Just-in-Time Inventory: Strategies for Reducing Costs and Waste

Just-in-Time Inventory: Strategies for Reducing Costs and Waste

What is Just-in-Time inventory management?

Just-in-Time (JIT) is a method of inventory management that entails only producing and storing as much stock as is needed. It is designed to reduce costs and waste whilst enhancing growth potential and ensuring customers receive the highest quality goods.

To implement JIT effectively, a meticulous understanding of demand forecasting is required. By having a clear picture of consumer demand for your products, you can continue to meet their requirements whilst continuing to optimise the efficiency of available warehouse space.

VLT Logistics implement these strategies to meet the needs of our clients.

Where did Just-in-Time originate?

JIT is known to have been perfected by Taiichi Ohno in the Toyota manufacturing plants. The company, facing shortages in supply, was forced to survive by minimising consumption of resources that added no value to the product.

It has since grown into the inventory management strategy that many companies apply to their operations today.

Benefits of Just-in-Time inventory management

1. Reduction of excess stock

Implementing JIT reduces excess stock which contributes to more sustainable practices, reduces waste within your business and opens up more opportunities with available space in warehouses and across the production line.

This can also lead to an increase in productivity within your workforce, as well as reduce losses caused by faulty products.

2. Focus on quality over quantity of goods

With JIT, focus can be narrowed to the generation of products that meet customer expectations, with quality at the heart of the business.

Mass production is conducive to a greater number of defective products leading to dissatisfied customers, and a higher risk to overall business costs.

3. Agility and flexibility

Ordering and manufacturing fewer goods allows greater flexibility with your inventory. You will be able to adapt to consumer demand faster than your competition.

4. Improved relationships

The efficiency that this strategy can create opens up relationships between suppliers and consumers through mutual trust and product quality.

Challenges of JIT
Challenges of JIT

Comparatively, JIT also comes with challenges, like any inventory strategy.

1. Greater costs across the supply chain

Ordering small quantities of stock frequently is more expensive than buying in bulk occasionally, which can eat into profit margins.

2. Disruptions in the supply chain

Due to the logistics involved with ordering to meet demand, any delay in the supply chain, from natural disasters and delivery of raw materials to understaffing in production can cause a chain reaction of disruption along the supply chain.

This will impact customer satisfaction and increase costs.

3. Reliance on forecasting

Reliance on forecasting to determine demand for your products can amplify the risk of running out of inventory if there is a sudden surge of demand.

4. Greater training costs

JIT strategies and technology, whilst recognised as legitimate strategies, are relatively modern and therefore require training for your staff. This can hinder your ability to find staff trained to implement the appropriate processes, and increase training costs across the company.

Examples of where JIT thrives

JIT can be applied to a broad range of industries but there are some that stand out as leaders in optimising the methodology for their needs:

Car manufacturers:

Car manufacturers have honed the skill of JIT by only producing cars upon order. As an industry that relies upon expensive raw materials and parts that are manufactured abroad, implementing JIT reduces costs and also allows customisation of vehicles for more luxury brands.

Home renovation companies:

Companies that produce bespoke home renovation products depend on JIT strategies to meet customer demand. This includes doors, windows, carpets and some furniture brands.

Fast food chains:

In order to deliver food that is fresh every day, fast food chains must implement stringent JIT inventory management strategies with clear, concise and accurate demand forecasting data.

Managing your inventory to meet consumer demand begins with the peace of mind that secure warehouse space delivers and VLT Logistics ensures your goods are taken care of. Our warehouse storage and warehouse to rent facilities are manned by highly experienced warehouse teams, backed by JIT inventory management strategies, 24 hour security and real-time data warehousing software, so your time can be spent improving business operations.

If you’re interested in outsourcing your logistics to a fully trained team who put your access and understanding first, get in touch today to discuss your requirements.