JIT Purchasing – 3 Reasons why it is Different from Conventional Purchasing

EVERYTHING
29 Dec

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.


Get 5S – Kaizen Guide to Organize the Workplace for Flow

JIT Purchasing
Comparison of JIT and conventional purchasing dynamics (Abraham et. al. 1990)

 

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.

Cimmra-eSourcing

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

JIT System

Phases of implementing JIT purchasing

The key phases for implementing the JIT purchasing are as follows:

  • Commitment;
  • Top management in both the manufacturer and supplier
  • Companies must gain commitment from employees to award just in time purchasing.
  1. 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.
  2. Selection of suppliers; JIT manufacturers must select suppliers who can support JIT operation and who are willing to commit to a JIT purchasing system.
  3. 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.
  4. JIT purchasing implementation will not be successful lf inbound freight scheduling is not reliable and is left to the transportation system.
  5. 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.

36 Comments

  • Asad Bokhari

    Good article, Mudassir

    • muddassirism

      Thanks Asad. Appreciate the feedback.

  • Jeongsang YU

    Good article. Thanks.
    Strong relationship with supplier is inevitable. True.
    Although many recognize it, most of them don’t know HOW.

    • muddassirism

      I certainly agree Jeongsang, strong relationship with supplier is must.

  • Marclyn Paige

    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.

    • muddassirism

      Hi Marclyn,

      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.

    • muddassirism

      Mohammed in fashion textile you can use combination of Lead-Agile systems.

  • Matt Henning

    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.

  • Jason Korth

    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!

    • muddassirism

      Thanks Jason, certainly agree with that

  • K.Maheshkumar

    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.

    • muddassirism

      Thanks Mahesh for your comments.

  • JIT Purchasing - 3 Reasons Why it&nbs...

    […] Finding Suppliers who can supply in JIT Purchasing Manufacturing environment is different from conventional purchasing. This article explains why.  […]

    • muddassirism

      This is what I call a good share!

  • margaret

    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

  • margaret

    good staff

  • Ricardo Damm Coelho

    I loved your article.
    Witch kind of manufacturers would you say that will be more benefited with JIT Purchase?

    • muddassirism

      All business which have regular demand and NOT in Engineer to Order Business.

  • Mazhar

    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.

    • muddassirism

      Thanks Trevor G. Kimambo

  • JIT System and Supply Chain Management- 5 Salient Features

    […] muddassirism on JIT Purchasing – 3 Reasons why it is Different from Conventional Purchasing […]

  • Seven reasons why you need to forecast in supply chain - Petro News Update

    […] The importance of Demand Forecasting is much higher in Made-to-Stock (MTO), Assemble-to-Order (ATO) or JIT Supply Business. […]

  • Chandru

    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?

    • muddassirism

      Hi Chandru,

      As long as you can find consistent quality and delivery performance for single components, it should not be a problem.

      Regards,
      Muddassir

  • 7 Supply Chain Risk Villains You Might Need to Fight Against

    […] to manage. For example, when an organisation implements the JIT Purchasing approach such as small lot sizes, it helps to reduce chaos control/chaos risk but may negatively affect flexibility in terms of […]

  • Jorge Rodriguez

    Excellent article. Clear and exact.

  • Greg Thornton

    In an comprehensive assessment of which model serves your own business, its critical that a total cost of ownership is applied.

  • zubair

    Dear sir,
    How JIT suitable for GCC countries, We depend on import of raw materials.

    • Muddassir Ahmed

      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!

  • 21 Authentic Procurement Interview Questions and Answers Guide

    […] This is the question I am always asking when hiring buyers. And in most cases, people struggle to explain or they start waffling! There is a difference and you can learn the difference by reading JIT Purchasing – 3 Reasons why it is Different from Conventional Purchasing […]

  • Rameshbabu

    Procurement team role in kanban and lean manufacturing in supply chain

  • Rameshbabu

    Procurement team role in JIT, kanban and lean manufacturing in supply chain

  • CHANDRA GANGADHARAN

    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.

Leave A Comment