JIT Purchasing different from Conventional Purchasing?
Most of us have worked in both some sort of JIT purchasing (Just In Time purchasing) and conventional manufacturing business. However, in the lean environment, the supply chain process should be capable of supporting Just in Time manufacturing. Manufacturers and suppliers have to adopt an appropriate method of supply acquisition to have availability of right material at right time at right price and in right quality. The Table by Abraham et. al. (1990) shows some of the differences between Just in Time purchasing and conventional purchasing you might be interested to read.
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Here are 3 reasons why ‘Just in Time (JIT) purchasing’ is different from ‘conventional purchasing’:
Small Lot Sizes
What I have noticed is parts purchased in small lot sizes is one factor for improving product quality. The smaller the lot size the easier it is to inspect and uncover defects and the earlier the detection of defects.
Small Number of Suppliers
The second important criterion is the number of suppliers. Ideally dealing with a smaller number of suppliers has many advantages, as discussed in earlier sections, but in terms of purchasing the benefits are:
- long term relationship;
- Buyers can work closely with suppliers and ask them to participate fully in JIT purchasing.
- Consistent quality; it is easier to involve suppliers in the early stage so for Design
- Saving of resources; money can be concentrated on selecting, developing and monitoring one or few qualified sources.
- Lower costs; the overall volume of items purchased is higher, which eventually leads to lower cost.
- Special attention; inclined to pay special attention to buyers, since the buyers represents large accounts
- Saving on tooling; the amount spent on supplier tooling is minimal.
High Performance Standard
The next important criteria in JIT purchasing, is a formal suppliers election and evaluation program. However the main issue is for the selected suppliers to be able to support JIT purchasing. Not every supplier can be developed into JIT Supplier. Supplier’s delivery performance, product design specification paper work, bidding and packaging should be evaluated regularly with
Phases of implementing JIT purchasing
The key phases for implementing the JIT purchasing are as follows:
- Top management in both the manufacturer and supplier
- Companies must gain commitment from employees to award just in time purchasing.
- Changing the system; a purchasing department must focus on changing the sourcing, pricing and procurement methods to a JIT purchasing system. Relationships with suppliers must be improved to enable a JIT purchasing procedure to be installed.
- Selection of suppliers; JIT manufacturers must select suppliers who can support JIT operation and who are willing to commit to a JIT purchasing system.
- Building relationships; once a JIT purchasing department s established it requires continuous effort to improve the relationship which will promote better efficiency in the purchasing operation.
- JIT purchasing implementation will not be successful lf inbound freight scheduling is not reliable and is left to the transportation system.
- The purchasing department will have to ensure that the transportation system is efficient and reliable ably taking responsibility of other alternatives to allow suppliers to take on that responsibility.
What are the other aspects which differentiate between JIT Purchasing and Conventional Purchasing, please do let me know.
Good article, Mudassir
Thanks Asad. Appreciate the feedback.
Good article. Thanks.
Strong relationship with supplier is inevitable. True.
Although many recognize it, most of them don’t know HOW.
I certainly agree Jeongsang, strong relationship with supplier is must.
JIT Procurement is a necessity today however several things need to be taken into consideration.
1. Are the items classified as a.b.or c? Typically only A items give you the most juice for the squeeze.
But also consider smaller lot sizes will increase your logistics cost, different than internal fabrication. I am an advocate for smaller lot sizes but in the procurement world in regards to quality I also need to know if my supplier is also running smaller lot sizes per my demand to improve quality. Often the supplier will run larger lot sizes and then ship you smaller lot sizes as requested. That also needs to be known.
Certainly there are lot more consideration in greater scheme of things.
Mohammed Masud Jamil
Conventional purchase is more appropriate for fashionable products whereas JIT cannot be good purchasing system for fashionable products where customer’s requirements changed frequently.
Mohammed in fashion textile you can use combination of Lead-Agile systems.
Excellent article sir. My company is extremely resourceful and flexible. We are working on becoming a great business partner for many JIT opportunities and wish that more customers would be open to resourcing.
Great article, I would disagree with global sourcing being only a JIT process. My company uses both processes for different materials, and both processes are very global at least in the chemical industry. Otherwise, everything else is spot on. Great job!
Thanks Jason, certainly agree with that
Thank u mr.Asad.
1. To control the excess inventory.
2. on time delivery once we received the material same qty move to production.
3. Handling also simple.
4. Discrepancies Error immediately sort out.
5. Inventory Holding cost reduced.
6.Transporting charges little bit increased.(May be Milk collection method to be used to mnimize the transport Cost.
7 No need to allocate extra space to particular items.
the above things to reduce the Borden of management.
Thanks Mahesh for your comments.
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This is what I call a good share!
its true that it all depends on the type of industry you are dealing with because for instance if the company is that of the power utility which constantly deals maybe shackles,the procurement personnel will consider conventional instead of Jit
Ricardo Damm Coelho
I loved your article.
Witch kind of manufacturers would you say that will be more benefited with JIT Purchase?
All business which have regular demand and NOT in Engineer to Order Business.
Jit finance is same way necessary as JIT supply of raw naterials.
Art of Supply Chain
Nice article and nice blog. It’s so good to see more people writing blogs about Supply Chain Management. Keep them coming.
Trevor G. Kimambo
Very good article Dr.
Thanks Trevor G. Kimambo
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Good article. We emphasize on small lot sizes and more frequent deliveries to reduce average inventory levels. However, sometimes it is good to have multiple suppliers for a single component just to protect the business better, don’t you think? The most value added work occurs on the assembly line, so, we should do everything possible to protect the line (I work in the materials department in a manufacturing plant 🙂 ). Your thoughts?
As long as you can find consistent quality and delivery performance for single components, it should not be a problem.
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Excellent article. Clear and exact.
In an comprehensive assessment of which model serves your own business, its critical that a total cost of ownership is applied.
How JIT suitable for GCC countries, We depend on import of raw materials.
This is difficult one. Try to use local distributors of raw materials and don’t be hesitant to pay a bit more if they supply on JIT!
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Good comparison.Only two issues
1.Quality Assurance- Vendors must be selfcertfied -no rejection when lots are receved,So the Vendor must be 100% confident of their supplies.
Developing such vendors is a long process
2. Change Management So JIT Process to be implemented requires lot or pre preparation with yr vendors t make sure their quality of supply for each lot is consistent no rejection and quantities are regular.This requires lot of work with the vendor to bring him to that level.