Just in Time Inventory in Today's Business



A business practice that has become very popular over the past ten years is Just in Time inventory. The Just in Time technique involves storing only enough inventory or materials to meet immediate demands, which is particularly effective for a product that has a short manufacturing process. For products with longer, more complex manufacturing processes, in-process inventory is reduced, requiring a great deal of communication between units to coordinate efforts and keep production running smoothly. In either case, Just in Time inventory can present a significant cost savings.

The Just in Time inventory concept was actually first used by Henry Ford in the 1920s. It was his vision that the perfect process would have the raw materials arriving from the dock and going directly to the factory floor for assembly?and then the finished product would roll out the door to be delivered. Of course, this would require that everything goes perfectly and there are no delays in transportation, leading to wasted time on the line waiting for materials. Because nothing is ever perfect, Ford's ideal vision is not likely to come to fruition. However, that does not mean you cannot find a compromise, storing only a minimum of materials and inventory as insurance against delays.

The Value of Just in Time Inventory

A major cost of a company that sells a physical product is the cost to store inventory. Storage costs can add up: warehouse space, staff for the warehouse, utilities?not to mention the costs associated with inventory loss through theft, spoilage or damage related to storing such as water damage. In most industries in today's business world , products are constantly changing or improving, and storing a large inventory will almost guarantee that your company will be left behind the curve, selling old products after your competitors have moved on. Storing an inventory is a very cost inefficient way to do business.

With Just in Time, all of these costs are greatly reduced or eliminated. Less warehouse space is needed to store your products, and you can say goodbye to throwing away spoiled or damaged goods. What may be more important, you can continually update your product line as needed to keep up with your competitors. When your research and development department makes an improvement on a component, you can integrate the improvements immediately, because you will not have large amounts of the old components to use up first. You will be able to provide your customers with the most up-to-date technology possible, which is great for your reputation.

A Just in Time inventory program is a viable answer for many companies that need to reduce costs and move their businesses faster to keep up with changing customer demands.

About Strategic Profits:

Strategic Profits is a privately held company headquartered in Delray Beach, Fla. Strategic Profits exists to help business and entrepreneurs online and offline with business coaching advice and tools that they need to succeed in the Attention Age. Visit the corporate Web site www.strategicprofits.com for more information or leave your questions and/or comments on Rich Schefren's blog at www.strategicprofits.com/blog. To download, the free report this article is referencing visit, http://www.strategicprofits.com/newrules.