Just-in-case inventory has its downsides, though, with high inventory costs that can eat into profits, as well as increased spoilage and obsolescence of inventory. Still, they were able to meet demand by increasing productivity in other locations and purchasing inventory from other producers in the region-their revenue grew by 4% in the fourth quarter of 1998. One of Dole’s competitors, Chiquita Brands, also had similar supply interruptions in Central America. They had no just-in-case inventory strategy in place and lost over $100 million due to supply interruptions. This helps prevent backorders and stockouts, which allows for high service levels and increased revenues.įor example, in October 1998, Dole Food Company lost 70% percent of its acreage in Central America due to Hurricane Mitch. With JIC inventory, businesses store large safety stocks to hedge against the risk of stockouts, uncertain demand, and difficult to acquire items. Just-in-time manufacturing has a sister philosophy called just-in-case inventory (JIC). However, this method is becoming increasingly popular with smaller retailers and eCommerce companies looking to streamline their order management processes. Mass-market retailers and manufacturers most commonly use just-in-time inventory systems to improve cash flow. Production based on demand rather than capability.The basic premise of just-in-time is ordering and receiving inventory as it’s needed to manufacture a finished product, hence “just-in-time.” This system is commonly referred to as lean manufacturing since it significantly reduces the amount of inventory a business has at any given time.
If you’re looking to optimize your supply chain management, one method is just-in-time manufacturing, otherwise known as the Toyota Production System, or TPS (we’ll tell that story later). If your business manufactures goods, you understand how critical the production process is and how it requires continuous improvement. What is just-in-time manufacturing (JIT)?
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