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Inventory management ensures that the right amount of supply is available to meet customer demand. With the right inventory management systems and processes, the business can accurately predict and meet customer demand. Effective inventory management requires gathering and analyzing data across the supply chain including purchases, reorders, shipping, warehousing, storage, customer satisfaction, asset turnover etc. The goal is to generate the maximum profits from minimum investment in inventory without impacting the customer experience. Inventory management can help avoid problems, such as stock-outs or overstocking. What is Just-in-time (JIT) Inventory?Just-in-time inventory ensures that there is just the right amount of inventory to produce only what you need, when you need it. The goal is to achieve high production volumes with minimal inventory on hand, thus increasing efficiencies and eliminating wastage. Many businesses have adopted just-in-time inventory to save costs and stay competitive. Benefits of JIT Inventory ManagementReduce WastageThe JIT inventory management model eliminates excess inventory and overstocking. You can have low inventory levels, significantly reducing the risk of inventory going unsold and sitting unused in the warehouse. You can also minimize the losses incurred due to defective products by easily identifying and addressing defective inventory items when production volumes are low. Improve EfficienciesThe JIT model reduces the costs of procuring, managing and storing excess raw materials and inventory. This results in a higher inventory turnover which in turn prevents inventory from sitting in your warehouse for too long and becoming obsolete. You can also receive and store deliveries in the smallest possible quantities, virtually eliminating excess raw material inventories. Local sourcing ensures that your suppliers are located near your company’s production facilities, enabling timely deliveries and reducing the need for safety stock. Increase ProductivityJIT inventory management increases productivity by reducing the time and resources required for manufacturing. This ensures faster production and shorter production runs. You can also implement product changes quickly as there is less raw material stock. Product damage is also reduced because of having lower inventory levels. Optimize ProductionJIT inventory management can eliminate bottlenecks and delays across the entire production cycle, by reducing product defects and automating processes. Shorter production cycles enable on-time deliveries and increase customer satisfaction. JIT production scheduling ensures that jobs are scheduled exactly when they are needed, meaning that your production runs start and end just in time for shipping. Reduce CostsAs it requires very low inventory levels, JIT inventory reduces the working capital required for inventory purchases as well as storage costs. Your business can purchase raw material only when needed, so any available cash can be better utilized by the company. Labor costs are also lower as fewer factory workers are required in JIT manufacturing as compared to full-time production. Improve QualityJIT inventory management involves having fewer items moving on the shop floor at any given time. This allows your management to focus on optimizing processes and building high-quality products. High-quality products with fewer defects improve customer satisfaction and reduce wastage. In the JIT manufacturing model, suppliers guarantee quality, so the deliveries go directly to production and avoid any delays due to inspection. Demand for your products can rise and fall at any moment. You need to be prepared for such eventualities. Do you have stock sitting in your inventory (see what is inventory) slowly depreciating or find yourself lacking the materials to keep up with customer needs? Maybe it's time you looked into a just in time inventory management system. Just in time inventory (JIT) can keep costs low and allow you to operate your cycle inventory to meet demand. Here's how it works and how you can adopt the strategy for your business. Just In Time InventoryJust in time inventory offers businesses a chance to streamline their purchasing, ensure a steady stream of supplies, and keep inventory costs low. It limits the amount of product on-hand and limits the risk of dead stock and backordered products. So, how does it work and who should use it? JIT Meaning: What Does JIT Mean?JIT, or just in time, is an inventory model where the raw materials you use or products you sell are delivered to your warehouse only as you need them. This involves staying in constant contact with your suppliers to ensure goods arrive at the optimal time. Many manufacturers choose this model to streamline their processes and save valuable resources. What Is Just in Time Inventory?Just in time inventory is stock that arrives in your inventory as you need it for production or sales. With JIT, instead of having a large amount of merchandise inventory or raw materials inventory, you have a much smaller rotating stock. This stock is ordered with the intention of using immediately upon arrival and will spend as little time as possible on your premises. In that sense, it's opposed to bulk shipping or bulk inventory. Who Should Use A JIT System?JIT systems are not beneficial to all businesses. Many newer businesses shouldn't adopt the model as they don't have a sufficiently built supply chain to handle a JIT system. It's important to evaluate how it would affect your operations before adopting the model. JIT systems are most successful for businesses that have the following:
