Wednesday, January 29, 2014

Just in Time Planning - Now a Cornerstone of Successful Supply Chain Management

With Warehousing Costs Prohibitively Expensive Producers Can No Longer Pile High
Shipping News Feature

WORLDWIDE – With expensive costs for warehousing consignments waiting for orders or shipping instructions the days of piling freight high in expectation of sales are pretty much over and efficient and profit-minded supply chain managers now anchor their production and shipment schedules on just-in-time planning. This technique utilises real and current customer demand to set goals, thereby delivering highly coveted product that sells fast and avoids the costly waste of surplus.

As was formerly the case it might seem more cost and time effective to use just-in-case planning to mass produce product ahead of time with demand unknown, in the hope that customers are so malleable to marketing that they will buy products because the stock is available and advertisements are so enticing. Also the temptation is to keep the production line rolling even when stock lies unsold and just keeps incurring rising storage costs.

Research shows however that method is often too much of a gamble, resulting in money wasted to store product for months or years and profit lost from deep discounts just to move the product to buyers who are lukewarm about it. Now the need to streamline the supply chain has led to the development of companies such as Neovia which specialise in designing models to ensure optimum efficiency, and successful supply chain managers are realising that centring everything on customers' current tastes and preferences is a far better solution.

Because just-in-time planning elevates customer demand and the driving principle, supply chains provide variety and customisation over quantity. Historically, some masters of the just-in-time method took direct orders from customers and created individualised products, such as computers or cars. This created a time delay, but resulted in high customer satisfaction. Toyota, the Japanese auto giant, calls just-in-time ‘a philosophy for the complete elimination of waste’ and, as one of the pioneers of just-in-time planning, made a name for themselves as a safety-focused company with high standards that people can trust and with a reputation that led to one of its cars, the Camry, becoming one of the most bought and popular autos of all time.

Since just-in-time planning is all about the finicky customer, quality is one of the highest principles of just-in-time planning. Supply chains that deliver faulty product with cheap materials, bland design and poor manufacturing will not be successful because they will incur a negative reputation. If that happens, customer demand for the product won’t matter because buyers will avoid and share their disdain with others. Today, most supply chains use research to anticipate custom features that will be popular with buyers from a certain location or demographic, then they deliver the different styles to specific stores and showrooms where research can match the product to customer wants.

To deliver the variety and quality necessary to make a just-in-time process successful, supply chain managers must be committed to investing in constant research, not just customer research, but also research on the latest technology, equipment, plant design and best practices in their industry and the ensuing logistics. The former will ensure the chain is bending to the constantly changing trends and tastes that customers' desire since; the latter will ensure high calibre production and delivery that rivals the competition. Managers at every level of the supply chain must be willing and daring enough to change procedures to heed the results of research. Just-in-time is as much about innovation as supply.

In summary, here are some practical tips to enhance a producer’s just-in-time model and ensure the maintenance of quality so essential to its success:

1) Increase inspection of products for safety and quality before delivery.

2) Keep a strict eye on inventory and notice while surplus is growing; then adjust production cycles.

3) Audit overall supply chain processes every few years to identity where money and time are being lost, whether through old and inefficient equipment, poorly trained workers or bad methods.

4) Create a company culture of being avant-garde so that division managers in the supply chain will be comfortable brainstorming ways to make constant improvements, even if they defy tradition.

5) Hire an established, reliable firm to conduct quarterly research amongst your target audience and provide analysis and recommendations.

6) Study competitors’ methods and see how to incorporate any new industry developments or technologies to gain an advantage.

This was a guest article by Willie Pena, a freelance writer, video producer, visual artist, and music producer. He prefers the Oxford comma. In addition to writing for firms such as IBM, Colgate, Transunion, Webroot and a multitude of private clients and websites, he also shoots, directs, and edits the hit celebrity web series ‘Teens Wanna Know’.