JIT inventory strategy, also known as just-in-time inventory, is an inventory management strategy that aims to minimise waste and inefficiency by delivering goods as they are needed. This means that businesses using JIT inventory will only order the amount of goods they need, when they need them.
Here are the steps on how JIT inventory works:
- Demand forecasting: The first step in JIT inventory is to forecast demand. This involves predicting how much inventory will be needed in the future, iX ERP inventory planning and forecasting report can be used to get 360 degree organisation inventory requirements.
- Order placement: Once demand has been forecasted, businesses can place orders with suppliers. The goal is to order the exact amount of goods that is needed, no more and no less, with the help of iX ERP the exact quantity can be ordered by using the required amount in iX ERP planning report, along with supplier selection based on price and delivery time included in iX ERP suppliers management module.
- Delivery: Suppliers then deliver the goods to businesses. The goal is to deliver the goods on time and in the correct quantity as per the purchase order issued from iX ERP and sent electronically to the supplier.
- Production: Businesses then use the goods to produce products or deliver services or reselling to the end user. The goal is to use the goods as efficiently as possible.
- Customer fulfilment: Once the products or services are produced or prepared, they are then sold to customers. The goal is to fulfil customer orders as quickly as possible.
JIT inventory can be a complex system to implement, but it is ever easier with iX ERP, also it can offer a number of benefits to businesses, including:
- Reduced inventory costs: JIT inventory can help businesses to reduce their inventory costs by reducing the amount of inventory they need to hold. This can lead to significant savings in storage costs, insurance costs, and obsolescence costs.
- Improved cash flow: By reducing inventory levels, businesses using JIT inventory can improve their cash flow. This is because they have less money tied up in inventory, which can be used for other purposes, such as investing or expanding the business.
- Increased efficiency: JIT inventory can help businesses to improve their efficiency by reducing the amount of time and resources wasted on managing inventory. This can lead to faster production times and lower costs.
- Improved customer satisfaction: By ensuring that they have the right amount of goods on hand, businesses using JIT inventory can reduce the risk of stock outs. This can lead to improved customer satisfaction, as customers are more likely to be able to get the products they want when they want them.
However, there are also some challenges associated with JIT inventory, including:
- The need for accurate demand forecasting: JIT inventory relies on accurate demand forecasting. If businesses do not accurately forecast demand, they may not have enough goods on hand to meet customer demand.
- The need for reliable suppliers: JIT inventory also relies on reliable suppliers. If suppliers are not able to deliver goods on time, businesses may experience stock outs.
- The need for a flexible workforce: JIT inventory can require a flexible workforce. Businesses using JIT inventory may need to be able to adjust production levels quickly to meet demand.
Overall, JIT inventory strategy can be a great way for businesses to reduce costs, improve efficiency, and improve customer satisfaction with easier implementation by using iX ERP. However, it is important to be aware of the challenges associated with JIT inventory before implementing it.