Just-in-Time Shipping: The Path to Container Efficiency

Just-in-Time Shipping: The Path to Container Efficiency

The 1970s played a pivotal role in the history of trade, shipping, and manufacturing. In this decade, Toyota revolutionized the manufacturing world with the wide adoption of its Just-in-Time (JIT) production planning process. In essence, that represents operating with low inventory levels where raw materials, goods, or even labor are scheduled to arrive or be replenished exactly when, or shortly before, they are needed in production. Having the system, Toyota could solve some of the problems associated with keeping high-inventory levels, free up a significant amount of capital, and reduce the opportunity costs. It could also minimize storage, service/maintenance, and inventory risk costs.

Nowadays, JIT and its equivalents are the industry standards in the automotive and are also universally adopted in the wider manufacturing and service verticals. However, if automotive or manufacturing sectors can afford to wait for an order to be placed and then produce, in many other business areas, in order to adopt JIT, highly accurate Demand Forecasting must be in place.

An obvious example of such an area is the container shipping industry, which in the 1970s has also experienced a renaissance with the wide adoption of containerization. However, improvident internal processes and trade imbalances led to huge inefficiencies. Empty containers had to be repositioned from big consumer centers such as Europe and the US to big manufacturing powerhouses like China and Southeast Asia. To be able to satisfy demand at any given time and location, and compensate for the long repositioning cycles, ocean shipping carriers keep excess container inventory. Traditionally, inland empty containers account for around 30-40% of the total container shipping fleet.