TRANSCRIPT

Title Lesson 4 Micro lecture 1

Module Introduction to Supply Chain Management

Lesson 4

Narrator Gareth Nelson

Date February 2021

Content
JIT can be applied to the four primary logistics functions.
• Customer service
• Order processing
• Inventory management
• Transportation management

We will first consider JIT in customer service. Customer service is a final output, either a good or a
service or a combination of both. In logistics customer service is measured by the quality with which
the flow of goods and services is managed and with the mission of business logistics in essence.
For an organisation to truly offer JIT customer service fundamental changes in the way in which
business is done, both internally and across organisational boundaries, need to happen.
You will have heard this before but Right product, right quantity at the right time. However, offering
the right product to a customer is not just concerned with meeting specifications but should also
consider the value-added services and the processes that produce them. This means that

selecting the correct JIT partner is essential and that translates into less inspections of inventories
and joint involvement of supply chain members in new product or materials design.
When talking about the right quantities at the right time that means that customers get exactly what
the want or need at the time they want or need it. Getting this right comes from dependable
estimates from buyers, who involve suppliers to a large degree in their inventory replenishment
decisions. Getting this right has huge implications of on-time deliveries, smaller shipment sizes and
more shipments that vary in size. The result of this means small inventories at each step through
the supply chain.
Like all lean applications JIT logistics aims to cut waste from the supply chain and in respect to
customer service eliminating waste like,
• untrained service personnel
• unavailable products
• service discrepancies
• insufficient product information

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are just a few examples of waste that could be eliminated.
We will now move onto JIT in order processing. Activities in order processing include
• customer placement of an order
• transmission and receiving of the order
• credit check
• expedition of the order
• distribution
• customer receiving the order and invoicing.

The order cycle refers to the elapsed time from time of order to when the customer get the order
and one of the aims of managing the order cycle is to reduce the order cycle time which in turn
improves customer service and logistical performance. Figure 4.3 is an example of the

customer order cycle consisting of the six stages. The main aim of JIT in order processing is to cut
the order cycle time down as far as possible thus making it as lean as possible.

Lai, K. and Cheng (2016) Just-in-Time Logistics. 1st edn. Taylor and Francis

Obtaining the necessary information is key to participant in the supply chain, obtaining it at the
correct time is paramount for organisations within the supply chain to adapt to the need of the
entire supply chain. It makes sense then that transparency in a supply chain would only help
information flow and allow all parties to react accordingly and at the right times.

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In JIT logistics, the lead time of order management should be minimised as the will enable
companies to respond quickly to customers needs simply by reducing the time required to make the
products available to the customers. Apart from the internet and the costs that has saved
organisations and helped reduce the order cycle there are many areas where wastes can take
place in order management.
• Prolonging the cycle time: Conventional order processing aims to satisfy the orders from a
broader range of customers therefore the waiting time of a particular customer is therefore
extended.
• Batch processing: Trying to collect and process orders from different clients in batches is
not compatible with the JIT philosophy as one order may be delayed while wating for
another customer to place their order.
• Administrative processing: Unfortunately, very order has an administrative process and
transactions normally include some type of paper-based process. These activities are
wasteful ad the customer does not benefit from these procedures
• Order discrepancies: Wrong items being shipped or shipped in the wrong quantity are
discrepancies that should be eliminated
• Negotiations with suppliers: If a company must negotiate with its suppliers for every
transaction that will take time. Besides price negotiation, spending time on delivery and
payment arrangement is also considered a waste of effort since these activities do not add
any value to customers.

Figure 4.4 gives an example of how Jit can speed up the order cycle process, the JIT order cycle
goes hand in hand with an electronic communications networks altering all parties in the order
process automatically and in real time.

