The just-in-time (JIT) inventory method is a method of inventory management. “The goal of these concepts, contrary to popular belief, is not to reduce inventory, although that's an appealing side benefit. Instead, JIT (like its imitators) is a continual process aimed at eliminating waste and solving problems throughout the supply chain” (Minahan, 1997, p. 45). Since its inception in 1984, Dell Corporation, Inc. has set itself apart from competitors through innovation and creativity. The company uses the JIT method of inventory management. Many businesses use Dell’s success as a business model.
Dell’s sales concept focuses on meeting the needs of its customers and building computers to order, selling them directly to the customer. “This direct business model eliminates retailers that add unnecessary time and cost, or can diminish Dell's understanding of customer expectations. The direct model allows the company to build every system to order and offer customers powerful, richly-configured systems at competitive prices” (Dell, 2007, ¶ 1). In executing this vision Dell has leveraged effectively its human capital to drive growth and brand loyalty. Dell has been very successful with this model; as a result, the company carries low overhead cost by keeping inventory numbers low.
Prior to adopting the JIT method, Dell struggled with managing finances. After implementing JIT, the company saw a vast improvement in inventory turnover and a reduction in the number of days worth of inventory on hand. The company achieved improvement by only placing orders with suppliers when needed. Placing orders JIT eliminates carrying costs associated with managing inventory. Table one reflects the continued reduction, showing 5.7 days of inventory on hand in 2001 and 3.4 days of inventory on hand in 2004 (Morningstar, 2010). Annual inventory turnover increased from 64.3 in 2001 to 107.1 in 2004 (Morningstar, 2010).
Efficiency Ratios – Dell,... [continues]
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