If you are in the transportation business, you have heard of the term “JIT Freight.” To those who are not familiar with the term it simply means “Just In Time.”

Just in time freight was created to cut costs for manufacturers. With this type of freight movement, the manufacturer does not need to worry about warehousing (or the costs associated with having a warehouse) nor do they have to worry about inventory costs because there is no inventory sitting around.

The idea of JIT works like this: a product is made - in order to make this one product there are several materials that are needed to make it and the materials are to arrive ‘just in time’. A lot of the automakers use JIT freight. A driver may pick up parts (say something like door handles) in the morning and he has to drive straight thru to the manufacturer because as soon as his appointment time arrives (or perhaps even when he arrives at the manufacturer) he is unloaded because they will need the freight he is hauling in order to manufacture whatever they are working on.

A lot of the manufacturers will charge a transportation company for arriving early to pick up a JIT load, very rarely do they like to load someone early, the same is true for the receiving end as well. Since they are shipping it to arrive ‘just in time’ to make a product - they do not want you early or late - they simply want you there Just In Time!

I was actually quite surprised to find that some people seem to think that this is what has caused a problem with our fuel situation:

It has been frequently charged that the oil industry has been influenced by JIT.[4][5][6]

The argument is presented as follows:

The number of refineries in the United States has fallen from 279 in 1975 to 205 in 1990 and further to 149 in 2004. As a result, the industry is susceptible to supply shocks, which cause spikes in prices and subsequently reduction in domestic manufacturing output. The effects of hurricanes Katrina and Rita are given as an example: in 2005, Katrina caused the shutdown of 9 refineries in Louisiana and 6 more in Mississippi, and a large number of oil production and transfer facilities, resulting in the loss of 20% of the US domestic refinery output. Rita subsequently shut down refineries in Texas, further reducing output. The GDP figures for the third and fourth quarters showed a slowdown from 3.5% to 1.2% growth. Similar arguments were made in earlier crises.

If you read this further it goes on to explain how JIT has nothing to do with fuel costs.

In Waguespack and Cantor (1996), the authors point out that JIT would require a significant change in the supplier/refiner relationship, but the changes in inventories in the oil industry exhibit none of those tendencies. Specifically, the relationships remain cost-driven among many competing suppliers rather than quality-based among a select few long-term relationships. They find that a large part of the shift came about because of the availability of short-haul crudes from Latin America. In the follow-up editorial, the Oil & Gas Journal claimed that “casually adopting popular business terminology that doesn’t apply” had provided a “rhetorical bogey” to industry critics. Confessing that they had been as guilty as other media sources, they confirmed that “It also happens not to be accurate.”

I personally find it hard to believe that fuel being JIT has anything to do with the high costs out there right now. That is more of a supply and demand problem in my eyes.

At any rate, JIT freight can be good for a driver who knows what they are doing and is very dependable. After all, would you want to be responsible for line shut down prices if you were late delivering a JIT load (which I have seen costing over $20,000)? I know I wouldn’t want to be!