During periods of growth, manufacturers of all sizes tend to come to the same realization: they’ve run out of space for equipment and people and need to expand.
Enter the Just in Time (JIT) delivery system.
When too much of your existing space is dedicated to storing and staging materials – not making products – and you’re not looking for physical expansion, JIT delivery is an ideal solution. In this article, we’ll examine JIT in detail, explain how a 3PL can help you take advantage of it, and discuss how JIT is still relevant post-pandemic.
What is a “just in time” delivery system?
Historically, manufacturers utilized what’s now referred to as a “just in case” logistics model. With this model, every item that the manufacturing operation could require – from nuts and bolts to packaging materials – was kept on-hand by the manufacturer “just in case” it was needed. This took up (i.e., wasted) large amounts of storage space that was no longer available for production. It was also a very expensive way to operate since items had to be purchased well before they were used.
“Just in time” (JIT) is a lean manufacturing logistics strategy in which materials are kept off-site and delivered to the manufacturer precisely when they are needed (as determined by demand signals or a pre-determined schedule). These materials can be nuts, bolts, and packaging components as described above – or they can be custom kits that are pre-assembled by 3PL at a nearby location and delivered as needed.
The biggest benefit of a just-in-time delivery system is that the manufacturer’s need for on-hand inventory is greatly reduced – freeing up more space for core operations. The JIT approach also frees up associates to focus on assembly instead of non-value-adding work like unboxing parts or discarding garbage. Additionally, the manufacturer’s logistics costs can be significantly reduced as space and labor costs are typically lower at an off-site warehouse (such as that of a 3PL) than they would be at the manufacturing plant.
JIT as part of a 3PL manufacturing logistics operation
So, if the inventory is no longer with the manufacturer, where does it go? JIT delivery is often a component of a larger 3PL inbound warehousing operation for the manufacturer. In this operation, the 3PL will take on the tasks of receiving and storing materials at its nearby warehouse(s), managing the inventory, and delivering products to the plant as needed.
With vendor-managed inventory (VMI), the supplier of the materials retains ownership of the inventory until it is delivered to the manufacturer. 3PLs routinely help to facilitate these arrangements – storing the materials on behalf of the supplier and then performing final delivery. 3PL systems give the supplier secure visibility to the warehouse management system to manage min/max levels.
VMI results in substantial cash flow improvements for the manufacturer who is not responsible for the materials until they arrive “just in time.”
Is JIT still practical, post-pandemic?
In the post-pandemic world, many companies reverted back – at least temporarily – to a ‘just in case’ inventory model; hanging on to more than enough product to withstand the supply chain disruptions which were prevalent in the last few years.
This doesn’t mean that you throw the baby out with the bath water.
The pandemic – and resulting disruptions – highlighted several weak points in the modern supply chain, particularly in the sourcing of component products. This has led many manufacturers to reevaluate their supply chain strategies and diversify their sources of materials to ensure a stable supply of goods.
According to a recent Supply Chain and Demand Executive article, “businesses are now planning and pulling multiple levers to make their supply chains far more resilient and reliable. For some, this means physical changes to their supply chain footprints, such as increasing inventory of critical products, dual sourcing of raw materials and localizing or regionalizing supply and production networks.”
JIT delivery very much has a place in this smarter manufacturing supply chain. Like many other supply chain components, however, it does need to adapt to new realities. This can result in changes such as sourcing components from multiple providers and even combining JIT and just-in-case inventory models.
Whatever it means for your particular business, a 3PL that specializes in manufacturing logistics should be able to help you plan and manage it. After all, the right 3PL for your business does much more than simple storage – it’s a true partner that has the logistics expertise to match market opportunities with market challenges.
Kanban Logistics is one such 3PL. Located in Eastern North Carolina, our warehouse network specializes in logistics support for manufacturers and has worked extensively with aerospace, automotive, and other advanced companies of all sizes. To learn how we can support your East Coast operations with JIT delivery and many other manufacturing logistics operations, contact us today.