![]() Production mistakes can be spotted more quickly and corrected, which results in fewer products being produced that contain defects. Also, having less inventory gives materials handlers more room to maneuver, so they are less likely to run into any stored inventory and cause damage. Less inventory can be damaged within the company, since it is not held long enough for storage-related accidents to arise. Multiply that by the number of supplies you use, and picture how much time your purchasing agents spend trying to cut better deals. The company is investing far less cash in its inventory, since less inventory is needed. The very low inventory levels mean that inventory storage costs (such as warehouse space) are minimized. This system requires a close relationship with suppliers who will immediately respond when an inventory need is identified. ![]() The goal is efficiency and cost reduction. Since production runs are very short, it is easier to halt production of one product type and switch to a different product to meet changes in customer demand. Under a just-in-time inventory management system, businesses can only purchase or produce inventory when a customer makes an order. Learn about the benefits of Just in Time (JIT) inventory management, how it minimizes excess stock, reduces costs, and improves operational efficiency. There should be minimal amounts of inventory obsolescence, since the high rate of inventory turnover keeps any items from remaining in stock and becoming obsolete. This reduces storage costs as less space is being occupied. The use of just-in-time inventory has the following advantages: JIT systems receive inventory only as they need them, so no excess stock is held in warehouses. Operations Management Advantages of Just-in-Time Inventory By using just-in-time concepts, there is a greatly reduced need for raw materials and work-in-process, while finished goods inventories should be close to non-existent. This approach differs from the more common alternative of producing to a forecast of what customer orders might be. The result is a large reduction in the inventory investment and scrap costs, though a high level of coordination is required. A just-in-time inventory system keeps inventory levels low by only producing for specific customer orders. Using a Just-in-Time inventory system reduces the amount of material on hand in the production facility.
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