Every company should be able to balance demand and supply to be profitable. Not having enough to sell is every firm’s nightmare. However, this does not mean that you must have warehouses constantly stocked to the ceiling with products waiting to be sold. Stocking too much inventory has its disadvantages as it comes with warehousing costs, rent, etc. The solution is to maintain just enough products.
As proved by corporate giants like Toyota, Apple and Zara, you can make a profit and meet customer demands while maintaining a lean inventory. Better known as Just-in-Time (JIT) inventory, maintaining a lean inventory involves manufacturing a product to meet existing orders instead of projected orders. It can help cut down costs, make your production lines more efficient and reduce wastage. This is a customer-driven system that can help your company maximize its potential.
4 Tips to Adopt Just-in-Time Inventory
JIT inventory is suitable for companies of all sizes. It is equally applicable to boutique companies and established multi-nationals. If you’re considering moving towards this system, here are a few steps you need to take.
Develop a Robust Inventory Management System
Maintaining a lean inventory does not mean that you have absolutely nothing in your inventory stocks. Instead, a company must maintain a minimal inventory to meet immediate demands. Thus, for this type of inventory system to work efficiently, you will need to be constantly aware of your inventory levels. Usage of supplies and timing the delivery of their replacement is crucial. You should also have a way to know the status of components being delivered to you. GPS tracking of transporter trucks and integrated trip management systems can be quite helpful with this.
Use Technology to Your Advantage
When you need to have an up-to-date, accurate account of your inventory status, technology can be a big help. Unlike manual inventory management, using technology to manage your inventory reduces the risk of miscounts at the ordering and receiving stages and human error. The technology available for inventory management ranges from stand-alone software products to integrated enterprise resource planning systems. Systems can be built in to issue alerts when inventory drops below a certain level or to automate ordering replacements.
Foster a Reliable Supplier Network
While your inventory may be lean, your supplier network need not be. Instead, you should have multiple suppliers for each product or component used in your production line. This ensures that you will always be able to get what you need within your timelines. The suppliers in your network should ideally have long-term relationships with your company and be willing to go the extra mile to deliver products within a tight schedule. It would also be ideal for your suppliers to be located close by.
Be Transparent with Customers
It isn’t true that you will lose clients if you cannot meet their demands instantly. However, there is a chance of losing clients if you make promises you cannot keep. The key to a strong customer relationship is to maintain quality and transparency. Give your customers a realistic timeline of when their orders will be delivered and then stick to this timeline. If you are upfront and honest with your customers, retaining their loyalty is not difficult.
With technological advancements and by maintaining a robust supplier network, it isn’t very difficult to do this with a JIT inventory system. Not only will such a system minimize wastage and maximize your floor space utility, by reducing warehousing costs, it could also help improve your profit margins.
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