Just-in-Time (JIT) Inventory Improves Supply Chain Efficiency: Myth or Reality?
An inventory management philosophy Just-in-time inventory aims to reduce waste and surplus inventory by delivering products, parts, or materials to an organization just when required. Considering this, it is easy to assume that JIT inventory improves supply chain efficiency but is that the reality? We investigate that here.
What if you could order parts for the assembly line and then have them delivered to you on the same day they’re needed for manufacturing? Well, you no longer need to wish that as JIT inventory allows you to send requests for parts to your supplier to have them delivered on time, not early or late.
So, does JIT inventory improve supply chain efficiency? To determine this, we need to dig deeper into JIT inventory systems and what they can help accomplish.
Understanding Just-in-Time (JIT) Inventory Systems
Systems that deliver production requirements ‘just in time’ for the production process, JIT inventory systems achieve their objective through effective communication and coordination with suppliers. A by-product of the JIT system is cost savings. However, this may or may not be the case depending on the industry and supplier requirements.
So, are JIT inventory management systems foolproof? Not exactly. The system minimizes the need for storing production supplies but at the same time, it increases dependency on suppliers, quality control and an ordering process free of errors. Not only that, unforeseen issues in shipping may delay the delivery of parts, delaying delivery and freezing up operations as a result.
A lot can go wrong with the delivery system that creates gaps in the supply chain and affects the end product. Also, if you want certain parts delivered to you but your supplier has run out of them, you will have to wait until the stock is replenished to place your order. All these things make JIT inventory systems not so foolproof after all. However, this does not take away the fact that a JIT system helps improve the inventory and manufacturing process, and in doing so improves supply chain efficiency.
How JIT inventory Improves Supply Chain Efficiency
Following are some of the ways JIT improves supply chain efficiency:
Eliminates the Need for Storing Inventory
Until they are required for manufacturing, raw materials are not stored on-site in a JIT inventory system. This eliminates the need for storing inventory. Not only does this save space but it also results in reduced overhead costs.
Inventory storage has a financial aspect. The space used for storing inventory could be used for other purposes and there are energy and lighting costs to incur. These costs may seem negligible now, but they add up over time. With a JIT inventory system, companies can avoid ordering surplus, which takes up space and drains resources unnecessarily.
Get Parts on Demand
With JIT inventory system, you get parts just when you need them, not early or late. And, perhaps this is the greatest benefit of using this inventory-management system.
While they are not exactly foolproof, JIT inventory systems can be extremely useful in improving supply chain efficiency. Keeping following us for more information on this or other information/news related to the supply chain industry.