What is just-in-time (JIT) for logistics?
In transportation and freight, just-in-time (JIT) refers to an inventory control system that manages the material flow into assembly and manufacturing plants by coordinating demand and supply so desired materials arrive “just-in-time.”
“When first developed in Japan in the 1970s, the idea of just-in-time (JIT) marked a radical new approach to the manufacturing process. It cut waste by supplying parts only as and when the process required them. The old system became known (by contrast) as just-in-case; inventory was held for every possible eventuality, just in case it came about. JIT eliminated the need for each stage in the production process to hold buffer stocks, which resulted in huge savings,” according to The Economist.
The benefits of JIT transportation tracking
- Enhanced visibility: JIT provides real-time visibility into the location and status of shipments, enabling suppliers and customers to proactively manage their inventory levels and plan ahead.
- Reduces costs: just-in-time shipping reduces costs because it produces goods only when they are needed in the production process, rather than producing goods in advance and holding inventory.
- Increased customer satisfaction: JIT transportation makes it more likely that goods are delivered on time, which improves customer satisfaction and helps to build long-term relationships.
- Reduced waste: just-in-time shipping helps to eliminate unnecessary movement, such as double handling and waiting times, which reduces waste and improves sustainability.
What are the drawbacks of JIT?
- Higher inventory costs: according to Forbes, with JIT smaller and more frequent orders can be more expensive than larger, less frequent orders. This strategy may decrease profit margins per sale.
- Supply chain disruptions: JIT can be vulnerable to disruptions in the supply chain, such as unexpected delays or natural disasters, which can negatively impact business operations and result in financial losses. This was especially evident during the Covid-19 pandemic. As noted by VoxEU, such events are becoming more frequent/likely: “a black swan event, but it highlights that pandemic events are ever more likely to happen in a globalized world. Moreover, by its disruptive nature, the crisis has drawn attention to other types of shocks associated with, for example, climate change.”
- Greater supplier reliance: the whole production process can be disrupted by a supplier who does not deliver goods on time, according to Oracle Netsuite.
- Inventory stockouts: this was seen during the Covid-19 pandemic when there was a massive disruption and mass panic that led to a ripple effect across the supply chain with many retailers running out of inventory, as stated by Flexe Institute.
How does JIT cut inventory costs?
“The just-in-time (JIT) inventory system minimizes inventory and increases efficiency. JIT production systems cut inventory costs because manufacturers receive materials and parts as needed for production and do not have to pay storage costs. Manufacturers are also not left with unwanted inventory if an order is canceled or not fulfilled, according to Investopedia.
JIT & Maritime AI™
Implementing JIT transportation is not without its challenges. The risk of supply chain disruptions and inventory stock outs can be significant obstacles to overcome. To mitigate these risks, companies need to embrace new technologies, such as Maritime AI™, which provides real-time tracking and monitoring of cargo, enabling stakeholders to make informed decisions and optimize their operations.
By combining JIT transportation with Maritime AI™, companies can achieve unprecedented levels of efficiency and cost savings. They can reduce wait times and transportation costs, eliminate unnecessary movement and waste, and improve overall productivity. The result is a leaner, more agile, and resilient supply chain that can adapt quickly to changing market conditions and deliver exceptional customer value.