The Wide-Ranging Impact of Just-in-Time Inventory Management

Just-in-time (JIT) is an inventory management process that ensures that materials, labor, and other resources are available when needed. JIT is typically used by manufacturing industries that carry out daily production, such as car assembly plants.

With JIT, resources required are made available with no shortage, thus there are decreased holding costs and purchases of defective products.

JIT was widely adopted in the 1990s to keep inventory and other resources at stores and reduce costs. The savings allowed companies to reduce prices, increasing consumer demand and leading to more production and industry growth (Helper & Sake, 2012).

 

Transporting for JIT

Companies that use JIT often use air transport as the quickest means to deliver goods from suppliers worldwide. This approach enables companies to more easily switch suppliers if resources needed to sustain the demand of production are not available domestically (Nemetz & Fry, 1998).

Firms that require more material at a cheaper cost often use ocean shipping for short distances. This method is slower, so orders are often larger to ensure constant production (Nemetz & Fry, 1998).

 

Impact Across Industries

The growth of JIT has triggered the development of effective communication systems to ensure that suppliers deliver goods in time. JIT has also led to government policies. The Interstate Commerce Commission has formulated policies for trucking goods that have supported the goal of getting goods to consumers at the right price as well as the goal of profitable companies (Helper & Sake 2012).

JIT growth has resulted in new transportation industries that have reduced expenses for many companies. More trucking industries offer JIT delivery, which has increased employment in the industry. As a result, JIT has raised the US GDP by a significant percentage (Helper & Sake, 2012).

 

Challenges Ahead

 

The challenges facing JIT growth include the potential for supplier production delays that can cause production delays downstream. Communication systems and quick transport methods can help mitigate this risk (Helper & Sake 2012).

There are instances where JIT is not applicable. For example, in the energy industry, the petroleum and gas required for daily operations must be made available in large quantities in order to ensure constant productivity (Helper & Sake, 2012). So, the industry must lay out a strategy to maximize energy resources despite increased holding costs. Thus, some industries that produce essential goods and resources and rely on oil and gas may stop using JIT if such commodities become scarce. (Helper & Sake 2012)

The growth of JIT has solved many problems by ensuring rapid response to increasing consumer demand. It has also resulted in technological advancements and created jobs both internationally and domestically. It is likely to continue to play a role in U.S. manufacturing for years to come.

Guest Post by Dr. Keith A Wade

References

 

Helper, S., & Sake, M. (2012). Supplier relations in Japan and the United States: are they converging? Sloan Management Review

 

Nemetz, P. L., & Fry, L. W. (1998). Flexible manufacturing organizations: implications for strategy formulation and organization design. Academy of Management Review, 13(4), 627-639.

 

Source : http://blogs.dcvelocity.com/reverse_logistics/2015/10/the-wide-ranging-impact-of-just-in-time-inventory-management.html