Can Just-In-Time Inventory Management Help Your Business?

Could your company benefit from having less unused inventory on hand at any given time? Many businesses have turned to a method for ensuring the most efficient use of inventory possible: just in time (JIT) inventory. What is this approach? How can it boost your profit margins? And what do you need in place in order to make it successful? Here's what you need to know. 

What Is JIT Inventory?

A shift toward JIT inventory means bringing in materials to produce your goods only when they are needed rather than keeping a large amount on hand as a safety net. For example, if your daily production of widgets is 500, you may have 500 of the key ingredients delivered each morning from your suppliers. Today's inventory arrives, you use it immediately, and new inventory arrives the next day to continue the process. 

How Does JIT Inventory Help You?

JIT inventory's biggest draw is reduced costs for holding on to raw materials in your possession. You don't overpay to bring in materials you don't yet need. The cost of materials for 500 widgets affect the company at the same time that you can sell those 500 widgets. You aren't prepaying for what's needed to make widgets next week. So, income and expenses are more evenly matched. 

In addition, storage costs go down significantly with JIT management. Rather than building or leasing a big storage area and paying to insure it, staff it, manage it, and secure it, you can put that budget elsewhere. The cost of paying higher rates for smaller orders or deliveries, for instance, is often dwarfed by the overhead expense of maintaining a warehouse. 

What's Necessary for JIT Inventory Management?

Of course, a system as delicate as JIT inventory requires discipline and good management. You need a steady supply chain that can provide materials on a strict schedule. Delays are much riskier when you don't have any backup inventory already in your warehouse. Any weak link within your suppliers could result in shortages in your production and disappointed customers. 

Your supply chain may also need to look different. Delays are more likely when you work with distant suppliers who may be affected by other economies or disasters, customs issues, and transportation breakdown. Many JIT companies, then, choose to work with more domestic or local suppliers. And rather than relying on one large supplier to do everything, they may have several who can step in at a moment's notice. 

Transportation itself must be reliable and able to be adjusted on the go if one part of the supply chain suffers a setback. You may also need to use different shipping methods to achieve the optimal mix — such as small trucks for daily deliveries as well as air freight for time-sensitive supplies and ocean cargo to keep the supply coming for the future. 

Finally, JIT inventory management requires a holistic logistical approach. JIT isn't just about managing how materials are shipped; it's about managing the inventory from beginning to end. Your suppliers need to manage their own inventory so they can provide the service you need. Transporters need to be reliable and flexible. And production needs to be able to forecast their needs. 

Where Should You Start?

Could a transition to JIT inventory management help your company? The best way to decide how and when to implement this new way of thinking is to meet with an experienced logistical service first. JBS Logistics can help. Our team is ready to aid you in assessing your needs and finding the best way to approach JIT methods. Call today to learn more.