Inventory Management and Just In Time (JIT)
Supply-chain management plays a pivotal role in ensuring goods, and services are delivered on time to customers. Within supply-chain management, inventory management plays a central role. Inventory involves various cost, investment, space management, etc. Also there are chances that stored inventory may get damaged or get stolen adding to extra cost to the company. Therefore, it is important to have a robust inventory management for an organization.
For an organization, it becomes important to hold inventory for the following reason:
Considering the above inventory holding objectives, next step for the company is to make inventory related decision. Inventory decision involves two major considerations, first is the order quantity of the raw material and second is timing for placing those orders.
Inventory management is based upon two basic models i.e independent demand inventory model and dependent demand inventory model.
There are three broad categories of cost associated with inventory; holding cost, ordering cost and set up cost.
Inventory management ensures that organizations are able to minimize cost and maximize profit.
Just In Time (JIT)
Just In Time is set of strategic activities, which are formulated to achieve maximum production with minimal maintenance of inventory. JIT as philosophy is applicable to various types of organization but on implement side it is more relevant with manufacturing operations.
For JIT system to be successful, there are two critical elements, attitude of workers/management and practice.
Fundamentals of JIT
JIT is based on the following fundamentals:
With the above fundamentals in place, JIT delivers the following:
- Inventory Management
- Production Planning and Control
- Operations Scheduling
- Waiting Line (Queue) Management
- Material Handling
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