A modern solution to an age-old problem
In the game of modern logistics, efficiency is almost always key to success. Part of that for many industries is maintaining optimal inventory levels, but what’s the best solution? Just-in-time (JIT) inventory management can create that efficiency.
Learn the ins and outs of this solution and see if it’s right for your business.
What is just-in-time inventory (JIT)?
Just-in-time inventory is a method used to manage inventory levels, so goods are only received when they’re needed in the production process. The goal of this solution is to reduce inventory holding costs while improving efficiencies by syncing production with customer demand.
There are four main concepts within just-in-time inventory management. These include:
Being driven by demand
Rather than using forecasting to predict the amount of product that will be needed, with JIT, inventory replenishment is triggered by actual customer demand. This both reduces overproduction and excess inventory on hand.
Constant flow
With just-in-time, the production process becomes smooth, minimalizing bottlenecks along the production line. To accomplish this, efficient coordination between suppliers, processes and distribution channels is vital.
Minimal waste
This solution is put into place to eliminate waste from the production process. This includes excess inventory, overproduction and defects. This can help to improve efficiencies and reduce costs.
Close supplier partnerships
To be efficient, you have to work well with your suppliers. This will help ensure timely deliveries of high-quality components. Your suppliers may have to make more frequent deliveries, shrink batch sizes or create more strict quality assurance measures to adhere to your new inventory management system.
Advantages of just-in-time inventory management
When implemented strategically, just-in-time inventory management has many potential upsides. These include:
Reduced inventory and storage costs
By reducing the amount of inventory you hold, you will save on storage fees. Reducing inventory overall helps to free up capital that can be further invested in the business.
Decreased lead time
While emphasizing quick turnaround times, JIT ensures shorter lead times for production and deliveries. This allows you to make faster decisions regarding inventory in times of high customer demand or seasonality.
Reduced waste
Cost savings come from the lack of waste in the production process. Reduced overproduction and inventory are eliminated.
Improved cash flow
Less inventory is needed under this solution. Therefore, more money will stay in your business and out of the production of goods, which leads to better health of your business and more liquidity on hand.
Increased flexibility
The just-in-time process is built to be responsive to changes in demand, market trends and production requirements. Flexibility in your supply chain allows you to shift positions depending on these changes in the market.
Streamlined production process
A streamlined process can lead to higher productivity and lower operating costs. Minimal waste and downtime help avoid making products that are not needed.
Challenges to overcome
For successful implementation, these are some challenges you’ll need to prepare for:
Supply chain disruptions
Because JIT relies on seamless coordination with suppliers and timeline deliveries, any disruptions in your supply chain can cause delays that lead to supplier issues and inventory shortages. Combat this by working with a trusted logistics partner and always be prepared to make quick decisions.
Accurate demand forecasting
The need for forecasting to support your customer demand is paramount in JIT. Inaccurate forecasts can lead to a lack of products or lost sales. This can be challenged by using a trusted and professional provider with a track record of expertise in this solution.
Quality control
JIT strives for the minimum of products to be manufactured to save time and money. If your production is not streamlined correctly, this could open the door to quality control issues. Maintaining high-quality standards can be challenging, but relying on a transportation partner to consult can be helpful.
Transportation costs
Using small deliveries to minimize inventory can get expensive if you are just looking at the transportation line item. By zooming out and looking at the macro of your business under JIT inventory management, you will see if your business can benefit.
Real-world application
Various industries use just-in-time inventory management to create efficiencies and save money. These include:
Automotive
The automotive industry often uses JIT. Suppliers deliver auto parts directly to the assembly line instead of manufacturing parts and delivering them to warehouses. This ensures that parts are where they need to be and reduces waste while improving efficiency.
Retail
Retailers also use this solution to optimize stock levels and reduce excess inventory. This works by closely monitoring both customer demand and sales trends and makes it possible to replenish stock in time to meet customer’s needs without overstocking shelves or tying up capital in production.
Pharmaceutical industry
Pharma companies implement JIT to optimize production schedules, minimize inventory costs and ensure timeline delivery of pharmaceuticals to patients. This can also help to reduce the risk of medication expiration, prevent shortages and improve supply chain strength. It is also used in many other life science operations.
Find a trusted logistics partner
A vetted and experienced logistics provider is essential to the implementation of just-in-time. Let that trusted provider be ArcBest. For over 100 years, we have creatively solved logistics problems for our customers. Through our managed solutions, ArcBest can make JIT inventory management as simple as possible.
Reach out today and see what just-in-time inventory management can do to benefit your business.
