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Reduce costs

How can JIT reduce inventory costs? Learn how to implement a JIT system to save money on inventory.

Overview

Inventory management is a crucial aspect of any business, as it can significantly impact the bottom line.

Just-in-time (JIT) inventory system is a popular approach that helps businesses reduce inventory costs by ordering and receiving goods only when they are needed in the production process.

This approach eliminates the need for businesses to stockpile inventory, which can result in significant cost savings.

Two well-known global brands that have successfully implemented JIT inventory system are Toyota and Dell.

Toyota was one of the first companies to implement JIT in the 1970s, which helped them reduce inventory costs and improve production efficiency.

Dell, on the other hand, implemented JIT in the 1990s, which helped them reduce inventory costs and respond quickly to changing customer demands.

How to

Implementing JIT inventory system requires a collaborative effort from various departments within a business.

Here are the roles and responsibilities of each department:

  • Production department: Responsible for monitoring inventory levels and initiating production orders when inventory levels are low.
  • Purchasing department: Responsible for placing orders with suppliers and coordinating with the production department to ensure timely delivery of goods.
  • Quality control department: Responsible for ensuring that the goods received from suppliers meet the required quality standards.
  • Accounting department: Responsible for tracking inventory costs and ensuring that the JIT inventory system is cost-effective.

Best practices

Here are six best practices for implementing JIT inventory system:

  1. Establish strong relationships with suppliers to ensure timely delivery of goods.
  2. Monitor inventory levels closely to avoid stockouts and production delays.
  3. Implement a reliable forecasting system to accurately predict demand.
  4. Invest in quality control measures to ensure that goods received from suppliers meet the required quality standards.
  5. Implement a robust communication system between departments to ensure that everyone is on the same page.
  6. Regularly review and adjust the JIT inventory system to ensure that it remains cost-effective.

Examples

Here are two potential examples of how small businesses can implement JIT inventory system:

  • Example 1: A small bakery can implement JIT inventory system by ordering only the ingredients needed for the day’s production. This approach will help them reduce inventory costs and ensure that their products are always fresh.
  • Example 2: A small clothing store can implement JIT inventory system by ordering new stock only when the existing stock is sold. This approach will help them reduce inventory costs and avoid overstocking on items that may not sell well.
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