Just-in-time delivery has long been touted as a key cost-saving, quality-maximizing strategy in the shipping industry. However, prolonged logistics challenges in recent years have called the method into question due to its lack of consideration for unexpected circumstances.
With the pandemic changing the conversation around operating methods, many companies are struggling to figure out how to rework their organizational strategies, and whether just-in-time should still be a part of that.
What is just-in-time delivery?
Just-in-time (JIT) is a method of inventory management aimed at aligning shipping and production with the sales cycle. In other words, companies practicing JIT are focused on minimizing inventory by ordering, creating, and storing only the materials they need at any given time.
Many know JIT as a spin-off of the Toyota Production System (TPS), or the lean management model. Founded by Toyota engineer Taiichi Ohno, this framework revolutionized the western manufacturing industry when it was introduced in the 1980s.
During this time, many businesses focused on improving efficiency by minimizing manufacturing costs and operating at maximum capacity at all times. TPS countered the traditional business sense to increase profits by maximizing economies of scale, instead introducing continuous improvement by identifying systemic inefficiencies.
Looking for a good read? Check out The Goal: A Process of Ongoing Improvement by Eliyahu M. Goldratt to learn more about lean management and the Theory of Constraints.
Although JIT was originally modeled in the manufacturing process, it’s since been applied to a variety of industries. Many retailers in particular have realized that implementing JIT can help reduce wasted inventory while saving warehouse space. Additionally, following lean practices can enable them to pivot more quickly, giving them an edge over competitors.
Downsides of just-in-time
Despite the well-known benefits of JIT, many companies find it too risky to implement at their own organizations. Because lean management relies on efficiency and communication across the production process, a single delay can throw off the entire system. This can put excess pressure on the organization to keep everything running smoothly, knowing that one unexpected obstacle can reverse all of the progress they’ve built up until that point.
In addition to the risks it poses, the transition into JIT can also be costly and time-consuming. As an organization-wide initiative, it often requires a significant investment into change management. Some companies following just-in-time practices even adopt analytics solutions to predict future demand and market conditions to guide their decisions. Because of the adherence to flexibility and continuous improvement, it also requires constant monitoring and revision from the management team.
The shipping crisis: Why shippers are moving toward just-in-case delivery
If you’ve been following logistics news over the last couple of years, you may have heard of the industry-wide shift toward just-in-case (JIC). With the ongoing market shocks brought on by the pandemic (and political conflicts even before), many shipping companies and retailers have uncovered holes in their just-in-time practices.
Some believe that there’s no place for JIT in a pandemic-era world, stating that this framework is “designed for perpetual motion” and therefore unable to function when faced with delays. Opponents of JIT cite examples of shortages and price hikes while calling for logistics companies to adopt more reliable alternatives.
JIT is well-known for its lack of crisis management, as most adherents refuse to hold stockpiles or “just-in-case” inventory. Some industry experts point to the automotive industry as a prime example of the failure of JIT, suggesting that the chip shortage could’ve been avoided if they’d followed traditional methods of keeping back-up inventory on hand.
However, others propose that these effects are the result of poor implementation of JIT rather than a reason to throw out the framework as a whole. In fact, Toyota, a leading proponent of lean principles, has been practicing a hybrid approach to JIT since 2011. As a result, when it predicted a chip shortage at the start of the pandemic, it ordered additional materials for its emergency stockpile. This proactive move enabled it to continue business as usual at the start of the crisis.
How to adapt in the changing logistics landscape
As uncertainty persists in the shipping industry, companies are increasingly seeking out ways to keep their processes running smoothly. In the end, shippers are trying to answer the question, “How can you run an efficient operation while preparing for chaos at any moment?”
For many companies, the answer is to follow Toyota’s lead by streamlining your inventory management while using business insights to adjust the balance as needed. Conducting real-time analysis may require additional resources, but that might be what it takes to stand out from competitors.
Whether your customers follow just-in-time, just-in-case, or some combination of the two, streamlining your operations is critical to running a successful business. Step up and take the lead to improve visibility, communication, and analytics for your customers by launching a customer experience platform. Book a demo to find out how Logixboard can help you and your customers get a leg up in the forwarding industry.