What are the advantages and disadvantages of "Just in Time" inventory?


Quick Answer

According to Inventory Management Review, "Just in Time" inventory systems offer reduced inventory holding and stocking costs, provided the shipping and logistics infrastructure can provide supplies on demand. Product sitting idle in warehouses takes up space and provides no benefit to a company, and if suppliers can't ship materials to the point of sale or wherever they are needed in a timely fashion, it may disrupt sales or operations.

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Full Answer

"Just in Time" inventory management is especially helpful for food service companies, where stock literally degrades from the moment it arrives at the warehouse. By only shipping supplies as needed, the company can reduce the amount of time its products spend waiting around for a customer to make a purchase. Even in the case of non-perishable items, products may depreciate in value while in storage, and any upgrade in the product line has the potential to leave a company with a surplus of obsolete and potentially unusable items in its warehouse. These systems rely on a robust network of suppliers and good inventory management and shipping mechanisms, however, and any failures in the logistics chain may leave a store or business location missing the vital supplies it needs to conduct day-to-day operations until shipments resume.

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