The Just-In-Time (JIT) warehouse model is considered a perfect fit for goods that have a shorter product life such as food or drink. You don’t want the fresh veg that you have just freighted from abroad to be sitting in your warehouse, going off when it should be on your customers plates.
But it has taken a major hit to its reputation in recent years after the strains of Covid-19 and Brexit showed up its flaws. It used to be thought of as the inventory model that everyone wanted to have and it’s not hard to see why with less need for supply chain staff and expensive warehouse space.
WHAT’S JUST- IN-TIME INVENTORY MANAGEMENT?
Just-In-Time is based on only holding the inventory in your supply chain that has been ordered or is forecasted to be ordered. Raw materials or products come into the warehouse and are only held there for a short amount of time before being used in production or sold.
You get the savings from fewer staff and less inventory space needed plus reducing the potential costs of having to write off stock that was stored and not needed or has spoiled.
For food and drink you will get fresher food in stores as you have reduced the time between harvest and consumption.
The other model that Just-In-Time is compared against is Just-In-Case (JIC) where you keep spare inventory on hand to deal with demand. It’s more expensive but it does usually mean that you can get stock to your production or customers as and when they want it.
WHAT DO YOU NEED TO MAKE IT WORK?
- Predicting what your customers will buy so that you can fulfil those orders. This is usually based on patterns of buying behaviour from previous years whilst keeping in mind other major factors such as changes in price points, distribution points and competitor activity.
- You’ll also need adaptable manufacturing as you need to make the right products at the right time rather than having long efficient production runs which would lead to overstocking.
- Real time tracking of where your stock is so you can tell where you are short.
- You will need a robust logistics system to make sure that you can get the products to where you need them in time without any contamination or damage.
SO, WHAT BROKE JUST-IN-TIME?
Covid-19 Messed Up Demand Forecasts
Covid-19 changed the way people shop in a way that completely outstripped what the supply chain could handle. Consumers were stuck in their homes which led to a spike in demand for household supplies and “take home” food rather than “ordered out” or “on the go” food.
You might have thought that a lot of the shortages in the supermarkets were down to a small group of people who were buying in bulk and stockpiling selfishly. However, the sales data shows that the stockpilers did not make that much of a dent in stock levels.
According to Market research firm Kantar, the shortages were actually caused by the majority of shoppers just buying more than they normally would and shopping a bit more frequently. If everyone does it by even a small amount, then the demand ramps up really quickly because there are just so many shoppers.
Brexit Slowed It Down
When the UK left the European Union, it left us all with extra paperwork, new checks, additional costs and a lot of delays.
According to the London School of Economics the extra red tape added an average £210 to UK food bills from 2019 to 2021.
Delays do not just add cost to the transport, but it also adds to the time that the food is out of storage and there is a knock-on effect of shorter product life when it does get on shelf.
CAN IT STILL WORK?
Just-in-time can potentially still work but just not as efficiently as before and as an inventory model it will probably become more “crisis prone”.
The most common way to work around this is to move towards a more Just-In-Case approach in certain critical areas. Supply chain managers will look at where there is the most risk and try to build more inventory in those areas.
Making your manufacturing more agile is always a balancing act against making it more cost effective and every case will be individual to the industry and the company.
You will need to look at how your logistics can adapt to a changing landscape. What happens if there is a sudden rise or fall in demand? Can you change routes quickly to take advantage of different opportunities?
Challenge your logistics supplier to give you the most time and cost-efficient route taking into account, import VAT, customs clearance and duties. Many will simply stick to the routes that they are used to.
If you would like to discuss any ways in which Baxter Freight can help optimize your supply chain, then please get in touch.