JIT

We all know that an objective of warehousing is to maximise the effective use of space. EDI is ready made for a just-in-time environment. Talking about JIT systems, basically this means getting incoming goods to arrive just in time to fulfill the requirements of the production plant. The main purpose of this inventory strategy is to reduce inventory levels and lower inventory carrying costs. JIT systems helps a manufacturing plant respond quicker to customer demands. This improved customer satisfaction.

Also, to make use of JIT systems effectively, good and reliable supplier relationships is definitely a must. Having such a reliable supplier will ensure that material will be there when required to satisfy customer orders any time. Having JIT systems helps a company plan its working schedule and production lines more efficiently, knowing when will material arrive just on time. Set-up time will reduce, and there is little possibility for a stock-out situation.

More importantly, JIT systems enables a company to become more flexible in terms of production schedule and ability to satisfy customer orders.

An example: I'm sure everyone still remembers the strategy built-to-order right?

In the case of Toyota, the Japanese car manufacturer, their implementation of the JIT system not only brought them greater returns but more importantly, they had effective risk management. How do we explain this? Toyota first implemented continous quality control and redesigned every part of the vehicle to provide greater offerings and variety. The reason for this? Toyota wanted to reduce the risks of having just one standardized part for their vehicle and reduce the effects of having an order rejected. Hence, this increased their tolerance for customer demand changes. Gradually, the production lines faced less and less disruptions and this minimized inhouse inventory. With all these advantages, the adoption of JIT systems has become more common. The main advantage is that JIT is able to match supply closer to demand(in timing and quantity) so that suppliers arrive just at the time they are needed.

In short, the Just-In-Time inventory system is basically to have the right material at the right time, at the right place and in the right quantity.

DELL uses a JIT approach which minimizes inventory costs. DELL's business model is a perfect envy of many other businesses. They have a manufacturing policy of manufacturing their products as close to customers as possible. Keeping low inventory allows DELL to use up its components rapidly, hence their warehouses store less inventory, saving up space for other warehousing needs.

Here is a video clip, on how DELL adopts it's built-to-order strategy and how it incorporates this into it's warehousing operations.

However, the main problem of having JII is that suppliers are open to large supply changes. Also vulnerable to supply shocks which means that manufacturers may suddenly reduce the purchase price to suppliers. Despite, many manufacturers still adopt the JIT approach to handle inventory levels, minimize production line disruptions and customer demands variations.

Here is an interesting short clip on Bohren Inc. on Transportation Division:

Cross Docking

Cross docking is a logistics practice that is becoming increasingly recognized as an indispensable way to increase inventory speed and throughput as it bypasses the put-away process, and is used by many leading companies such as WalMart. Basically, cross docking is an operation whereby products from different incoming trailer trucks arrive at the warehouse in truckload lots. There is little and essentially no storage in this operation. Goods are immediately arrived inbound and in the large staging area close to the outbound area, value adding activities such as labeling, tracking and consolidation can be performed in the cross-docking facility. In fact, different products come together at the cross dock facility and are being sorted and combined into full shipments, ready to be delivered to final customers. In terms of adding value to customers, customers value the efficiency of truckload volumes. Such effective consolidation and performed at the highest accuracy is definitely one important strength essential in warehouses and distribution centres today.




In fact, Walmart was the first to perform this operation.


Usefulness:

• Reduces inventory storage, handling and operating costs.



• Efficiency in flow and speed of goods to reach customers.



• Increases available warehouse space, for other important products.



• Streamlines the flow between supplier and manufacturer.

An important added advantage is that cross docking requires efficient and strong networking between suppliers and distribution centres. Continuous communication and reliable logistics software integration that streamlines the flow between manufacturer and supplier. An example: WalMart makes majority of it's goods, of around 85% undergo the cross docking operation. Hence, WalMart is able to offer lower prices for retailed goods because of the savings in costs using this cross docking concept that is good with a "U" flow layout. This is the main reason why Walmart is able to offer low prices for retailed products.