An inventory management method to analyze the received goods from the suppliers is called JIT or Just-in-time. This inventory management method helps to reduce inventory costs and increase turnover.
What Are a JIT and its significance?
Careful planning of the whole chain of supply and the usage of software to continue the process is needed for a JIT. This method helps increase efficiency and lower the chances of errors. In this process, every stage is monitored. We will now discuss a few effects of the just-in-time management system.
What is a JIT and how does it reduce inventory waste?
This inventory method is pledged to reduce overproduction. This problem often occurs in the market when the supply exceeds and there is no one to buy so much of goods. Then the unusable inventories become the waste and dead stock and keep consuming inventory space. But if you’re using the just-in-time system you only have the option to order goods that are needed hence the chances of inventory waste are reduced.
What is a JIT and how does it decrease the cost of the warehouse holding
One of the most expensive investments of a business is its warehouse. Moreover, if there is excess inventory then the holding cost of the warehouse becomes double. The just-in-time inventory management method helps to keep the warehouse cost as nominal as possible. This is possible with the help of just-in-time because you can only place orders when your clients have asked for them. Those companies who follow this inventory management system can easily eliminate warehouses or decrease the number of items in the warehouse.
What is a JIT and how does it give more control to the manufacturer?
The producer has all the control in this inventory management system. The manufacturer can monitor and inspect the entire production process. But it is dependent on the market demands. By using just-in-time the manufacturers can meet the customers’ requirements promptly. This method automatically increases the production of the product in demand. It also helps to decrease the manufacturing of slow-moving goods.
This is why the just-in-time inventory system is flexible and can cope with the constant change in the markets. A company like Toyota uses this method and never purchases raw materials until they receive an order. Keeping the inventory minimal, reducing the inventory costs, and adapting changes rapidly have been possible only through a just-in=time inventory system.
What is local sourcing?
As we discussed previously that if the companies are following a just-in-time inventory system they can reduce various costs in the process. But when an order is placed through just-in-time, the team needs to source local raw materials to get them delivered to the respective units earlier.
How does it help in smaller investments?
You need very less working capital in a just-in-time inventory system because it requires only essential stocks for finance procurement. The return on investment is quite higher in this method as it needs very less stock amount.
What are the flaws?
Although this is a very commonly used and effective method, it doesn’t g beyond criticism. There are some flaws in the just-in-time inventory system that we will now discuss.
- Reworking on orders becomes very difficult in this method. It is because the method only functions based on customers’ orders.
- The supplier’s performance is important here and the entire method is dependent on that.
Summary
This inventory management method helps to reduce inventory costs and increase turnover. This method helps increase efficiency and lower the chances of errors. In this process, every stage is monitored. This inventory method is pledged to reduce overproduction. This problem often occurs in the market when the supply exceeds and there is no one to buy so much of goods. Then the unusable inventories become the waste and dead stock and keep consuming inventory space. Careful planning of the whole chain of supply and the usage of software to continue the process is needed for a JIT. This method helps increase efficiency and lower the chances of errors. In this process, every stage is monitored. The just-in-time inventory management method helps to keep the warehouse cost as nominal as possible. This is possible with the help of just-in-time because you can only place orders when your clients have asked for them. Those companies who follow this inventory management system can easily eliminate warehouses or decrease the number of items in the warehouse. The manufacturer can monitor and inspect the entire production process. But it is dependent on the market demands. By using just-in-time the manufacturers can meet the customers’ requirements promptly. This method automatically increases the production of the product in demand. You need very less working capital in a just-in-time inventory system because it requires only essential stocks for finance procurement.
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