Just in time delivery | Cutting Costs While Remaining Competitive

on August 15, 2018

Reducing costs and improving competitive advantage are two of the main drivers in any business. For that companies must ensure that every part of their business is aligned and ready to meet customer requirements. This is particularly important for those in just in time (JIT) production.

At the time of production, each ‘moving part’ needs to arrive at the right place at the same time. To increase the efficiency of operations an increasing number of companies have decided to switch to the ‘just in time’ production method.

The JIT method means producing ‘only what is needed when it is needed, and in the amount needed’. In other words, the business holds no stock, waste is eliminated and suppliers deliver raw materials and components only when they are needed and when the order is placed.

Toyota is probably the most notable example of just in time implementation simply because it was the first company to effectively use it. It is said that there are two industries for which JIT is a really good fit; retail and manufacturing. In fact, the success of this strategy relies on how precise the coordination between businesses and their suppliers is. In addition, effective JIT implementation requires investing in information technology as well in order for suppliers to be automatically notified when orders are placed. The full embracement of digitalization in the automotive sector is expected to bring annual economic benefits of £4.3bn to manufacturers and £2.6bn to suppliers.

While JIT inventories are proven to drive financial returns, implementing JIT comes with challenges that require complete information sharing amongst shareholders to streamline the process. JIT is also heavily dependent on third parties, therefore, any kind of disruptions among the supply chain can have a serious impact on the production process.

In 1997 a fire took place at a brake parts plant owned by Aisin, the sole supplier of P-valve part for Toyota vehicles. Aisin had no capacity to produce the component anymore, and Toyota had to shut down production for several weeks. The fire cost Toyota nearly $15 billion in lost revenue and 70,000 cars.

Producing car involves assembling around 30.000 parts which means running just in time production requires a great deal of coordination.

Generally, failures fall into 2 categories. Quality failures and failures of timing. It only takes one supplier of raw materials to not deliver the goods on time to shut down a manufacturer’s entire production process. It is estimated that, in the automotive industry, the cost of stopping the production line for just 1 minute equals $22,000.

To ensure just in time management systems are running to their full potential the need for end-to-end visibility among the supply chain needs to be addressed and implemented. Internet of Things (IoT) technology is now making it possible to track inventory with pinpoint accuracy achieving full visibility and allowing companies to react immediately to unforeseen supply chain fluctuations.

For businesses heavily dependent on goods arriving at the right place at the right time reacting to supply chain failures can be just as important as preventing them. Of course, the erasing of any and all delivery failures is the ultimate goal. However, unforeseen circumstances often arise leading to delivery failures. Car accidents, traffic, delayed flights and customs checks often lead to disruption. ParceLive is enabling those using just in time deliveries, specifically in the automotive sector, to react and be pro-active about failures in real time.

Using global networks and the Internet of Things ParceLive can help those in the automotive industry react in real time to incidents out of their hands. With parts often travelling across multiple borders and carriers on their journey to production the service enables invaluable visibility for the just in time production line.

The six sensors of ParceLive allow users to not only use location related information but also predict if goods may have been damaged or exceeded temperature requirements along their journey. For those using just in time delivery the ability to understand before an item has even arrived if it is likely to be damaged or not is a new capability.

To find out more about how ParceLive can improve your just in time delivery systems and offer real time data request more information by clicking the link below:

Written by Ana Bila

Stephen HartnettJust in time delivery | Cutting Costs While Remaining Competitive

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