EXPLAINED: Just In Time Inventory Management

Published

June 17, 2019

Author

Goda Jurgaityte

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Just in time inventory management is something every ecommerce merchant should be familiar with. This method of managing inventory can be useful in a number of situations as well as preferable for certain categories of goods. We’ll provide all the necessary information about just in time inventory management. This will be aimed at ecommerce merchants.

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What is just in time inventory management?

Just in time, or JIT, is an inventory management method. As the name suggests, inventory is ordered / received precisely when it is needed. This sounds simple and complex at the same time. And both those words go well with JIT.

Pros and cons

Pros and cons of just in time inventory

Let’s go through the main positives and negatives of using the just in time inventory management method.

Positives:

  • Reduced dead stock. Since you’ll have less inventory on hand, it’s certain that you’ll be left with less unsold goods. These days, shopping trends shift rapidly. There’s always a newer, better product.
  • More liquid capital. You’ll be investing less into the same variety of products. This means you’ll have more cash to move around. This allows you to pick up and test new products.
  • Reduced storage costs. Whether you’re using a storage service or housing your products at home – it comes at a price. Even if you store goods at home – you encounter the opportunity cost. Meaning, you could have something else in there, that could bring you more profit.

Negatives:

  • Problematic order fulfilment. If a customer orders something you can’t supply within a reasonable timeframe – it’s more than just a lost sale. Depending on the marketplace you’re selling on, this could hurt your ratings and call for negative feedback, not to mention the refund request.
  • Requires experience. You’ll have to act quickly and accurately when using the just in time inventory management method. Because there is less time, you ought to be ready to process orders quickly. When doing things with haste, we’re prone to error. Such errors in business can be costly, so accuracy will save you a good amount of money and stress.
  • Price changes. Normally, you’d wait for a supplier’s prices to go down before purchasing stock for an extended period of time. However, using the JIT method you’ll be buying goods simultaneously to selling. So, if the supplier has higher than usual prices, your profit margins will go down.

How to make use of JIT?

In a best case scenario, finished goods and services are produced only when needed at the point of sale and never even put into what would traditionally be called inventory. – Don Sadler

Attentive readers probably already thought about dropshipping. We could say that dropshipping is an extreme case of just in time inventory management.

However, you don’t have to dropship to make use of JIT. Just pay attention to your stock levels over time and examine reports. If you’ve never been close to letting a customer down due to being out of stock – you could probably play around with your reorder points.

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Reorder points

Whenever you drop below the reorder point – it’s time to knock on your supplier’s door. It’s burdensome to keep up-to-date stock numbers and also have the reorder points in mind for each product. Mistakes can and will happen.

That is, unless you use inventory management software. Software like Multiorders will remember your reorder points and notify you when it’s time to restock. Looking for ways to streamline your business and haven’t yet considered inventory management software? You’re very advised to.

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Multiorders

Multiorders is an inventory management software solution that automates the majority of tasks done by ecommerce merchants. Connect all your marketplaces and control the entirety of your business from a single dashboard.

Considering that the set up takes merely a few minutes and doesn’t require a credit card – there’s little reason not to look into it. But don’t just read about it – try it yourself.

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