The supply-chain process can easily become complicated and expensive, often causing waste in inventory as well as hefty storage and delivery costs. The idea behind Just in Time logistics (JIT,) an inventory management system developed in Japan in the 1970s, is to make sure a product arrives at the warehouse immediately before the manufacturer can ship it to the customer. The number-one goal of this system is to minimize wasted time. JIT logistics accomplishes this by minimizing inventory and warehouse storage costs, which ultimately reduces delivery times and waste.
Let’s take a closer look at the advantages and disadvantages of JIT logistics, and explore who could benefit most from implementing this inventory management system.
One of the top advantages of implementing JIT is dramatically reducing inventory. If JIT is working effectively and the product arrives at the warehouse immediately before being shipped to the customer, then a manufacturer’s inventory requirements can be reduced by a very large margin.
Less inventory means less warehouse space is required. This can be a huge benefit for manufacturing companies, because inventory storage and warehouse management is costly, especially when inventory ends up sitting for long periods of time in a warehouse.
Another problem that arises when inventory sits in storage for too long is that the rapid evolution of trends can make certain products obsolete in relatively short spans of time. When this happens, large quantities of inventory can be wasted.
While it’s clear that JIT logistics offers major benefits to manufacturers, there can certainly be disadvantages to it as well.
In order for JIT to work most effectively, all the moving pieces of the supply chain have to also be working effectively. One supplier catastrophe can shut down a whole production line. A clear example of this is the recent disruptions in the auto industry, due to the supply shortage of computer chips.
Another disadvantage of JIT is that it can be completely disrupted by shipping issues. A recent example of this in the news was when the container ship, the Ever Given, got stuck and blocked the Suez Canal for six days, completely disrupting the global supply chain.
A supplier catastrophe or a supply chain disruption can add up to unexpected costs for manufacturers. Another hidden cost of JIT that’s worth mentioning is the initial investment that goes into getting the system working. The construction of necessary infrastructure and the special training needed to start using JIT all come with a price tag. These are things worth keeping in mind when deciding whether or not JIT logistics will work for you.
As you can see, JIT logistics have the potential to make valuable improvements for manufacturing companies, but it’s also true that JIT can turn into a nightmare for distributors when unexpected disruptions wreak havoc on the supply chain.
That’s why it’s important that an organization is fully prepared before implementing JIT. Some helpful questions to ask are: “will JIT result in significant savings for our company?” “Is our team able to handle significant new changes within our work process?” If the answer to these questions is “yes,” then JIT could very well be worth implementing.
JIT logistics is amazing at making companies efficient, but it involves a level of complexity that demands a competent logistical partner.
At Surus, we specialize in providing customized, cost-cutting transportation solutions to manufacturers and distributors across North America. We understand how important reliable transportation is to a company’s profits and how it affects their customer service and business’ overall success.
We have first-hand knowledge of the hurdles within the manufacturing industry, and that includes understanding the advantages and disadvantages of JIT logistics. If you are looking for an experienced, logistical partner, or are interested in learning more about how JIT logistics can work for you, we’d love to chat.