There’s a tricky balance in manufacturing between keeping things lean and having enough stock for your customers. Often, businesses find that they aren’t walking a tightrope but instead always running out of product or struggling to keep waste down.
In this post, we’re going to explore a unique approach, just-in-time management, which rides the line between these two extremes with finesse.
What is just-in-time management?
Just-in-time management (JIT) is a manufacturing management philosophy that originated in Japan. This strategy aims to have inventory arriving just as you need it rather than stocking it ahead of time.
In other words, right as you’re running out of a product, more arrives at your warehouse. Hence the name ‘just-in-time management’.
This has two key functions. It ensures that you always have the products you need in stock, and it prevents you from overstocking and creating waste through excessive products, transportation, or labour. This makes it particularly useful for food and drinks SMBs whose products have a limited shelf life.
The benefits of just-in-time management
Despite how challenging a just-in-time approach can be, there are significant benefits for businesses that can make it work. Here are just a few of the benefits you can expect when adopting a just-in-time methodology.
Lower inventory holding costs
Warehouse real estate is one of the highest costs for SMBs in the manufacturing sector. Every product competes for space, and unfavourable market trends can lead to wasted warehouse space month after month. That’s monthly overhead with little to no return.
Just-in-time management helps prevent this from happening. By only stocking products right as you need them, you avoid the seemingly ever-present issue of unsold stock.
This reduces overhead and allows you to store more of your hottest products, creating a warehouse flow that provides the maximum ROI.
Less dead stock and waste
Building on the last benefit is the reduction of dead stock. Dead stock represents the long-term consequences of poor inventory management. As seasons and trends change, you start to accumulate products that haven’t sold and seemingly never will.
This excess creates just the same problems as before. You have less floor space, more overhead, and less organisation. Fortunately, the just-in-time method helps you avoid this challenge.
You’ll be stocking fewer products at a time and only with the certainty that this product is about to be moved into customers’ hands.
Improved cash flow
Reducing dead stock and lowering your overall inventory costs will immediately provide you with more cash. Cutting down your overhead increases the money you have to invest in new products, space, better suppliers, transportation options, and so on.
Additionally, just-in-time management increases the ROI of each of your products. They’ll be moved from the manufacturing centre and to your customers in as little time as possible, reducing potential costs they could incur during the waiting period.
These two factors will significantly improve your cash flow, providing you with more security, peace of mind, and opportunities.
Pitfalls to avoid when adopting just-in-time management
Of course, the JIT approach isn’t without its obstacles. It can be difficult to implement, especially for businesses that aren’t used to lean strategies. By being prepared for these potential stumbling blocks, you can stay a step ahead of them.
You’ll have less room for error
Using the JIT approach means having much less room for error. Order products too soon or too late, and you’ll have too much or too little inventory on hand. You’re going to be cutting it close; it’s in the name ‘just-in-time’.
You can stay ahead of this potential pitfall by having the right tools and relationships in place. A solid inventory management system, trustworthy suppliers, and a keen research team or platform can help you keep your inventory in sync with customer demands.
You’ll have less control over product costs
Buying products with the just-in-time management approach means you’ll likely have less control over the price you pay for your products and supplies. That’s because you’ll be buying products at unpredictable times rather than in bulk.
As a result, you’ll pay whatever the current price is for materials at that time. This can lead to unexpected expenses and increased costs at inopportune times.
You’ll need to exercise more control with suppliers
The JIT method also means you will have a much closer relationship with your suppliers. To get items to arrive “just-in-time”, your suppliers will need to be able to meet demands quickly and potentially without warning.
This could require adjusting your current supplier partnerships or seeking out new suppliers. SMBs can also use different suppliers for different times of the year to maximise their chances of getting the right materials at the right times.
How to get started with just-in-time management as an SMB
Getting ahead of these stumbling blocks means having the right tools and strategies in place when adopting the just-in-time management method. Below are key strategies your SMB can implement when using JIT.
Planning is key
First, your SMB should prioritise planning. The global pandemic has shown that the unexpected can happen, hitting harder than anticipated. Food and drink SMBs should be especially wary of potential supply chain changes and disruptions.
Planning for these occurrences will allow your business to weather unexpected changes even while using the just-in-time strategy. SMBs don’t want to be left understocked during a period when restocking is difficult or impossible.
This is why investing in research alongside this just-in-time management is key. Your business needs a constant and intuitive understanding of its supply chain to have contingencies prepared.
Invest in a great inventory management system
Second, SMBs need to invest in a great inventory management system. Inventory management solutions are core to manufacturing success, doubly so if your business is using a just-in-time management method.
A great inventory management platform provides real-time insights into your stock — incoming, outgoing, and stationary. At a moment’s notice, you should be able to view all of your products, view trends, and understand what you need to order right when you need to order it.
With the right inventory management system in place, your business can properly utilise the JIT methodology. This will allow you to minimise overstocking and ensure that you have just as many products as you do customers.
Categorise your stock
Another way to start implementing JIT into your SMB’s workflow is to categorise your stock. Dividing your stock into subgroups makes it easy to track your stock trends. You can better understand which products are moving and which aren’t. This makes it simple to keep the right products in stock and reduce overstocking of less performing items.
Find reliable suppliers
Finally, your business will need to find reliable suppliers. These suppliers will need to meet demands at a moment’s notice, keep up with current trends, and prioritise your needs when they arise.
Restructuring your supplier relationships might be necessary to ensure you get the best support for your just-in-time management approach available.
Adopt just-in-time management with support from a reliable inventory and order management system
Adopting the just-in-time management strategy isn’t just about controlling external factors. It’s about having the right tools on your side to keep your business lean, accurate, and agile. Book a demo with Workhorse today and see how our cutting-edge inventory and order management system can support your goals.