers’ desired items within their wanted time interval. Of course, businesses should be able to fulfil all this. But they also want to spend as a lower amount of money as possible. And here, the tool of JIT comes as a popular method that supply chain professionals use. And it really helps to get everything done.
As we have mentioned several times, JIT is very attractive in the field of supply chain and finances as a supply chain software. But actually, it is pretty challenging to implement. For a perfectly optimized supply chain, the customers (both internal and external) should get what they want whenever they want it. Meanwhile, the companies should spend as little money as possible.
The info mentioned above shows that one significant aspect of JIT is understanding customers’ demand. And the primary way to get it is through communication. The 2 methods of communication are:
- or with the use of various systems.
Those can be enterprise resource planning (ERP) and materials resource planning (MRP).
After identifying customer demand, next comes the establishment of a business-customer strong relationship. The majority of suppliers cannot hand out the needed supplies immediately. But any business holder should keep in mind: a successful JIT supply chain depends on knowing precisely the time intervals. For example, how early the materials should be ordered, when they should arrive, and be delivered.
The Advantages of JIT
JIT supply chain management platforms, like all the notions in the world, have both their advantages and disadvantages. As for the significant benefits, we’d say that in this case, production runs are short. It means that manufacturers can easily switch from one product to another. Furthermore, warehouse needs are minimized. It also means that this method reduces costs. And as the companies use resources only for those products that are already ordered, they spend less on raw materials. To mention some other benefits of JIT, let’s see the points below.
- The method of JIT can be applied to a vast range of businesses. It can include not only e-commerce but also accounting, management and many other fields.
- With the help of JIT, you can reach a higher quality of your production.
- This approach helps to reduce the cost of inventories and their requirements.
The Disadvantages of JIT
The main disadvantages of this modern system can include potential upsets in the supply chain. If suppliers don’t work correctly and provide on-time deliveries, it will definitely break down the whole production process. So mainly sudden orders are drawbacks for JIT systems. That happens because the final aim cannot be accomplished. Thus the final product deliveries to the buyers become delayed.
- Unexpected changes regarding the supply amounts and demand can become an obstacle for the JIT system.
- Just-in-time system implementation can be challenging in the scope of its time-consuming nature.
Possible JIT Problems
JIT methods help to calculate e-commerce metrics, such as lead time, for example. They can seem to bring fewer lead times. But meanwhile, also bring lower inventory costs. It means that for understanding the impact of this method deeply, some steps are to be taken. For instance, you can pay attention to the indirect cost of the system. This will help find out those materials and components that just in the time system can work the best for.
If you still have a production, quality or demand issue, they certainly impact your supply. Here just-in-time methods can bring unexpected costs to you. Changes in customer demand can also cause misperformance of JIT methods. Thus, fees, product confusion, and other similar issues can end up impacting business operations badly. This means that not all types of businesses suit just-in-time supply chains. Before applying it, one should thoroughly think out and make sure to be able to use JIT strategies effectively.