The just-in-time (JIT) inventory strategy has been the darling of manufacturers, distributors, and retailers for 20+ years. But there’s an inherent danger for retailers who use JIT.
JIT is at the heart of the nimble business model, allowing businesses to be flexible and responsive to new market conditions. It reduces investment in inventory, it reduces inventory obsolescence, and it reduces inventory storage needs – major benefits to retailers whose margins are squeezed every day. So what’s the downside?
Communication and speed are the vital components of successful JIT. The JIT cycle begins with a “pull” event. A pull event can be an alert that stored inventory has reached a pre-set level of depletion, or it can be something as simple as a single sale. The pull event triggers a message that more product is required in order to maintain a retailer’s inventory at the optimal level.
The message may initiate more production or it may request a transfer of inventory from warehouse to store. When the pull event message is triggered, manufacturing and logistics must move swiftly to deliver fresh inventory.
As long as the pull event message is received, and the inventory can be re-filled quickly, JIT is an undeniable winner. Retailers get all the benefits of low inventory costs. But if there’s a breakdown at any point – an unforeseen surge in demand, a communications delay, a diverted shipment – retailers are left with empty shelves and lost sales.
Every retail operation has a sweet spot that balances the cost of warehousing inventory against the risks of a JIT breakdown. Retail is a gamble in itself, but you can hedge your JIT bets by using automated vertical storage. These space-efficient vertical carousels can increase storage capacity by 50%, allowing a risk-averse retailer to keep an inventory cushion on hand for unanticipated demands, without the additional cost of extra storage space. For those retailers who are comfortable gambling with somewhat lower inventory on hand, a vertical storage system can reduce their storage footprints by as much as 75%, yielding a substantial financial cushion to offset potential JIT breakdowns.
JIT is a well-tested and well-proven strategy for managing inventory efficiently, productively, and profitably – as long as the system works smoothly and speedily. Mitigate the JIT risks with a vertical storage system, and you can bet safely on JIT.
Image © F8studio / Fotolia.com