Companies that want to reduce costs and improve efficiency thrive to implement a Just-In-Time (JIT) supply chain strategy or employ a lean production model.
What this means is that the company will create what is needed, when it is needed, and at the precise amounts that are needed. The idea is that to maintain a tightly synchronized choreography of raw material, parts and finished goods to realize optimal use of resources for production. When companies produce what they need and nothing more, they are able to ensure that goods do not idly sit around as inventory and safety stocks and it decreases the amount of waste created as well. Ultimately this reduces costs and improves efficiency in the short and long run.
While simple to understand in theory, lean production and the Just-In-Time strategy is often difficult to implement – particularly for large companies that need orchestrate the coming and going of goods from around the world. The main difficulty in applying this strategy is that companies have no visibility on their goods for the longest part of their supply chain which is while their goods are in transit.
Fortunately, there are a few things companies can do to improve their supply chain, implement lean production tactics and integrate Just-In-Time to their operations.
Know Where Your Goods Are in Real-Time
The most important aspect of implementing a strong and effective Just-In-Time strategy is knowing where your goods are at all times.
The notion of Just-In-Time manufacturing has been around since the 1970’s and has been adopted by many industries but it’s only with the appearance of cargo monitoring technology that fine tuning and visibility of the entire supply chain is really possible.
Since there is little room for mistakes when companies create what is needed, when it is needed, it is vital that companies have an accurate view of the real-time location of goods and receive immediate notification of delays or other unexpected events occur. Companies that need to bring material from around the world to create a perfect final good should have strong control of the exact situation and conditions of the raw goods or parts as they are in transit.
Tobacco companies for example, need to bring in raw tobacco leaves that has a limited shelf life from various locations around the world. In order for them to implement a Just-In-Time strategy that does not cause a decline in meeting consumer demand, it is essential that they should know the exact location of the raw goods at any given point. Not knowing this has long-term effects on their ability to create the precise amount of tobacco needed when it is needed in a way that does not impact demand, and does not create a surplus of supply that would lead to waste.
Most companies nowadays need to source materials from various locations around the world to create a final product. The automotive industry is largely dependent on the ability to source various parts and components from different locations around the world, bring them together to an assembly line, ship them again to another manufacture for final assembly, and distribute them based on consumer demand.
That is why for automotive companies who want to implement a finely tuned Just-In-Time strategy, it is imperative that they should know the exact location of the different components. If an automotive company does not know exactly where the components for creating an engine are, it becomes nearly impossible to accurately predict when they will be able to complete the assembly, and therefore when they will be able to complete the entire vehicle.
That is why companies need to have a real-time cargo monitoring solution implemented on all their goods in transit. By having a real-time and independent cargo monitoring solution, companies can know exactly where their goods are at any given moment, eliminating blind spaces, improving understanding of supply chain, and optimizing their ability to implement and manage a Just-In-Time strategy. Having real-time cargo monitoring supports companies in decreasing the amount of costly inventory and safety stocks stored or on the move.
Beyond knowing where goods are in real-time, companies that want to have an effective Just-In-Time strategy need to know what is impacting their goods and be alerted when it matters most.
This means understanding how their goods are impacted by events along the way to their final destination, as the goods may be damaged or and companies won’t know up upon arrival at destination.
Pharmaceutical companies for example need to know where and what impacts their cargo along the way since the content they transport is often time, temperature and condition sensitive. If a pharmaceutical company does not know until their container reaches a port of destination that the temperature in the container exceeded the maximum allotted one, or that the contents were tampered with in another way, are not able to come up with a contingency plan in time to meet demand.
Companies that thrive to apply a Just-In-Time strategy already know that they have to come up with a formula calculated in function of countless components, deltas and coefficients in order to be able to lean their supply chain as much as possible. What we mean to explain is that a supply chain does not have a complete and perfect Just-In-Time strategy unless the company has complete visibility into the whole journey.
With the idea in mind that even with full visibility problems still occur during transit and that companies aim for continuous improvement, having a monitoring solution that offers IoT-based cargo data and AI to provide actionable insights for better business decisions and maximum supply chain efficiency. Global enterprises can optimize planning, execution and monitoring of their shipping process, maximizing “On-Time In-Full” delivery, quality and safety across the entire supply chain.
Cargo monitoring solution offering BI insights support many facets of the supply chain optimization processes including benchmarking of third party suppliers’ efficiency, route optimization and improve logistics at lower cost. It is important to providing a strong end-to-end diagnostic that facilitates understanding of what happened during the course of the transportation, and how it impacted the delivery of the goods.
Ultimately, for a company to have a real Just-In-Time strategy and employ a lean production model, there must be comprehensive understanding of their entire supply chain – particularly the aspects that they have no control over and are dependent on the abilities of others – such as transportation of goods using cargo companies.
To find out how Contguard can help you achieve your Just-In-Time supply chain strategy, please contact us!