The purpose of this paper is to discern the process of the Just in Time (JIT) inventory system in companies, as well as provide key examples of JIT. It is considered to be one of the best inventory management systems that there are. Due to the reliance that many companies have on JIT, it is important to realize the utilizations of the system and why it is commonly used. As well as, recognize potential weaknesses, and possible risk mitigation plans that companies can practice to avoid future problems with inventory management.
JIT Key Elements
We have all heard the phrase ‘Just-in -time’. ‘Just-in- time’ for dinner, ‘just-in-time’ for work, ‘just-in-time’ for the store shelf, wait…, what? Yes, ‘just-in-time’ is more than an everyday common …show more content…
According to Charles Atkinson in his article, entitled, Inventory Management Review, Dell is highlighted as a company with low inventory levels. A decrease in inventory over time, as seen in following chart, had a great effect on Dell’s overall performance because computers depreciate at a very high rate and if a computer company is sitting on a lot of inventory, the losses are great. Dell also uses the Just in Time inventory method to make their manufacturing process a success. However, Dell has a different approach to using this method, they influence their suppliers in order to reach their JIT goals. One thing that sets Dell apart from everyone else is that they have short lead times for their customers. They are able to achieve this by making their suppliers stock up on the inventory rather than carry the supplies themselves. Dell implements this by demanding shorter lead times, so they can quickly assemble and ship the products to their customer’s (Wilson, J. 2015.).A lower than industry average inventory turnover ratio changed Dell’s …show more content…
In a JIT system there is risk of not having enough stock, because the system calls for such low levels of inventory. By having such low levels of inventory, a company runs the risk of having to heavily rely on the delivery of their suppliers. This is a risk that is hard to mitigate, and leaves a company at the mercy of their suppliers. In addition to the inventory risk, the JIT system can be quite costly because it requires more resources to properly forecast. These resources can be hard to obtain and can be expensive as forecasting takes time and data in order to be executed correctly. If a company cannot properly forecast, then the JIT can quickly backfire and cost more money than
JIT Key Elements
We have all heard the phrase ‘Just-in -time’. ‘Just-in- time’ for dinner, ‘just-in-time’ for work, ‘just-in-time’ for the store shelf, wait…, what? Yes, ‘just-in-time’ is more than an everyday common …show more content…
According to Charles Atkinson in his article, entitled, Inventory Management Review, Dell is highlighted as a company with low inventory levels. A decrease in inventory over time, as seen in following chart, had a great effect on Dell’s overall performance because computers depreciate at a very high rate and if a computer company is sitting on a lot of inventory, the losses are great. Dell also uses the Just in Time inventory method to make their manufacturing process a success. However, Dell has a different approach to using this method, they influence their suppliers in order to reach their JIT goals. One thing that sets Dell apart from everyone else is that they have short lead times for their customers. They are able to achieve this by making their suppliers stock up on the inventory rather than carry the supplies themselves. Dell implements this by demanding shorter lead times, so they can quickly assemble and ship the products to their customer’s (Wilson, J. 2015.).A lower than industry average inventory turnover ratio changed Dell’s …show more content…
In a JIT system there is risk of not having enough stock, because the system calls for such low levels of inventory. By having such low levels of inventory, a company runs the risk of having to heavily rely on the delivery of their suppliers. This is a risk that is hard to mitigate, and leaves a company at the mercy of their suppliers. In addition to the inventory risk, the JIT system can be quite costly because it requires more resources to properly forecast. These resources can be hard to obtain and can be expensive as forecasting takes time and data in order to be executed correctly. If a company cannot properly forecast, then the JIT can quickly backfire and cost more money than