Just-in-Time (JIT) inventory systems - Essay Example

There are several reasons why companies are choosing to implement Just-in-Time (JIT) inventory systems. The primary advantage to utilizing this process is that it reduces costs associated with having inventory on hand and stocked. Just in time inventory is a great system to adopt into any retail industry Just In Time Inventory (JIT) means you get your inventory when you actually need it, not before you need it! A former employer philosophy was no need to have your cash tied up in inventory – if you don’t need the inventory for months.

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They thought that you could gain the most value out of your monthly operations this way. Just In Time Inventory enables you to have the exact amount of inventory you need, when you need it with no more and/ or less. The company believed that Inventory remaining in your warehouse collects dust and cost instead of revenue. In addition the company saved on the lost profit from financing and storage costs, inventory in their warehouse had to be insured due to risks such as fires, floods, hurricanes, typhoons and of course theft!

Just In Time service allowed the company to move product quickly, based on demand with purchase orders in step with inventory movement. Just as JIT has many strong points, there are weaknesses as well. Because of this strong interdependence with JIT, a weakness in the supply chain caused by a JIT weakness can be very costly to all linked in the chain. JIT processes can be risky to certain businesses and vulnerable to the supply chain in situations such as labor strikes, which is what happen in 2003 to my previous employer, when the employees decided to strike for better wages and benefits.

Labor strikes, stock outs, and port lockouts can quickly disrupt an entire supply chain while JIT processes are in place. the company using JIT generally has very little inventory to compensate for the emergency. This lack of inventory is exactly what makes JIT so great to companies in reducing costs, yet making it risky as well by in some cases not having enough inventories to react and keep the supply chain moving Advantages of JIT There appear to be many advantages to using the just-in-time inventory systems for manufacturing companies as well as retail stores.

Just-in-time inventory systems are focused on eliminating waste and gaining more value of the company operations. The concept of JIT is to maintain a competitive advantage by continuous improvement, eliminating excessive waste and completely utilizing the skills and capabilities of the people working within the company. With the development of JIT inventory company’s can take advantage of being able to place items in the right place at the time, or create orders only as necessary.

This allows purchase orders to be available on a real time basis, shipping inventory as soon as the items enter the warehouse. JIT inventory software and various services enable a company to identify inventory requirements, allowing companies to have the exact amount of materials in inventory needed to supply customer demand. JIT also encourages companies to rotate materials, ensuring everything bought is used at some point in time. Just in time inventory deviates from poor inventory control and the inefficiency and wasted capital expenditure often experienced by manufacturers.

Software used in JIT can provide real time interaction, showing a picture of how inventory flows through the company. The software can also provide a direct connection to financial systems offering an integrated view of your business on the basis of cost of sales versus revenue, personnel and operating expenses. The greatest advantage of JIT is the system design that helps manufacturing, distribution and retail companies increase efficiency and customer service.