Just-in-time (JIT) delivery and its benefits in supply chain optimisation
With new and cutting-edge technologies, the retail industry has seen significant changes after Covid-19. The e-commerce industry has seen huge fluctuations in demand and supply, yet it accounts for over 13% of global retail or USD 215 bn.
Constantly changing and expanding customer demands, the need for faster delivery, and warehouse inventory optimisation have led businesses to adopt a just-in-time (JIT) order fulfilment methodology.
This article explains just-in-time inventory management and its importance and benefits in the e-commerce industry.
What is just-in-time delivery?
JIT delivery limits the inventory in stock to the right amount to meet the demand at any given time. The goods do not sit on a warehouse shelf but arrive only when there is an order. JIT delivery became highly popular during the Covid-19 pandemic when businesses were scrambling to fulfil the demand and keep profits and efficiency high.
From reducing the warehouse space to lowering the cost of storage, there are numerous benefits of using the JIT model in e-commerce.
How does just-in-time inventory management work?
The JIT model puts the focus on quality and not on getting the lowest price. It requires reliable partners and long-term contracts. This concept originates from ‘Kaizen’, the Japanese philosophy Toyota adopted to produce vehicles only when there was an order.
JIT aims to eliminate wastage and the need for large storage spaces and associated costs and increase the efficiency of operations.
While the JIT elements may vary for every organisation, the most common ones are –
- Continuous improvement – Identify inefficiencies within the supply chain and formulate ways to improve the overall function. For example, streamlining the unloading of the delivery vehicles and stocking the shelves, thus reducing delays.
- Minimal wastage – Cut down the wastage in inventory, transportation, and human effort. Do not store the items that do not have an order from the customer yet.
- Automation – Automate the small and mundane tasks to make the supply chain efficient and fast-moving. For example, the automatic scanning of bar codes for information as soon as the packet arrives and before it leaves reduces the time it spends in the warehouse.
JIT requires an exceptional supply chain. Any minor breakdown can cause a major setback to the overall delivery timelines.
Benefits of just-in-time inventory in supply chain optimisation
The JIT methodology of inventory management uses a range of techniques to streamline and optimise supply chain operations. It focuses on working with smaller lot sizes, increasing the transparency between demand and supply. Some of the benefits of JIT are –
Greater order accuracy and lower cost
JIT delivery reduces any wastage of warehouse space, thus lowering inventory costs. It optimises the warehouse space for storing other items, thus increasing the capacity to take more orders. JIT reduces errors with inventory control, increases efficiency, and ensures the accuracy of the stock.
Better inventory management
JIT gives the capability to do accurate demand estimates. Build the fulfilment centre strategically and ensure proximity to plan for the lead times and deliver the goods to the customer quickly.
Achieve higher waste reduction by eliminating obsolete inventory and dead stock. This makes it easy to identify and fix defective stock, thus reducing cost of scraping.
High efficiency and productivity
Improve the efficiency of the warehouse and the supply chain by reducing the raw material, extra inventory, and the need for storage space. Receive product deliveries in as small quantities as possible multiple times a day, reducing the items from just sitting on the shelves for too long.
Source from suppliers that are located nearby, thus reducing the need for holding a safety stock.
Eliminate delays due to bottlenecks within the supply chain and warehouse operations. Achieve shorter delivery and dispatch cycles and compress the operations into essential steps that deliver items quicker to the buyer.
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How can Infosys BPM help?
The Infosys BPM systems and technologies help you assess the health of your supply chain. Build flexible yet robust supply chains through innovation and digitisation with a focus on a just-in-time (JIT) model of delivery.
Inventory optimisation helps improve the working capital, reduces obsolete items, replenishes faster, and achieves better service levels. Read more about the just-in-time service model and supply chain optimization at Infosys BPM.