Just-in-time delivery

Definition

Just-in-time delivery is a logistics strategy aimed at reducing inventory carrying costs by receiving goods only as they are needed in the production process, thus minimizing waste and improving efficiency. This approach relies heavily on accurate demand forecasting and effective supply chain management to ensure that products arrive exactly when they are needed, avoiding excess stock and storage costs.

5 Must Know Facts For Your Next Test

1. Just-in-time delivery minimizes storage costs by ensuring that materials arrive right before they are needed for production, reducing the need for large warehouses.
2. Effective just-in-time delivery relies on strong relationships and communication with suppliers to ensure timely deliveries and reduce lead times.
3. Implementing just-in-time delivery can lead to significant cost savings, but it also increases vulnerability to supply chain disruptions, which can halt production if not managed properly.
4. This strategy aligns closely with lean logistics principles, focusing on eliminating waste and improving overall operational efficiency in the supply chain.
5. Companies utilizing just-in-time delivery often leverage technology, such as Transportation Management Systems (TMS), to monitor shipments and streamline logistics operations.

Review Questions

• How does just-in-time delivery impact inventory management practices in a logistics operation?
  • Just-in-time delivery significantly impacts inventory management by reducing the amount of stock held at any given time. By receiving materials only as they are needed, companies can minimize excess inventory and associated carrying costs. This approach requires precise demand forecasting and collaboration with suppliers to ensure timely deliveries, fostering a leaner, more efficient operation overall.
• In what ways does just-in-time delivery interact with transportation management systems to enhance logistics efficiency?
  • Just-in-time delivery interacts with transportation management systems (TMS) by providing real-time data that helps optimize route planning and shipment scheduling. TMS can track deliveries and monitor supplier performance, allowing companies to adjust orders based on real-time demand fluctuations. This integration enhances overall logistics efficiency by ensuring that materials arrive exactly when needed, minimizing delays and reducing transportation costs.
• Evaluate the risks associated with implementing just-in-time delivery in international supply chains, particularly in relation to incoterms.
  • Implementing just-in-time delivery in international supply chains presents several risks, particularly regarding incoterms that govern shipping responsibilities. For example, relying on tight schedules means that any delays or misunderstandings related to incoterms—such as who bears the cost of shipping or insurance—can lead to production halts. Additionally, international sourcing can introduce volatility due to customs delays or geopolitical issues, making it crucial for companies to balance efficiency with risk management strategies when using just-in-time delivery in global contexts.

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.

Supply Chain Management: The management of the flow of goods and services and includes all processes that transform raw materials into final products.

Inventory Turnover: A ratio that shows how many times a company's inventory is sold and replaced over a period, indicating the efficiency of inventory management.