Is Just-In-Time (JIT) Logistics Realistic Today?
If you run out of grocery supplies and there’s still a deadly virus spreading outside, what would you do? You have two options: either go to the nearest grocery store and run the risk of getting infected, or order it online, have it delivered at your doorstep, and decrease the chance of catching the virus. By ordering groceries online, you have instantly replenished your supplies without leaving the house. Thanks to logistics, we have access to such services. In this time of uncertainty, logistics plays a vital role in helping us overcome this great challenge.
Logistics: Our Bridge to the Outside World
“The line between disorder and order lies in logistics.” This famous saying by Sun Tzu, author of the book The Art of War, rings true today as we continue to adapt to the new normal of staying indoors. It’s in times like these that logistics come in handy. According to Investopedia, logistics is the overall process of managing how resources are acquired, stored, and transported to their final destination. It’s like a bridge that connects us to the outside world when we can’t physically go outside — from the business sector to us. It links the entire supply chain. We can still buy things and avail services even in the comfort of our own homes while companies continue producing and selling their products despite the limited workforce. Now more than ever, companies have to think ahead and plan their logistics during this global pandemic to be sure their shipments arrive on time while minimizing inventory and storage expenses. For this very reason, many companies currently apply Just-In-Time (JIT) logistics to their services. What is JIT logistics? Is it realistic today?
What is JIT?
JIT logistics originated in Japan, first known as the Toyota Production System (TPS). It revolves around the philosophy of efficiency — by doing only what is needed, in the amount that is needed. Its focus is mainly on the management of inventories and the reduction of safety stock. But why is this important today?
To help you understand the real essence of the JIT method, let’s take a look at the “bullwhip effect”. When a certain product booms in the market, the consumer’s demand increases. When this happens, the links of the supply chain (a.k.a. the suppliers) will also demand more stocks of that certain product from the manufacturer. This keeps their own safety stock and sustains the market’s demand. This could be overwhelming for the manufacturer once it receives a larger number of orders from the suppliers than what they usually produce. In order to keep up, the manufacturer will have to double-time production work. As a result, more time will be needed to accumulate the orders before they can be distributed to the suppliers causing delays on the deliveries, resulting in unsatisfied customers.
This is where JIT logistics enters the scene. The JIT method identifies where the real problem is. It deals with the transparency of data between the supply chains to avoid storing more safety stocks. Therefore, the manufacturer has a clearer picture of the “actual consumers demand” rather than an artificially increased demand due to the bullwhip effect. Production and shipment of goods are only done as it is needed rather than in advance. There’s no need to ramp up production. Inventory work will be much easier to monitor. Storing only the materials needed at the time will also minimize the warehousing cost. JIT logistics is designed to minimize such delays, create a faster response to the market, and make customers happy. All in all, the logic of this method lies with the exchange of data transparency, efficiency, and cost-cutting — a survival tool that fits our ever-changing world today.
