Pros and Cons of JIT Inventory Control
Just-in-time, or JIT, inventory is a type of inventory system that's used by a variety of companies. This type of inventory system involves keeping a low amount of inventory on hand and then receiving inventory just before it's needed. This system can help lower costs, but it could also cause customer service issues.
Function
The JIT inventory system is a type of inventory control that can be administered by large and small businesses. This system requires the company to receive products directly before they're picked up by customers. This system also requires the suppliers of the company to be timely. The suppliers have to bring the products immediately when they're needed so that they can then be distributed to the customers.
Costs
One of the benefits of this type of inventory system is that it can save a substantial amount of money for the company. Instead of tying up a large amount of funds in inventory, the company can have more money to use elsewhere. The company is also able to avoid investing in a large amount of warehouse space. Instead, they can keep only a small amount of inventory on hand and save money on leasing costs.
Responsiveness
A JIT inventory system can be much more responsive than a traditional method. With this type of system, you only order exactly what you need when you need it. With a different type of inventory management system, you would potentially have to predict what to buy well before you need it. The market could change, and the products in your warehouse could become obsolete before you sell them. This ties up your money in items that you may not be able to sell.
Customer Service
One of the most common problems with the JIT inventory system is that it can cause customer service issues. When a company relies on its suppliers to get product to them immediately, they inevitably have to deal with shipping delays at some point. When this happens, you can anger your customers because their products aren't available when they need them.
Interdependence
With this type of system, your business greatly depends on factors that are outside of your control. You basically have to rely on your suppliers for everything. If your suppliers can't come through for you, you may be going out of business quickly. Companies that have large amounts of inventory on hand could withstand supplier issues and still keep selling to customers.
