Estimated reading time: 5 minutes

Customer expectations are higher now than ever before.

For many firms, mastering the intricacies of supply chain management can be the difference between thriving and being left behind by the competition. 

One strategy that has revolutionised this field is Just-in-Time (JIT) delivery. 

Rooted in Japanese manufacturing practices and widely popularised by its successful implementation by Toyota in the 1970s, JIT is more than just a logistics strategy; it’s a philosophy that intertwines efficiency, quality management, and continuous improvement. 

This post delves into the various facets of JIT delivery, exploring its definition, impact on suppliers, benefits to manufacturers, and the pivotal role of purchasing departments in its implementation. 

What is Just-in-Time delivery?

JIT delivery is a supply chain management strategy aimed at reducing inventory costs and improving efficiency. 

Its core idea is to align raw material orders from suppliers directly with production schedules. Companies employing JIT strategies typically order smaller quantities of materials to be delivered right before they are needed in the production process rather than maintaining extensive, costly inventories.

By minimising inventory levels, companies can reduce the costs of storing, managing, and insuring inventory and also reduce waste by preventing overproduction and excess inventory. 

However, JIT delivery requires precise coordination and strong relationships with suppliers. It can be vulnerable to disruptions in the supply chain, such as delays in supplier deliveries or sudden changes in customer demand, as was experienced during the COVID-19 pandemic. 

Successful implementation of JIT delivery involves meticulous planning and often requires a cultural shift within the organisation to embrace flexibility, quality management, and continuous improvement.

Does Just-in-Time delivery benefit suppliers?

JIT delivery presents a mix of benefits and challenges for suppliers. 

On the positive side, this method can forge more robust and collaborative relationships between suppliers and buyers since suppliers must become more integrated into the production schedules of their clients, often leading to a more stable and predictable business environment.

For example, suppliers can use real-time tracking tools to monitor the progress of customer orders and adjust their own production schedules accordingly. 

Suppliers can then plan their production and inventory management more effectively with better visibility into their customers’ needs, ensuring their deliveries align closely with real-time demand. 

Additionally, the JIT philosophy, which emphasises efficiency and minimising waste, can encourage suppliers to streamline their processes. This pursuit of continuous improvement often leads to more efficient operations and innovations in managing production and delivery schedules.

However, these advantages are balanced by notable challenges. 

The JIT system requires suppliers to be highly flexible and responsive to changes in demand, which can sometimes strain resources and require a more adaptive production process. 

Moreover, the emphasis on timely deliveries places significant pressure on suppliers, as any delay can have a ripple effect throughout the supply chain, potentially leading to strained relationships and financial penalties.  

For instance, if a supplier is unable to meet a deadline due to unforeseen circumstances, it may be required to pay for expedited delivery to ensure that the customer is not affected, even though such costs may be unexpected and unplanned.

Another consideration is that JIT typically involves smaller, more frequent orders rather than large bulk purchases. While this can aid in reducing inventory costs, it might also lead to increased transportation costs and lower economies of scale.

What benefits do the manufacturers receive from JIT delivery?

JIT delivery offers several significant benefits to manufacturers, fundamentally reshaping how they manage their production and inventory.

Firstly, JIT significantly reduces inventory costs. By receiving goods only as needed in the production process, manufacturers can minimise the capital tied up in stock, leading to lower storage and insurance costs, as well as decreased risk of inventory obsolescence.

Such a lean approach to manufacturing also encourages a smoother production flow, with less clutter and fewer delays caused by excess inventory, often resulting in shorter lead times and faster turnaround times, which can be a crucial competitive advantage.

However, it’s important to note that these benefits require a highly coordinated supply chain, reliable suppliers, and a relatively stable economic environment. 

Many of the pandemic-era supply chain disruptions stemmed from overly optimised supply chains. For instance, many companies had to reduce or completely suspend their production due to shortages of key components, which could have been mitigated if they had contingency plans in place to ensure the availability of backup sources.

Manufacturers must invest in building strong relationships with their suppliers and often need to adapt their internal processes to fully realise the advantages of JIT delivery.

What can purchasing do to implement JIT deliveries?

As their decisions directly impact inventory levels and production efficiency, purchasing departments play a crucial role in the successful adoption of JIT, something that will require a strategic shift in purchasing practices. 

To start, purchasing needs to develop a deep understanding of the production process. This involves close coordination with the manufacturing team to determine the precise materials needed and the timing of their requirement. Without precise coordination, the overall picture will not come together.

The next step is building solid relationships with suppliers. This needs to go beyond standard supplier relationships and often involves collaborating with suppliers to improve their understanding of the company’s production needs and schedules. In some cases, suppliers may even need to be located nearby or have the ability to deliver quickly to meet the JIT requirements.

Investing in technology can be a game-changer. Advanced forecasting and inventory management systems can provide real-time data, improving the accuracy of order quantities and timing. These technologies enable purchasing departments to make informed decisions based on current production needs and market trends.

Finally, behind any successful JIT delivery scheme, there must be a culture of continuous improvement where employees and leadership are open to reviewing and adjusting strategies as needed

Implementing JIT deliveries is a comprehensive process that requires purchasing to align closely with production needs, build strong supplier relationships, embrace flexibility, leverage technology, and continually seek improvements.