Just In Time (JIT) inventory management: What role does it play for retailers?
One of the core challenges many retailers have traditionally struggled with is managing their inventory effectively and efficiently – hot products would sell out quickly, leaving merchants unable to meet customer demand, while slow-moving items would sit in warehouses and freeze capital until they were offloaded (often at losses at heavy discounts).
For most modern retailers, inventory remains a big concern. However, new techniques, when applied with the right eCommerce software, can help make inventory management less of a major concern. One of these newer strategies is called “just in time” (JIT) inventory management, which is a play on a practice developed by the Japanese auto industry.
What is Just in Time to retailers?
JIT stresses the important of only carrying the bare minimum amount of stock required to satisfy the demand of customers. Traditionally, retailers have aimed to carry surplus so they don’t run out of stock and miss out on sales. However, in a time when operating within a budget is a priority objective due to a recovering economy, this isn’t an option. With a JIT model deployed, the ultimate goal would be to have zero inventory, and have merchandise sent to the warehouse only when an order has been placed.
“By minimizing inventory, JIT frees up resources to employ elsewhere in the company,” explained the Small Business Chronicle. “A retail store using JIT can remodel the warehouse space into more retail sales floor space without expanding the physical store. A manufacturer gets more space to produce goods. Both companies free the workforce to focus on primary tasks, from making goods to interacting with customers rather than stocking merchandise.”
To execute JIT effectively, merchants should turn to eCommerce software that can help them track and analyze the level of inventory available at suppliers and manufacturers in real time. Modern solutions automate purchasing and receiving of inventory as customer orders are placed. This makes inventory management much easier on the end of the retailer as the organization doesn’t have to manually keep track of every purchase order, which was a very real problem and time-consuming task for merchants in the past, according to WiseGeek.
The challenges of integrating Just in Time
That being said, successfully implementing a JIT model may present a challenge in terms of ensuring various retail systems “play nice” with each other. All of the eCommerce software deployed by retailers must be integrated and work together in unison or else they may lead to breakdowns that result in too much stock being ordered or running out of inventory completely. Additionally, employees and retail leaders managing these systems must be properly educated on how to use them.
“Workers take ownership as they comprehend that nothing goes to waste and that they control the process – there is no cushion or margin of error to fall back on,” Small Business Chronicle added. “All workers, tools and processes work with one purpose: gaining and keeping customers. Anything or anyone not contributing to that purpose can be whittled away.”
JIT inventory management is quickly becoming a more viable solution for retailers, thanks in part to the rapid improvement that can be seen in modern eCommerce software . That being said, successfully converting to such a means of eCommerce operations is no easy task. It requires meticulous attention to detail and accurate forecasting to ensure implementation goes off with a hitch. Integration can also be an investment in terms of implementing and learning how to use the required tools. Finally, it should be viewed as a long-term commitment – merchants can’t simply decide to use Just in Time inventory overnight, it will take some time to adjust to.
Read how Gearhead.com is using SalesWarp eCommerce software to manage their just in time inventory system.