5 Key Benefits of Just-In-Time Inventory Management!

Just-in-time inventory management

In today’s fast-paced environment, businesses continuously strive to improve their processes in order to maximize productivity and customer satisfaction. Depending on the type of business, there are many areas that can benefit from leaner systems and quicker turnarounds.

For manufacturing businesses, efficient inventory management is essential and just-in-time inventory management has been increasingly adopted over the past years. This system ensures that production is closely tied to demand, synchronizing the production of goods with orders.

Adopting a just-in-time (JIT) inventory system has numerous advantages for a business, so read on to find out the key benefits.

1. Eliminates waste

Waste elimination is the most immediately visible benefit of just-in-time inventory management. When you only need to order and store the goods you are certain you need, there is less redundancy and lower storage costs.

Of course, this means you have to closely monitor your orders and emerging consumer trends, so you can match their needs without producing too much. Just-in-time inventory is key to reducing waste, especially if you are working with perishable goods. 

Furthermore, in the retail industry, where consumer preferences change frequently, you can ensure that you are not stuck with goods and products that have fallen out of demand and are now obsolete. This is not only beneficial to your bottom line, but it can also be friendlier to the environment, which is always a plus.

2. Reduces up-front costs

This benefit applies especially to startups and early-stage businesses. When you only buy the goods you need in the near future, you pledge a smaller proportion of your funds. Just-in-time inventory can lower the barrier to entry for businesses and help them hold on to cash that might be needed in other areas of the business. 

Having cash and available funds is often key to the survival of new businesses, and it is risky to block a high proportion of capital in goods that will stay stuck in a warehouse with no immediate business result. By not having to store too much, a business will also save on storage space, security, or electricity and heating.

3. Improves efficiency

When you need to be quick at meeting customer orders, the need to improve efficiency becomes a top priority. You need to make sure you closely monitor and analyze demand, production processes, existing inventory and suppliers, as well as your needed stock, so you can maintain customer satisfaction.

With all this scrutiny, you will likely find many processes that can be improved and inefficiencies that can be cut. As you need to make the most of your inventory, there is very little room for waste and errors. While this might place some stress on your processes and employees, it can lead to massive improvements in productivity, ultimately leading to a more relaxed and efficient workforce.

4. Maximizes quality

All businesses aim to improve and maximize the quality of their services and products. However, when mass production is the goal, it becomes more difficult to focus on quality. If your warehouse is cluttered with goods and products, it is much harder to find errors and pinpoint areas for improvement.

On the other hand, if you are only stocking the products you need to meet orders, you can more closely analyze their quality. Plus, if an error occurs, it is less painful if caught early and addressed before all of your products are ready to ship.

5. Boosts profit

This is likely the top benefit of just-in-time inventory management and it emerges from the combination of all the other improvements listed so far. When waste is kept to a minimum, processes are efficient and quality is continuously improved, your business will inevitably thrive.

The result will likely be more profit to share with stakeholders and employees, as well as available capital to further develop the business through new investment.

Adopting a lean strategy with just-in-time inventory management at its core is beneficial for all business areas. Of course, just-in-time inventory management has its risks as well, since your business will be more exposed to supply chain disruptions and shortages.

These risks can be easily offset when you use inventory management software that allows you to monitor your inventory in real-time. You will be able to predict and address any disruptions early on, thus staying in control of your inventory easily.

Article and permission to publish here provided by Bazoom. Originally written for Supply Chain Game Changer and published on November 17, 2023.

Cover photo by Pickawood on Unsplash