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Just In Time: Inventory Management Tool
Today is a very competitive market. With globalization the world has grown smaller and smaller. The companies are today selling their product in just opposite part of the world. Toyota being manufactured in Japan is having a big market in USA and other parts of world.
With Globalization, the customers are getting multiple options for a single product to satisfy there needs. This has lead to intense competition and rivalry between different corporate to increase the sale of their products. For this they use either of following way i.e. either to drop the price and convince the customer or to increase the quality and price of the product.
Companies are today trying new and innovative ways to decrease the manufacturing cost. One such modern way is to keep inventory as minimum as possible. This approach to reduce the inventory cost is known as Just in time approach. This has not only transferred the inventory management but helped companies to reduce the cost.
Just in Time approach says to keep no or zero inventory. These means the material has to be supplied only when it is needed. This not only applies to the raw material, but also to the finished goods. The philosophy of Just in time approach is simple that not to waste money on keeping the inventory. However having a just in time approach being followed is very difficult and companies need lot of investment to be made.
This investment is not only monetary but includes, employees training, system installation, maintenance and all other factors. But once this JIT approach is successfully installed, it helps the companies to substantially reduce the cost of the product.
This system is said to be developed by Toyota to decrease their cost of inventory. The largest retail chain of world, Wall mart is successfully following this approach and thus they are in a position to offer the product at a lower cost as compared to other retail chains.
This is also popularly known as “Pull System” in production. In other words it is reverse chain of production, where customer places the order and accordingly the product is manufactured. For proper implementation of JIT, proper correspondence between customer and supplier has to be maintained.