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Luxury goods
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Just-in-time has traditionally meant manufacturing efficiencies being given priority over transport efficiencies. Isn't it about time for a rethink?
Words: Louise Cote Just-in-time (KT) was initially devised as a method of keeping manufacturing flowing with minimal stock holdings and, therefore, minimal capital costs and optimal cashflow.
There are few organisations today that implement pure JIT distribution or manufacturing on a large scale. However, the principles and practices of JIT have shaped the demands of many freight customers. Since oil prices are peaking and environmental pressures are intensifying, CM asks if it is a good time for JIT to be re-examined?
Alan McKinnon, professor of logistics at Heriot-Watt University, believes that the time has come for such a re-examination, particularly in the light of congestion, a major cause of extra fuel consumption and pollution.
He says: "We need to put JIT into perspective as one of a great many factors that can cause lorry capacity to he under-utilised. While MT pressures are undoubtedly causing some loss of transport efficiency and adding to environmental costs, many companies have been clever and resourceful in mitigating these adverse effects.
Time compression "According to road freight statistics from the Department for Transport (DfT), average consignment weight has actually been increasing through time. This is not to deny, however, that in some sectors, HT replenishment will have depressed consignment size and weights."
The Logistics Directors' Forum recently held a discussion entitled JIT-RIP, which was led by Professor Peter Hines of the Lean Enterprise Research Centre. The title was deliberately provocative, says Hines. "There was discussion of JIT from an environmental perspective." he says. "Many organisations see JIT from a manufacturing perspective or a logistics perspective, but you have to see both. JIT is a model built on time compression and also lean thinking getting rid of waste. And environmental measures are also a natural extension of lean thinking."
Hines says that where JIT doesn't work is with single suppliers frequently shipping small amounts. He argues that JIT simply isn't seen in a wide enough context. -If you were really following KT principles, you wouldn't manufacture in Africa or the Far East and ship to the UK. JIT relies on local production such as Toyota's principle of having all its suppliers within Toyota City." Having all your suppliers within five miles is green and lean, he argues, because the frequency of journey is more than counteracted by the short distances.
An integral part of the process More manufacturers need to take account of transport as an integral part of the product process, reckons Hines, rather than as a last-minute detail. They would often find the supposed savings in labour through Far Eastern or Eastern European manufacture are offset by the cheaper costs of transport. "One white goods manufacturer was changing its production from Western to Eastern Europe because Polish labour cost 75% less. But, in fact, the extra transport costs were going to wipe out this saving," Hines believes that while environmental concerns aren't sufficient to change business behaviour without a strong financial incentive, too few firms see the whole picture.
Bruce Arlinghaus, director of supply chain soIutionS for Ryder Europe, agrees. Ryder administers a1 JIT accounts for customers. "JIT doesn't make it impossible to optimise loads, it just makes it more of a challenge," he says. Ryder addresses these issues through its Transport Management Line in Dusseldorf, a virtual transport network thiktimpany uses to ensure optimisation through capacity management, bacldoading and multi-user trucks across accounts.
"JIT has proven its worth as a way of increasing efficiency, but like all good ideas, it can be taken too far and [the industry] dances on the edge of that. Our customers expect to have HT delivery and best value, so if we think they should be increasing stock holdings for efficiency, we would suggest that."
Allan Waller, chair of European action group ELUPEG, professor at Cranfield School of Management and an ardent advocate against empty running, is adamant: -JIT isn't passe," he says. "Transport contributes just 14% of greenhouse gases, while agriculture contributes 32%. And we throw away a third of the food grown in this country" He believes that JIT has never been the product of convenience, but of efficiency, and so serves both an environmental and a commercial cause.
Collaboration and consolidation
But the mitigation of JIT's effects. which McKinnon spoke of, will depend to an extent on collaboration and consolidation across transport providers and across brands.
Theo de Pencier, chief executive of the Freight Transport Association, says: "Historically, there has been a reliability issue concerning multi-user warehouses and transport, but now the [multi-user! costs are clearly so much more competitive in return for a slightly lower level of service."
Nonetheless, the transport industry must continue to evolve. "Consolidation is the key," he says, citing the successful collaboration between Kimberley-Clark and Unilever to service more frequent retail deliveries. "We don't want to do it and it doesn't come naturally, but it is necessary. The Unilever-KC deal was more JIT than ever before but it also brought lower costs, better vehicle use and better customer service. Collaboration will have the greatest positive impact." •