What is a just-in-time delivery?

The just-in-time (JIT) process is a part of procurement logistics. It ensures that the materials needed for production are in the right place at the right time. This means components do not have to be put in storage, which lowers storage costs and staffing requirements. This logistics method requires the focus to be placed on the entire supply chain. One iteration of JIT is just-in-sequence, which also considers the sequence of the goods being delivered. Both delivery methods are frequently used in the automotive industry. The JIT concept was originally developed by Taiichi Ohno for Toyota as part of the production process.

Just-in-time production processes

For many companies, it makes no financial sense to maintain their own warehouse with dedicated staff to keep the required components ready for production. Instead, many have started to collaborate more closely with their suppliers and order only the raw materials that they actually need at any given time. For example, a large corporate cafeteria sells French fries as a side dish on Wednesdays. The number of guests varies very little on weekdays and the cafeteria does not have a large storeroom. The cafeteria manager therefore places an order to have a fixed quantity of potatoes delivered every Wednesday at 4:30 am. The potatoes are used up completely on Wednesdays and so do not have to go in storage. The cafeteria always sources its potatoes from the same supplier. Supply problems would put French fry Wednesday in jeopardy.

Pros and cost of using just-in-time

The goal of just-in-time deliveries is to reduce storage capacity, thus lowering costs and reducing the time and money spent on logistics. Benefits of using JIT:

  • Optimises procurement processes
  • Cuts costs by eliminating warehouse capacity, personnel and logistics
  • Accelerates production times and reduces lead times
  • Ties up less capital
  • Ability to respond to market changes and special customer requests
  • Transfers risk to the supplier
  • Shortest storage time and minimum stock levels of individual goods

Just-in-time delivery has disadvantages as well as many advantages:

  • Heavy dependence on suppliers
  • Higher risk of deteriorating quality due to the elimination of receiving inspections
  • Long-running contracts with suppliers, making it harder to compete on price

Requirements for JIT

Few things are more important for just-in-time deliveries than close interactions between the customer and the supplier. Communication takes place via electronic interfaces (EDI). It also helps to be in close physical proximity and have good infrastructure so that deliveries are not affected by traffic jams or severe weather. If delivery problems arise, the supplier will have to solve the problem creatively. JIT delivery is generally used for items that experience steady demand since it is more involved to implement and suppliers often keep large quantities in stock to respond to customers.

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