Just-in-Time (JIT) Inventories
Effective operation strategies are continuously being reevaluated to enhance their efficiency, reduce unused products, generate higher quality products, as well as many other features of what is obviously defined as Just-in-Time (JIT) (Vonderembse & White, 2013). This methodology was reinvented from the worldwide automotive manufacturing giant, Toyota during the 1980s. This method looked at ways to upsurge the quality of manufacturing without having outrageous amounts of additional inventory (Vonderembse & White, 2013). Today, many other firms have been able to adjust the concept and processes of JIT within their own businesses to decrease surplus waste from production. Yet, there are still organizations that this process of efficiency would not be as beneficial for.
In the retail industry, companies are using the JIT process to reduce the amount of back stock that housed within their facilities. The decrease of this back inventory allows for a greater turnaround of existing products while safeguarding that when stock amounts begin to decrease; the availability of ordering and receiving replacement orders are relatively productive and quick turnaround time. Yet, for example, the restaurant industry does not have the practices to greatly lessen excessive inventory to the levels that resemble the JIT process. Most restaurants, today, have the ability to use the fresh, farm to table products with easy re-order accessibility. However, there is a required amount of inventory that is needed, on hand to run their operations successfully on a daily basis.
Another company similar to restaurant servicing is Costco and Sam’s. Both companies are notorious for their warehouse approach at discounted pricing for members. The amount of excess inventory based on the current product listing far surpasses the quantity of traffic that is achieved. Costco and Sam’s Club will also order standard items that may not be readily available to the members until a certain time frame. This process is effective for these wholesale companies and alike warehouse shopping centers, but it does not reflect the JIT concept of only having the needed amount of inventory based on the production of sales. Just-in-Time has beneficial factors that can be tailored to many businesses and there are those, as previously illustrated that cannot or will not be able to adapt to the processes in their entirety.
Vonderembse, M. A., & White, G. P. (2013). Operations Management [Electronic version]. Retrieved from https://content.ashford.edu
Companies or Industries WhichJust-in-Time ( JIT) Would be Inappropriate
It is important to understand the concept or the theory behind the term Just-in-Time (JIT), which was explained in the text (Vonderembse, & White, 2013); which is a strategy implemented by management to increase its efficiency while minimizing its inventory. The JIT strategy works to align raw material orders from suppliers directly with its production schedules. One of the main goals of this system is to reduce waste by receiving the goods only when they are needed for the production process, which results in a decrease in the cost of inventory. In order to successfully implement this strategy, it is vital that the producers forecast demand accurately (Vonderembse, & White, 2013).
Based on the concept of JIT, there are companies that would not benefit from this strategy and it would also be inappropriate based on the type of industries. Organizations that operate without any kind of processing cycle that consists of a repetitive nature, such as manufactures of custom or specialized products would not benefit from JIT. If the company or industry does not have a production process that is repetitive, then they would not know what materials are needed ahead of time. As a result, the JIT inventory system would not work for small retailers, because the lower inventory volume would yield a higher cost per unit (Vonderembse, & White, 2013). This model is unaffordable for smaller retailers due to the higher cost per unit. For example, a small retailer such as Bealls department stores that sells apparel and various household items would not benefit from this system because they lack purchasing power and product volumes. However, companies like Walmart thrive on the JIT model because they have high production levels and can benefit from economies of scale.
Vonderembse, M.A., & White, G.P. (2013). Operations Management [Electronic version].
Retrieved from https://content.ashford.edu/