Holding inventory incurs significant cost to an organisation and JIT aims to eliminate this as much as possible. Eliminating lead times not only reduces inventory but also reduces the potential time incurred waiting for delivery which will inevitably reduce production. This requires significant flexibility and closer involvement from suppliers as they are requested to deliver materials to the point of consumption just in time to be used. Consequently, reducing inventory and lead times require a significant amount of planning and management of the supplier relationship by material planners. This also involves building a strong cross-functional relationship with the purchasing function.
Reducing waste caused by failures and delays such defective products or late deliveries is achieved through a commitment to quality. A common approach is the Total Quality Management (TQM) approach which aims to continuously improve the quality of products and processes throughout the supply-chain.
With the increase in global supply sources as well as global consumer markets, the role of the logistics function to implement and manage the JIT philosophy has become more challenging and is growing in importance.
As a consequence of JIT, the following objectives can be achieved:
- Reduction of wasteful activities reduces cost and improves the overall profitability of an organisation
- Reduction of lead-times can lead to competitive advantage and improved customer satisfaction
- Improved quality can lead to competitive advantage and improved customer satisfaction