Is JIT Logistics Right for Your Business?
May 25, 2018
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Are you tired of your inventory blocking your shelves and ruining your cash flow? Do you want to try a different approach to logistics? Are you wondering if the Just-In-Time (JIT) method would work for your business?
Here’s what you need to know to make up your mind.
What Is JIT?
JIT logistics means that goods (whether raw materials or finished products ready to be sold) arrive at your business at the exact time when they‘re needed. In theory, you don’t hold any inventory at all.
Obviously, this isn’t a reasonable expectation. In real life, JIT means the minimization of inventory to the smallest amount possible.
What Are the Advantages?
JIT minimizes your inventory, which frees up both space and money for your business. You can convert your inventory shelves into a more useful space, like extending your manufacturing floor or your customer service area.
With traditional logistics, your cash is often stuck in heaps of raw material or unsold products; JIT solves that problem by eliminating your inventory.
JIT minimizes your inventory, which frees up both space and money for your business
JIT logistics also increases your employees’ level of engagement and creativity. They need to constantly step up and do their best to ensure that nothing clogs the logistics pipeline. You and your team have to anticipate customer needs and think proactively, because you don’t have a buffer of inventory to fall back on.
What Are the Disadvantages?
Because of the lack of inventory, a small error in the process can cause a big delay. If a shipment of raw materials is late, or a machine is broken, your whole production line is halted, because there’s literally nothing else for your people to work on.
If a shipment of raw materials is late, or a machine is broken, your whole production line is halted, because there’s literally nothing else for your people to work on.
Similarly, if you miscalculate the demand for your products, you may end up with a large stack of unsold inventory (that you can’t store anywhere because you converted your inventory space into something else), or disgruntled customers who want their orders at the promised time, not two weeks later.
Is JIT the Right Solution for Your Business?
Acing JIT requires a lot of planning. You have to anticipate market trends and plan ahead so you have just enough inventory to cover demand.
For manufacturing businesses, this planning needs to cover every aspect of production, including calculating the amount of necessary raw materials, shipping time, assembly time, as well as marketing and sales.
While planning ahead is definitely beneficial for your business, there are other aspects you need to consider before you choose JIT logistics.
Everything needs to come together at the right time (which is usually the very last minute), and everybody needs to work really closely together.
JIT is like a well choreographed, but very complicated dance. Everything needs to come together at the right time (which is usually the very last minute), and everybody needs to work really closely together. This includes your employees, as well as your suppliers, logistics providers, and anybody else involved in your supply chain.
If the industry you’re in is extremely volatile, working with little to no inventory may be risky. In addition, JIT logistics requires you to tolerate a high level of uncertainty. If the thought already gives you a stomach ache, then JIT may not be the right solution for you.
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