Just-In-Time Inventory: How To Become More Competitive While Saving Money

Today’s business juncture is full of all sorts of different businesses. In fact, the emergence of new business models have re-shaped many aspects of the traditional supply chain: inventory management, for instance, has been and continues to be, the most receptive to changes and a sheer array of innovations. For example, long before the emergence of eCommerce businesses—and the eCommerce inventory management software of course—it was quite normal to see businesses attempting and struggling to meet consumer demands by manufacturing goods in excess. These surplus quantities of goods would end up flooding a business’s stock. The old-fashioned way, so to speak, was all about manufacturing the bare minimum inventory to satisfy and meet the previously anticipated demand to sell the surplus quantity of products. Of course, logically, this would lead, and actually would create, high production costs, inventory expenses and flooded stockpiling warehouses.

These problems were compelling enough for companies, especially those eCommerce businesses, to come up with a new system so that they could handle the processes commonly associated with managing inventory. The system in question has been addressed by David Kiger in previous posts, and it is commonly referred to as Just-In-Time or JIT. Just-In-Time was first conceived during the 70’s amidst the boom of innovative, almost-perfect-quality Japanese manufacturing businesses such as Toyota, Sony, amongst others. However, it was not until the 80’s when it became really popular amidst American businesses.

The idea behind JIT Inventory Management

Or, better said: what is ultimately Just-In-Time inventory? JIT inventory management outlines a process in which companies only produce the real quantity of stock they need to meet consumer demands. Ideally, goods should be moving from one point to another as fast as customers take them out. In addition, a well carried out and properly functioning Just-In-Time inventory system prevents businesses from running out of stock during special seasons or peak periods of time. Just-In-Time inventory was initially developed as a much better, and feasible, solution for retailers; today, it still reigns amongst the myriad of the increasingly popular eCommerce businesses, for the process behind the idea of JIT gets rid of many of the problems and difficulties associated with terrible situations such as running out of stock or, instead, producing way more than what is really needed. It also provides retailers with serious additional benefits.

Of course, as in everything, especially as in everything related to supply chain management and inventory, setbacks and drawbacks may come all of a sudden, and Just-In-Time sadly is not the exception. The whole idea behind JIT is the concept of precision. In order for businesses to properly and, moreover, successfully get the most out of this methodology, they need to really tune and tighten their logistics processes and, above all, develop solid and strong relationships with the people they work with and alongside, specially those who act as suppliers. But, if there is a crucial aspect within this, is that companies cannot make mistakes when it comes to forecasting demand.

It is quite obvious to assert that managing to comply with what was laid out above is definitely not an easy thing to do. In fact, for retailers, the mere idea poses a great challenge—which explains why many eCommerce businesses prefer to lean towards a different approach irrespective of whether it is riskier than striving to integrate the JIT methodology to their model.

What is good about JIT?

Implementing JIT, or rather: being able to successfully implement the JIT inventory model methodology poses several advantages: businesses can adopt a more relaxed stance when it comes to purchasing stock, especially, too much of it, and then being forced to reclaim capital via offloading. Besides, JIT allows them to avoid the risk of falling victim of overstocking, which is particularly daunting for niche retailers who prefer to offer a sheer array of goods. It also helps businesses become more competitive via end price since it enables them to decrease the costs commonly associated with the inventory. By diminishing the inventory, retailers can cut some of the labor and storage costs commonly necessary to seamlessly comply with the operation. The resulting space can thus be used in other corporate activities.

money_currency_saving_logistics_just in time
Image courtesy of Pixabay at Pexels.com

Besides, those savings can be used in other things, or can be reused to improve other areas of the company or the businesses: many decide to improve the activities that comprise a company’s fulfillment processes for a much faster shipping; many decide to improve their eCommerce website allowing customers to have a much rewarding purchasing experience; and also many invest on customer service. Be that as it may, these activities are only possible after having implemented JIT methodology, and taking into the account the ROI on striving to slowly—but efficiently—implement JIT, it is definitely worth the “risk”.

* Featured Image courtesy of Pixabay at Pexels.com

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