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Mitigating product waste and warehouse overhead costs are spurring companies to ask, “What is just-in-time inventory management?”

Companies face a big dilemma when it comes to managing their inventory. They need to create enough space in their warehouses to hold stock without investing too much in one product that may suddenly no longer be in demand.

Even when successfully balancing warehouse inventory to have enough products to fill customer orders, fluctuating customer demand and new product designs will always create products that have become obsolete. These items lead to overhead costs in managing the inventory that is taking unnecessary space on shelves.

Your company also must invest in product disposal by drastically discounting the items, selling the items to liquidation companies, or donating the items to charities. A method to use to avoid this inventory management problem is just-in-time inventory management.

Just-in-Time Inventory Management — Defined

This methodology is similar to just-in-time (JIT) manufacturing strategies. JIT manufacturing involves manufacturers requesting materials for their processes only when that part is necessary during the production phase.

For example, a manufacturer may not keep a certain gear part in stock that it uses for engine assemblies. Instead, once the design and creation of the engine takes place, the manufacturer will order the gear, as it will then be placed into the engine assembly the moment the part arrives.

Just-in-time inventory management works in a similar fashion. For this strategy, the warehouse will not keep excess inventory of a certain product.

Using demand forecasting, you understand how much customer demand is for that product during a shorter sales time and then request products to meet potential sales orders. As products arrive, they are immediately placed toward sales orders and shipped to customers.

Just-in-time stock control may be used for items that sell well and have quick turnaround rates. Since the stock will be leaving shelves soon anyway, it becomes more cost-effective to simply fill orders as the items arrive — instead of wasting money and labor to place the items onto shelves.

Role of 3PLs With Just-in-Time Inventory Management

The just-in-time method of inventory control relies on having a robust, stable supply chain. The supply chain must be flexible to shifts in customer demand to immediately lower or increase the number of products shipped to fill client orders. It also must be able to handle emergencies at any given moment.

If one supplier has a production line down or cannot meet product order deadlines, another supplier must have its production lines up and running to fill those gaps. This strategy can cause minimal delays in order fulfillment and minimize long backorders.

A 3PL using versatile logistical strategies plays an important role in helping companies with JIT inventory management. The 3PL with distribution and fulfillment centers in key locations allows you to map the best routes for products to take from suppliers to warehouses and to customers.

Relying on regional distribution centers closer to warehouses and customers can allow your products to reach customers faster. In addition, the 3PLs partner with carrier networks to provide the best method of transportation — whether by truck, airplane, rail, or boat.

Advantages of Just-in-Time Inventory Systems

  • Less obsolete inventory: Your company as well as the manufacturer obtain benefits with JIT inventory control. Your company does not have to waste money on getting rid of products that are obsolete. The manufacturer can reduce material waste for product creation when customer demand wanes, as it does not have to fill large batch orders.
  • Improved customer demand responsiveness: Since you are no longer creating long-term demand forecasts, you can more easily switch to newer product lines based on customer trends. You gain real-time insight on what items customers want. This insight enables you to make smarter product investments.
  • Lower warehouse overhead costs: You can place your company’s working capital toward other areas of operations. You will not have to spend resourceson overcrowded warehouse spaces or managing excess inventory. 

Industries Utilizing Just-in-Time Inventory Methods

Numerous industries — from small businesses to large corporations — use just-in-time inventory methods to create more flexible supply chains and order fulfillment capabilities:

  • Tech manufacturers
  • Restaurants
  • On-demand publishers
  • Automobile manufacturers
  • Retailers
  • Drop-shippers
  • Fast fashion companies

WSI Inventory Management Services

Understanding the many cogs involved with inventory management systems allows your company to devise the best strategies to work with your present and future supply chain.  To fully implement JIT stock control, you will need to evaluate existing suppliers, warehouse processes, and logistical capabilities.

Here at WSI, we provide complex inventory management services that can help companies facilitate their just-in-time product deliveries to customers. Our services include fulfillment, packaging, transportation, and returns management.

Contact WSI today to learn more about our capabilities.

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