Just in time

What is the just-in-time method?

The “just in time” method, symbolised by the acronym JIT and also known as “lean production” consists in only replenishing stock once provisional or fixed orders have been placed within the company. Once the order is known, the company places its order for the raw material, components or goods required for the retailer. Delivery then occurs with limited or non-existent storage time. This kind of management is efficient when wanting to reduce stock levels to close to zero. It therefore entails a drastic drop in storage fees, whilst complying with the products’ obsolescence date. Originally, this method was used in very small Japanese shops that were unable to store several products at the same time. It implied several deliveries per day. Retail pharmacies use the just-in-time method. They receive daily deliveries from a dispatcher.

Though stock is a main source of revenue, it also generates large fees. Reduced stock requires less space, handling, transport, disposal, depreciation and fewer cash disbursements. This being said, to work efficiently with customers and suppliers, just-in-time stock management requires strict compliance with the following rules:

• Draw up your provisional needs in terms of goods or production;
• Minimise transport fees and bulk breaking times by focusing on local sourcing;
• Being absolutely sure to deliver unaltered goods on time;
• Favour flexible hours;
• Ensuring utmost proficiency in terms of ordering processes and quantities.

Specificities of the just-in-time method

Just-in-time or lean product can be operated in two different ways:

• Using a push or kanban system, if production is based on provisional random sales;
• Using a pull system, if production is based on effective, undoubted orders.

Examples and practical applications

Advantages and limits of the just-in-time method

• The just-in-time method encourages more flexibility regarding deliveries, as well as responsiveness and competitiveness.
• Permanent communication is established between the company’s partners: producers, assemblers, logisticians, suppliers and lastly distributors. The main risk lies in chain breaks.
• Production forecasts are dictated by customers to their suppliers at different moments: firstly, quantitative forecasts based on month N+1, week N+1, day N+1 and hour N+1. These forecasts present - if required - the detail of any parts or sub-parts to be delivered, i.e. a product’s components.

It is the perfect solution to limit loss during transport, damage during handling, depreciation caused by seasonality or expiry dates. Retailers can maximise margins by strongly reducing expenses. Only products that have already been sold are purchased. This guarantees good treasury management.

Barriers to adopting the just-in-time method

The first constraint is a strong one. Though costs pertaining to storage and loss no longer have an impact on the retailer’s results, they do on the provider’s - as they have to respond to production. They are at the very least required to store their production or components. Furthermore, the supply chain needs to be sound. Even the tiniest fault entails delays that can be hard to catch up with. Mutual trust when it comes to the quality of the partners involved is essential for this kind of management. The JIT (just in time) method is a prerogative for companies with regular orders.

 

Regulatory cornerstones

• Transport contract, if there is one
• Sales contract

Otherwise, the Internal transport orientation law, no. 82 - 1153 dated 31 December 1982 that made a written agreement mandatory