Just-in-time delivery

Definition

Just-in-time delivery is a strategy that aims to improve a business's return on investment by reducing in-process inventory and associated carrying costs. This approach relies on precise timing in the supply chain, ensuring that goods arrive right as they are needed in the production process, minimizing excess inventory. By synchronizing production schedules with delivery schedules, companies can enhance efficiency and responsiveness to market demands.

5 Must Know Facts For Your Next Test

1. Just-in-time delivery originated from Japanese manufacturing practices, particularly at Toyota, during the 1950s as part of their effort to improve efficiency and reduce waste.
2. This approach relies heavily on reliable transportation networks and effective communication between suppliers and manufacturers to ensure timely deliveries.
3. Companies using just-in-time delivery can experience reduced costs associated with warehousing and storage, as they maintain lower inventory levels.
4. While just-in-time delivery can increase efficiency, it also makes companies more vulnerable to supply chain disruptions since they rely on consistent delivery schedules.
5. The implementation of just-in-time delivery has led to innovations in logistics and transportation technology, including tracking systems and automated inventory management.

Review Questions

• How does just-in-time delivery enhance efficiency in the supply chain, and what role does transportation play in this process?
  • Just-in-time delivery enhances efficiency by aligning production schedules closely with delivery times, reducing the need for large inventories. Transportation plays a critical role as it ensures that materials and components arrive precisely when needed. Reliable transportation networks enable companies to minimize delays, allowing them to respond quickly to market changes without overstocking, which can increase carrying costs.
• Analyze the impact of just-in-time delivery on inventory management practices within businesses.
  • Just-in-time delivery significantly alters inventory management practices by encouraging businesses to maintain minimal stock levels. This shift leads to reduced holding costs and promotes a leaner operation where resources are allocated more efficiently. As businesses adopt this model, they must also invest in robust supply chain partnerships and communication systems to ensure that materials arrive on time, thus necessitating a cultural change within organizations regarding their approach to inventory.
• Evaluate the potential risks associated with just-in-time delivery in the context of global supply chains.
  • While just-in-time delivery offers several benefits such as cost reduction and increased responsiveness, it also introduces significant risks, especially in global supply chains. Factors such as natural disasters, geopolitical tensions, or pandemics can disrupt transport routes and lead to delays in receiving critical components. These vulnerabilities mean that businesses must find a balance between maintaining lean inventories and having contingency plans to mitigate potential disruptions, ensuring operational resilience without sacrificing efficiency.

Related terms

Lean Manufacturing: A production practice that considers the expenditure of resources in any aspect other than the direct creation of value for the end customer to be wasteful and thus a target for elimination.

Supply Chain Management: The management of the flow of goods and services and includes all processes that transform raw materials into final products, focusing on maximizing customer value and gaining a competitive advantage.

Inventory Turnover: A ratio showing how many times a company's inventory is sold and replaced over a period, indicating efficiency in managing inventory levels.