JUST-IN-TIME (JIT) INVENTORY Harvard Case Solution & Analysis

JUST-IN-TIME (JIT) INVENTORY Case Study Solution

Implementing Just-in-time Inventory

Before implementing the suggested plan of Just in time inventory, the small business owner must make sure that specific elements are helping them out, which will further contribute to the better implementation of the JIT strategy.

Healthy Owner-Supplier Relationship

A strong relationship between the two parties; owner and supplier is a must for continuing with the establishing of the JIT inventory management system. The owner relies on the last minute delivery from the supplier to fulfil the last minute order. The Supplier is entrusted by the owner that all the orders will be delivered on time as soon as the owner will place an order. For that, the owner and suppliers’ bonding has to be strong with better communication between the stakeholders. The company which has decided that it will change its inventory processing system will also have to good suppliers, the ones that has the ability to provide the raw material or inventory in a short notice. A weak supplier will be of no use to the company and may cause friction between the two parties.

Proper Medium of communication

Despite a strong owner supplier relationship, what will actually happen if the company can’t tell the supplier about the new orders to its supplier? The phone line may stop working or the internet service may go down, causing greater trouble for the owner to communicate its supplier. A time being wasted is equal to an order being wasted, hence the JIT system has to be perfectly fine and efficient. The other thing, owner has to keep in mind is to properly provide the details of the orders to avoid any confusions.

Taking help from the Technology

An accurate measure of supply and demand can never be successful when handling the inventory manually. The chances of errors and wrong estimations are always at the higher side of the scale, damaging the business’s profitability. Now, an owner can choose from variety of affordable softwares and Enterprise Resource Planning (ERP) systems is one of them which is completely integrated and will help the small business owner to manage its inventory. The only problem arising from the sophisticated software is the ability to buy them because they can be a bit costly. Including this, manual counting may often become the reason of miscounting at the delivery stage. The increased number of workers may add up to this problem as they may forget the number of supplies counted or may even miss some of the items from counting. To stay away from this problem, using bar code scanning and electronic data interchange (EDI) can help get rid from the manual counting of the inventory and can remove the data entry errors completely.

Hiring an expert

Are there good enough people in your company that can manage the just-in-time inventory system? To answer the question, the company would look towards the experts of the JIT inventory system, the one who can look after the production process along with managing the supply chain processes.

Training the staff              

Apart from hiring an expert, the small business owner would dearly want its employees to get a hold on the new technology and to get along with the new system. Due to changed strategies, workers tend to follow the track and gets left behind the process. In this case, the management has to come forward and take full responsibility of guiding the employees about the policies and procedures. A well trained employee would know what should be done when the order is placed. The knowledge of the employees can be monitored by constantly having a closer look at the time of procedure and reaching out to them at times of difficulty.

Key Points of JIT inventory procedure

In this section, the key features of Just-In-Time Inventory system’s key features will be analyzed thoroughly:

  • Minimal Warehouse Cost

As the owner would restrict ordering larger quantities of stock, there wouldn’t be a need to have a large storage house for that. Additional to this, the handling cost will automatically get strangled with the low inventory as there would be less labor and minimal effort required to manage the inventory. As said, the business owners wouldn’t hire much labor and they may also rent or buy a much smaller warehouse and thus rein in the fixed cost.

  • Less Wastage

Inventory managers have been struggling with the continuous headache of inventory wastage. Small businesses doesn’t want to right off the stock that was initially brought in with the invested capital. In these kind of situations, JIT strategy implementation controls down the wastage and causes less spoilage hence proving to be beneficial for the company’s profitability.

  • Better control over manufacturing process

The business owner can closely monitor all the aspects that are related to manufacturing after using the JIT procedure. In times of quick orders or change in customers’ demand the management can respond quickly and deliver the product according to the customers’ needs.

Olympia textiles did the same thing when they stopped focusing on a plain jeans and shifted their focus towards ripped jeans as they saw the change in customers’ taste towards ripped jeans. They could only do so when they had complete control over their manufacturing department and they handled their inventory with greater efficiency after using JIT technique.

Learning JIT process from other companies

Toyota Motor Company

JIT inventory process was initially introduced by Toyota Motors in the 1970s and it took almost 15 years for the company to completely get a hold on to the process. The Toyota Manufacturers only bought production parts from its trusted supplying partners only when they received new orders.

The company has always relied on its set of trusted suppliers which it believes can deliver the product on the required time and as soon as ordered. Neither they have compromised on the quality of their workers nor they let their machines slowdown the process and maintain them on the daily basis. Efficient labors was always in demand when using the JIT system so that he could work well in the assembly line with larger affectivity.

Kellogg’s

Most of the Kellogg’s items are perishable goods, it should be obvious that they are one of the companies to implement Just in Time inventory management method to manage their stock with higher efficiency. The company only places limited stock in its inventory basket just enough to fulfil orders.

Zara

The brand feels that piling up too much inventory is equal to their business’s death so it designs about half of its clothing items just in the middle of the season rather than locking in complete clothing line just at the beginning of the season.

Recommendations

The Just-in-time inventory management system is the new of its kind which was begun by the Toyota Motors in an attempt to lower down its wastage and handling cost. The small business owners can implement the JIT system helping them to enhance their control over the inventory of their business which will allow them to order the stock only when its order is received by the customer. The less inventory would means minimal wastage helping the company efficiently utilizing the country’s depleting natural resources. Lower inventory also doesn’t eat up much space allowing the owner to get a smaller warehouse and bringing down its handling cost.

Though, the company would need to hire expert individuals who can take care of the complete process and doesn’t allow any mishaps from the workers perspective. With this, there would be a constant need to train the employs that won’t be completely following the new JIT procedure. Well trained staff combined with high technology will be extremely useful in implementing the new JIT system. The new technology would allow the company owner to get rid of the manual counting of the goods shunning the chances of data entry errors. Therefore, it is highly recommended for a small business owner to implement Just in time inventory system as soon as possible because the greater the delay the greater will be the impact in the company’s bottom line............

 

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