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How to Implement a Just-in-Time (JIT) Inventory System

Quality inventory management keeps your business running smoothly while maximizing your profits. When your inventory system works well, you keep the optimal levels of inventory on hand to meet demand and keep sales up without excess goods sitting in your warehouse. Exploring different inventory systems helps you decide which type is right for your business. A just-in-time inventory system (JIT) can save your small business money and time, as long as you have certain elements in place within and outside of your company.

What Is Just-in-Time Inventory Management?

JIT inventory management is a system of purchasing or manufacturing goods only when they’re needed to avoid a large amount of inventory in your warehouse. If you make your own products, that means you order small amounts of raw materials based on your production schedule. This strategy cuts down on the amount of materials you need to store until you’re ready for production. If you order finished goods, your orders are also smaller, with just the amount of inventory you need rather than stockpiling large quantities.

Successful Just-in-Time Requires Strong Supplier Relations

Having strong relationships with suppliers is essential when you use a JIT system. The premise of a JIT inventory system is your ability to place a last-minute order for inventory and rely on the goods arriving on time. To do that, you need suppliers you can count on to deliver as needed. When you place an order, your supplier should have the ability to process and ship the order quickly to meet your needs. Before entering into shipment contracts, check that your suppliers can process your orders on a timely basis, have the capacity to take on orders with short notice, and hold a reliable history of fulfilling requests.

A reliable channel of communication is also essential when using a JIT inventory management system. Distributing order information to your suppliers quickly and clearly to specify exactly what you need ensures you get the orders on time and accurately. You need to be able to reach a supplier at any moment, especially if an order needs to be adjusted. Because a JIT inventory system revolves around being as efficient as possible, time is your greatest resource, and so efficient communication with suppliers is a must.

Training and Management for Just-in-Time Systems

There’s a high learning curve with Just-in-Time inventory systems, and it falls on your shoulders to demonstrate policy guidelines and procedures to employees. Training gives you the chance to impress your employees on why efficiency matters and how they can achieve it. Employees need to know exactly what to do before and after receiving an order. Developing internal process charts for manufactured goods and flowcharts to demonstrate the entire life cycle of the product can help employees better understand the processes. Hold ongoing forums to monitor the knowledge of your employees and expertise within your company.

Benefits of a Just-in-Time Inventory System

Once you master it, you may see many benefits to Just-in-Time inventory management. JIT systems typically lower your expenses compared to other inventory systems because of lower storage costs, lower insurance expenses, fewer losses due to obsolescence or expiration, and less theft. Additionally, you can charge higher margins, especially for last-minute rush orders. JIT inventory systems allow for a greater degree of product flexibility with the ability to service a wider range of customers. You also need fewer resources for internal controls.

While setting up a JIT inventory system is demanding, it reaps benefits for your organization in the long run by saving time and money. Putting the right tools in place, such as inventory management apps that integrate with QuickBooks, can improve your results. 5.6 million customers use QuickBooks. Join them today to help your business thrive for free.

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