Gambling on Just-In-Time? Retailers Can Hedge Their Bets
There are lots of reasons for retailers to love just-in-time (JIT) inventory management. Reduced investment in inventory, reduced inventory obsolescence, and reduced warehouse needs all help to keep costs down – a big benefit for retail margins that are under constant assault. But there’s a dark side to JIT, and it can bring a business to its knees.
The keys to successful JIT inventory management are communication and speed. The JIT cycle is initiated by a “pull” event which triggers a message to create more products. The pull can be something as small as a single sale, or it can encompass a number of products being depleted to a pre-determined level. Whenever a pull occurs, a message is sent to manufacturing to make more product(s) to re-fill the inventory.
At that point, manufacturing production must react swiftly to fill the retailer’s product order. As the new products are finished, logistics must then move them to the retailer as quickly as possible. Retailers, like nature, abhor a void, and the entire JIT chain must move smoothly and speedily to fill the gap in inventory.
When the process works reliably, it’s an undeniable money-saver for retailers. But if there are breakdowns at any point, retailers can find themselves with bare shelves and lost sales. An unexpected surge in demand, a delay in communicating a low-inventory message, a manufacturing staffing problem, a diverted shipment – any of these will short-circuit a JIT cycle and ultimately prevent a retailer from doing business.
For every retailer, there’s a sweet spot that balances the cost of warehousing inventory against the risks of JIT breakdown. All retailers are risk-takers to some degree, but no matter if you’re a hardened gambler or thoroughly risk-averse, there’s a way to hedge the JIT bet: automated vertical storage systems. 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. And if a retailer is willing to gamble with a lower quantity of inventory on hand, a vertical storage system can reduce the warehousing footprint by 75% — a substantial financial cushion to offset potential JIT issues.
JIT is a well-proven way to make any operation more efficient, more productive, and more profitable, provided the system works properly. Retailers can mitigate the JIT risk with a vertical storage system that lets them bet on JIT safely.
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