A Closer Look at the Just-In-Time Inventory Management Strategy

Sep 23, 2022Articles

Thanks to the current supply chain crisis, it’s never been more difficult to determine the right inventory management solution for your business, especially if you are a manufacturer or a distributor. Maintaining just the right level of supply availability is critical to successfully running a business that relies on stocking.

There are obvious consequences for having too much or too little available inventory. One option is to rely on just-in-time production which can work fine just as long as the inventory is immediately accessible.

Prior to the Covid-19 pandemic, the main issue for many manufacturers was that it was very difficult to know in advance what the demand for any product would be. So, the tactic was to just make the product according to the immediate demand. In order to move forward with this plan, the companies relied on ordering the minimal inventory of parts and raw materials when needed or what is better known as just-in-time.

Just-in-time inventory management works best when suppliers and factories are located relatively close to each other; usually, less than an hour or two apart which is often found in industrial parks in China. In these cases, manufacturers or distributors can conveniently schedule daily or even hourly deliveries. When the just-in-time process runs smoothly it
delivers lower costs and better financial performance by allowing companies to manage lean supply chains, improve inventory quality, and save money by avoiding holding too much inventory.

To reiterate, the just-in-time strategy can work well as long as all the key players are in close proximity. Manufacturers that rely on suppliers in all parts of the country or even globally can suffer serious consequences when deliveries can’t be made precisely when they’re needed.

As we’ve seen during and following the pandemic, even being in close proximity is not a full-proof guarantee that deliveries will be made on time. We’re now seeing a shortage of drivers in the labor force that is affecting the reliability of deliveries being made on time.

When all the stars align, the just-in-time strategy can work quite well. But it does come with risk. The good news is that there are other options that can be considered. At Shippers Solutions we help our customers identify the best inventory management process to fit their specific situation and needs. If you’d like to learn more about our proven supply chain solutions, we invite you to contact us today by sending an email directly to our president, Henry Camp: [email protected].