Is Just-in-Time Inventory Management Ideal for Your Company?
Many businesses face substantial holding costs. They have to rent large facilities to store their inventory, provide security and purchase insurance to cover possible damages. You can usually save a substantial amount of money by using Just-in-Time (JIT) inventory instead. You should take the time to find out whether JIT is appropriate for your company.
What Are the Benefits of JIT?
There are a number of different advantages of using JIT. Here are some that you should be aware of.
Reduced Risk of Obsolescence
In many industries, products can become obsolete very quickly. Retailers could purchase large volumes of industry that they are unable to sell as quickly as anticipated. These businesses could be stuck with a large supply of inventory that they canâ€™t sell right away.
Using JIT management allows you to drastically reduce the risk. Your suppliers will make sure that the inventory they deliver is up-to-date to decrease the costs of depreciation and obsolescence.
Fewer Holding Costs
Some businesses spend over a quarter of a million dollars on holding costs every year. You can reduce these costs substantially by using JIT and downgrading to a smaller warehouse.
Better Responsiveness to Customer Demand
Implementing a JIT strategy also makes it easier to respond to changes in customer demand. You can immediately cease purchases of a product if customers are no longer expressing an interest in it. This allows you to meet their needs without having to unload massive levels of inventory that they donâ€™t want.
Operate on a Leaner Budget
Companies that store large volumes of inventory need to spend a considerable amount of money at the beginning of the period. The investment can deplete funds needed for other activities. On the other hand, companies using JIT can operate on a much lower budget, which makes it easier for them to invest in new capital and marketing.
Can JIT Work for You?
Just-in-Time inventory management can be a very beneficial strategy for many companies. However, it may be difficult for some to operate. You will need to speak with your supply chain management company to understand the transportation logistics involved.Â They will help you work with your suppliers to see if a JIT strategy is feasible.
You will also want to make sure the ROI of a JIt strategy justifies the costs of taking regular shipments. This strategy is ideal for retailers and manufacturers that need large amounts of inventory on a regular basis, but may not be appropriate for companies with more irregular business cycles.