What is (Just In Time) Inventory Management? It’s an strategy that is aimed at monitoring the inventory process in such a manner as to minimize the costs associated with inventory control and maintenance. Just-in-time inventory process relies on the efficient monitoring of the usage of materials in the production of goods and ordering replacement goods that arrive shortly before they are needed. This simple strategy helps to prevent incurring the costs associated with carrying large inventories of raw materials at any given point in time.
Another part of just in time inventory focuses not on raw materials but on finished goods. The idea is to develop a understanding of what is needed to produce goods and schedule them for shipment to customers within the shortest time frame possible. As with raw materials, shipping finished goods shortly after producing them leads to minimizing storage costs and any taxes that may be applicable. This just in time inventory strategy can significantly cut the operational expenses of a business in regards to the amount of inventory that must be stored at any one time and the amount of taxes that must be paid on larger inventories.
Companies should use this because it is necessary to know how long it will take for the item to be shipped from the supplier and arrive at the manufacturing facility. Second, the anticipated life or usage of the item must be determined. By knowing these two pieces of information, it is possible to establish procedures that allow the item to be reordered just in time to arrive and replace a worn item, without having the replacement set in storage for an extended period of time.
Just-in-time inventory is not without risks. There are also reasons why some companies wouldn’t consider using the Just-in-time inventory. By using just-in-time inventory companies intend to walk a fine line between having too much and too little inventory. If company buyers fail to adjust quickly to increased demand or...
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