If your business meets all these criteria, the JIT system might be the right choice for you. If not, look into which are lacking and work on improving the current system you use. If your suppliers can't meet demand in a timely manner, you don't want to switch models and be left without products to sell. JIT Manufacturing: Just In Time ManufacturingThe just in time inventory model is very common in the manufacturing industry. Since production costs are tied directly to a manufacturer’s ability to survive, any savings there give the business a better chance of success. By receiving raw materials only as needed for production, a manufacturer can save money on storage as well as avoid issues with dead stock or decoupling inventory. JIT manufacturing is also similar to lean manufacturing in that it helps eliminate wasted efforts by employees and lets you cut out processes and areas that are unnecessary. By manufacturing only what demand requires, production costs go down while production quality goes up. This, in turn, leads to higher customer satisfaction and better sales. Just in Time Inventory ManagementJust in time inventory management requires planning and forethought to avoid running into supply shortages. Since inventory arrives only on an as-needed basis, you must always be aware of expected sales and the amount of time it takes for your goods to be ready for sale. You must also be flexible and ready to respond to sudden shifts in market demands. Just in Time Inventory Control ModelThe just in time inventory control model allows a business to quickly respond to shifts in customer needs and reduces the number of unsold or outdated products. This model is best used for businesses that have shorter demand spikes. It is often used by the foodservice industry, technology manufacturers, and book publishing. These industries need to make product quickly to keep up with demand and avoid excess inventory when that demand falls. JIT: Just In Time Inventory SystemA just in time inventory system, or JIT system, is an inventory strategy where raw materials and supplies are ordered and received as they're needed. The just in time system requires a strong relationship between the retailer, an online marketplace, and the supplier. It is unlike the just-in-case inventory system. In that system, you order and store safety stock in the event demand surges or you run into production problems. Characteristics of Just in Time Inventory SystemThe just in time inventory system has a number of characteristics that set it apart from other inventory systems. Here are a few common ones:
Just in Time Inventory System ExampleThe just in time inventory system isn't as complicated as it may sound. Here's an example of how it works:
If any other orders come in during that production time, the same steps are followed. This keeps the production chain moving quickly and keeps excess inventory from building up in your warehouse. How to Make A JIT System Work for YouIf you decide to adopt the JIT system for your business, there are a few things you can do to get the most out of it. Here are our top three recommendations on how to make a JIT system work for you:
Advantages & Disadvantages of Just in Time InventoryAs with all inventory management techniques, using a just in time inventory system has both advantages and disadvantages. Advantages of JIT Inventory Management:
Disadvantages of JIT:A disadvantage of the JIT inventory system is the ...
Quiz: A Just in Time Inventory System Usually Reduces Costs for...Were you paying attention to how a just in time inventory system works? Let's find out with a quick quiz. A just-in-time inventory system usually reduces costs for: A. Both the producer and its suppliers. B. Neither the supplier nor the producer, though it does lead to more flexibility for both. C. The producer, but not its suppliers. D. The suppliers, but not the producer. If you chose C, you’re correct. The producer sees lower cost under the JIT inventory system, while the suppliers see little change. Nice work! Did This Help You... Just In Time?Did we convince you to use a just in time inventory management system? Now that you know more about it, you can make an informed decision about what works best for your business. ABC inventory analysis may also be of interest. Whatever the case, don't leave money on the table and look into new ways to lower costs, boost your sales, and grow your business. Other methods for eliminating waste and saving storage costs is by using dropshipping or consignment inventory. You can compare these two inventory models and see what might work for your business so you can focus on growing sales. Streamline order management, grow your bottom line, and get back hours of your time with BlueCart. Schedule a demo now: |