It is over 60 years old, but it is still the object of desire and the ideal of many supply chains across the globe. The Just in Time philosophy (‘Just in Time’ in English) pursues an objective that is easy to state but more difficult to achieve: having the exact amount of material (whether raw materials or finished products) in the right place and at the right time .
Its origin comes from Japan after World War II, with the Toyota brand at the forefront of this revolution. The idea behind just in time (JIT) is, by eliminating stocks, making the entire production process more efficient, optimizing costs and being able to respond to customers better and faster.
The advantages of Just In Time
One of the most immediate consequences of the implementation of just in time models is the reduction of inventories. Each step of our production system will only demand the necessary quantity from the previous link and will deliver the requested quantity to the next one, making the flow as fluid as possible and eliminating -or significantly reducing- storage needs.
During the manufacture of a product we can differentiate two moments: the time in which work is being done directly on the product, improving it and adding value, and the time in which this product is waiting, either stored or going from one place to another. another to continue to be elaborated. Just in Time seeks to eliminate these dead times and increase the effective time in which the product is being worked on.
Among the implications of this reduction in inventories are: a lower need for storage space, a lower amount of product lost in inventories, the reduction of products that become obsolete, expired or lose value while they are stored, savings in hours of work dedicated to locating the merchandise and the rest of the associated processes, etc. In addition, we will also reduce the money invested and that has not yet been made profitable, as there is less product circulating or stored waiting to be sold.
The demands of Just in Time
However, achieving a JIT work system requires effort. It should not be seen simply as an inventory management model, but rather concerns the work and decisions of the entire company. For example, purchasing departments, accustomed to seeking discounts through volume, would be influenced by a new way of working in which large purchases could not be made to store raw materials or components. Agreements with suppliers that included the delivery model at our facilities may even have to be reviewed, which may not be viable under the new situation, since it could be carried out in quantities incompatible with the new model.
The same goes for logistics. Our supply chain would have to get used to the fact that new batches will be smaller and more numerous. Logistics is very sensitive to the economy of scale and it is necessary to assess the possible change in costs. You may even need a change in logistics providers, if they are specialized in large volumes but fail to give us the new type of service we need when moving to smaller and more frequent batches.
The internal logistics of our company will also be affected. Where before we may have received a trailer, now we may receive a dozen shipments of pallets in small batches, changing our way of receiving the merchandise. Or where before our company did storage, now it is forced to do merchandise consolidation work.
Integration with suppliers and customers is another of the great challenges of just in time. In order to maintain the productive flow we need a very close collaboration with all of them. Being able to know how much quantity we need at any given time, integrate order processing and be able to rely on punctual delivery. Starting from the fluidity of information, which in pull systems goes from front to back; that is to say, from the client -who pulls the rest through the demand- to the origin of the merchandise. What is repeated in the productive process: each productive link is the one that demands the need for material from the previous one.
We will also need to test the performance of our providers. It is essential to work with companies that assure us that the supply will take place under the agreed conditions of quality, quantity and time. Otherwise, these disruptions can stop the production process.
The existence of minimum purchase volumes can also be a problem, in the event that our new demand system places us below these minimums, as well as a possible inability of our current suppliers to work with lower response times. The ideal is to technologically integrate the entire process, so that there is complete information in real time.
When looking for suppliers, the idea of “sufficient quality at the lowest cost” is no longer the only parameter, but these aspects of reliability, integration and responsiveness come into play that allow us to improve costs through the best global operation, as well as by reducing stocks. Other aspects, such as geographic proximity, also become more relevant in just-in-time environments. Since having a very distant supplier complicates the reduction of times and makes it difficult to solve supply problems that may arise.
We cannot assume that Just In Time will always be the right answer to our needs.
Is just in time always the best answer?
If something allows you to save costs and improve the service to your customers. Shouldn’t it be the ideal solution for everyone? But it is not that simple. It cannot be assumed that moving to JIT will always be beneficial and that it is the ideal solution for all companies.
Such a profound change is not easy and depends on several factors to be successful. It needs a change in the business culture, management involvement, the type of suppliers we have -perhaps a key supplier for us cannot adapt to the model and we cannot find a replacement-, etc.
In addition, there are companies that adapt better than others. If we have a very volatile and difficult to predict demand, the JIT can help us when demand falls sharply -by having less quantity of the components necessary for production- but it could run into difficulties in unforeseen spikes. For example, we may have problems obtaining raw materials from our suppliers because we do not have a large quantity stored at our facilities.
Difficulties to take into account before applying JIT: business culture, difficulties that small suppliers may have, logistical factors, the type of demand (if it is very predictable and stable or if it is very crazy, it may be convenient to have stock), changes in the prices of raw materials (which can advise more massive purchases and avoid possible shortages or price increases) or in obtaining them (problems with suppliers) that may leave us without stock. Unforeseen weather, labor, etc. These factors can also especially hurt a JIT organization.
Finally, it must be considered that the more we adjust to a purely JIT operation, the more exposed we will be to possible risks. The continuous reduction of stock, up to a theoretical zero stock, could even eliminate the existence of safety stock, which implies working ‘without a network’. Companies must be able to measure very well what stocks they want to keep, what consequences a stockout or production stoppage would have, and how and in how long they could solve it.
The JIT increases the importance of logistics in the company. It is necessary to make it shorter and faster, more consistent in transits and integrate all logistics activities, including suppliers in that overall vision.
The requirements of the just-in-time model guide companies towards process improvement, since it is essential for them to comply with deliveries on time and form for their operation, simplify processes, standardize them as much as possible and ensure their replicability. In addition to improving the relationship with suppliers and customers.
The possibility of getting to know the customer more closely also allows us to better define their needs and be able to incorporate them into the value production system of our processes.