How JIT improves with efficient supply chain?
The increasing complexity of business processes and operations has turned inventory management into an extremely challenging task. Not only does it require an organization to incur a variety of extraneous costs but it also causes an unnecessary drain on the company’s human and financial resources. Moreover, the smallest of errors in identifying demand patterns with precision, can lead to a lower product turnover and thus, reduced profits.
One of the best ways to overcome such grievous inventory management issues and release the capital tied up in excess stock is to utilize the highly competent approach of the Just-In-Time system.
At this juncture, it becomes pivotal to understand what a Just-In-Time system truly is and how it can be an indispensable characteristic of business supply chains.
What Is Just-In-Time?
Commonly abbreviated as JIT, Just-In-Time is essentially a business strategy that aligns production schedules with raw material orders. In other words, the components and materials required by an organization for undertaking regular operations are procured from suppliers, as and when the need for them arises.
This implies that a company does not have to store and maintain approximate inventory stocks for a long period. Instead, it can simply place an order based on its exact requirement and have it delivered at the earliest possible time.
The JIT system is quite different from the Just-In-Case (JIC) system, under which large inventories are held merely to cater to the possibility of a high demand. With Just-In-Time, a business can cut costs, increase productivity and eradicate wastes.
JIT, in fact, derives its legitimacy from the following systemic principles:
- Total Quality Control – Inventory is basically a buffer which functions as a safety stock in case product components develop defects. With JIT, the quality of production improves, thereby, lowering defect rates and reducing the need for keeping extra stores.
- Elimination Of Waste – Redundant inventory is the bane of most businesses. With a slight change in any internal or external factor, a huge amount of unwarranted waste can accrue. JIT helps eliminate the need for holding on to stock surpluses which might eventually turn into dead inventory.
- People Involvement– An extensive system like the JIT can be successfully implemented only with complete involvement of people across different verticals of the organization. Teamwork and participation provide the basis around which operative capabilities can be built.
Although JIT is a foolproof strategy, it can work well only when the three pillars of supplier predictability, planned contingency and coherent supply chain, lend it a strong foundation. Out of these, supply chain is known to harbor the maximum potential for enhancing the performance of JIT.
How JIT Improves With Efficient Supply Chain?
Supply chain is a critical factor that improves the functioning of JIT by optimizing the sequence of activities and processes involved in the production and distribution cycles. As the entire manufacturing flow within and outside the organization is streamlined, consistency and competitiveness begin to be maintained.
To put it simply, an efficient supply chain enables JIT by:
– Managing the total lot size by improving the quality of items manufactured in every production run.
– Synchronizing the proposed changes with suppliers while increasing the overall order frequency.
– Aiming to reduce the amount of inventory which has been stored and trying to bring it down to a bare minimum.
– Lowering the per unit cost of material, product or component ordering, purchasing and carrying.
– Seeking reliable suppliers who can align their production schedules according to the company’s requirements.
– Initiating appropriate material handling by integrating various sections of organizational logistics.
With focused, targeted and transparent operations, an effective supply chain ensures that a continuous improvement is brought about in the JIT approach and a certain level of seamlessness is induced in the production line arrangements.
How Is JIT Salient For Supply Chain Management Optimization?
While supply chain strengthens the performance of JIT, the Just-In-Time system too, in return, acts as a crucial factor for supply chain management optimization. As inventory runs, customer service and response time are improved, a multitude of benefits are reaped across the whole supply chain.
These largely include:
- Reduced usage of warehouse space and consequently lower overhead costs which lead to greater savings.
- A gradual decrease in the total number of transportation carriers and suppliers, thus consolidating workflow.
- Lower costs of logistics handling as the distribution prices are steadily brought down.
- Better overall productivity and a substantial control exercised over the different stages of production.
- A hugely diminished amount of raw components, in-process materials and finished good stocks stored as a buffer.
- Lessened time required to finish the run of a complete manufacturing cycle.
- Improved rates of the final inventory turnover and advanced quality of the products being supplied.
Owing to its accuracy and speed, the JIT strategy transforms the supply chain into a more progressive and collaborative tool that can be employed to expand flexibility and encourage strategic support.
The Way Forward
Despite the critical inter-linkage between JIT and supply chains, an organization would still need to make sure that factors like excess dependability on one supplier, distance based delivery time and uneven demand tracking procedures, are properly accounted for. It is only when an integrated business plan is designed that the technique of JIT can fulfill all its objectives.
As market fluctuations and financial inconsistencies unfold, the economic scenario is likely to become all the more uncertain in the future. In such times, it is only the effectiveness of the supply chain assembly and the proficiency of JIT, that can empower an organization to meet consumer demands with high vigor, absolute resilience and long-term sustainability.