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Lai, K. and Cheng (2016) Just-in-Time Logistics. 1st edn. Taylor and Francis

In a JIT environment, inventory is considered wasteful, and the aim of every company should not
be just to reduce it but to eliminate it. As has already been discussed the implementation of JIT will
result in a significant reduction in inventory. It is easy to understand
• Items are produced at a rate required by customers
• Strive to eliminate all unnecessary lead times
• Aim to reduce set-up costs and achieve the smallest economical lot size
• Optimise material flow from suppliers to end point

This all ensures that JIT minimises inventory, high-quality JIT delivery from suppliers are ensured,
safety socks are minimised and a Total Quality Control programme is implemented. Besides the
pull factor based on consumers purchases a demand focus for the management of inventory in JIT
logistics should not be neglected. The demand focus takes into account all the instruments that
could impact demand and affect stock levels in a supply chain, and it has been suggested Lee
(2004) that the idea that marketing and logistics departments act separately would lead to gross
inefficiencies. Under JIT logistics organisations need to manage many different facets of the
business to endure they have inventory to mee the demand, examples would include
• Pricing
• Promotions (Discounts etc.)

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 • Deal structure (Return policies etc.)

The demand focus for inventory management will require organisations to

• Understand the impact of changing the levels of these tools on product demand, where
the effects of these can be interactive
• Recognise the management objectives and constraints faced by the company
• Incorporate the true supply chain costs corresponding to the demand that results from
the use of these instruments
• Link demand-based management decisions with supply chain planning and execution
decisions, so demand can be anticipated and met with the right amount of inventory.
This avoid both excessing leftover inventory and stock-out
• Carefully measure and monitor performance

There are numerous inventory management tools that help JIT logistics.
• Kanban
• Materials requirement planning (MRP) I
• Manufacturing resources planning (MRP) II
• Distribution requirement planning (DRP)
• JIT II
• Flexible manufacturing
• ABC analysis
• Benchmarking
• Vendor managed inventory (VRP)
• Quick response
• Efficient customer response (ECR)
• Postponement
• Collaborative planning, forecasting and replenishment (CPFR)
• Enterprise resources planning (ERP)
• Advanced planning and scheduling (APS)
• Demand planning system

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Lai, K. and Cheng (2016) Just-in-Time Logistics. 1st edn. Taylor and Francis

Transportation management
We have already covered transportation modes in a supply chain, but we are going to look at JIT in
transportation management. This may sound self-explanatory but once products are completed,
they need to be transported to the final customer and this is where JIT in transport management
comes in. Although the process seems straightforward there is a high level of planning and
collaboration between all parties to ensure that the customer get their products at the right time, at
the right quality and at the right quantity.

Transport is responsible for getting the products through the supply chain and is mainly responsible
for when the customer gets their products and how quickly the customer gets their products as well
as getting the customers product to the correct place. If this particular function in the supply chain
does not function properly or if mistakes occur organisations need to compensate for those
mistakes by holding stock, the cardinal sin in JIT. In addition, customer service offerings are below
par if products are delayed due to mistakes and mistakes push costs higher but customer
satisfaction lower.

The difference between standard transportation i.e., betting products on tucks, trains, plane or bus,
is that JIT transportation management includes every step to move materials from the hand of the
last value supplier location to the hand of the first value adder at a customer location all while
striving to offer the highest level of customer service.
Some wastes to consider in JIT transportation management are,
• Idle time in waiting for deliveries

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 • Damaged products due to inadequate packaging
• Unutilised vehicles
• Excessive finished goods inventory
• Goods are unavailable for consumers

There are several management tools that are useful for organisation to consider when designing
their transportation for JIT logistics, some examples are.
• Network design -The goal of performing network design is to optimise the inventory
carrying costs and the transportation costs while aiming to deliver the items on time.
• Scheduling and routing -Routing is about minimising total route costs, number of routes,
total distance and time, while scheduling focuses particularly on ‘time’ constraints
• Quality audit - Continuous evaluation of performance, such as, claims, customer service,
billing errors and equipment availability are some examples.
• Transportation management system - This system enables organisations to compare
different modes of transport, routes and carriers, and use the comparisons to create
transport plans for the items to be delivered
• Warehouse Management System - This is a system used to optimise the storage and
picking of goods in a warehouse, including compliance with carrier and customer
documentation standards.

I hope you enjoyed the first micro lecture of the week