4 Reasons Why Retailers Love Just In Time Inventory Systems

Retail can be tough. At times it seems like constant slog to get ahead. Margins can be tight and customer demands are forever changing.

One of the biggest risks to a growing retail firm is managing their inventory. Industry leading retailers are sleek, nimble and run like well-oiled machines, meaning that if your processes are just a little bit off, your bottom line can teeter from healthy to uncompetitive in no time.

Provided your ERP is set up to handle it, a great way to keep the inventory-management risks as low as possible is to adopt a Just in Time, or JIT, inventory management strategy.

A JIT inventory strategy aims to veer away from buying large volumes of stock and having it sit in your factory or store. Instead, it prefers a retailer to buy only what they sell – ultimately keeping inventory levels low by ensuring suppliers only produce when a customer orders.

So why should you opt to go for a JIT over other methods of inventory methods? Here, we explain four reasons why your retail store could benefit from adopting a JIT inventory system.

Improved warehousing costs

As we touched on earlier, retail is an industry where your financials need to be lean and mean across the board. One of the biggest ancillary costs to a retailer is the inventory holding costs associated with housing excess stock, which has been ordered based on best guess estimates or  for that rainy day.

Rent, electricity, water and other costly warehousing overhead costs can quickly swallow those margins even before the stock has hit the floor and had a chance to end up in your customer’s hands.

A JIT system will cut out the need for large warehouses – or at the very least minimize the storage space required – which flows back to the bottom line of your business.

Lower rates of inventory obsolescence

Inventory obsolescence, or ‘dead inventory’, is a major problem retailers face in industries such as technology and fashion. What might be cutting edge one season may be destined for the history books a mere month or so later.

A JIT system will ensure that you’re not stuck with products that no one wants, saving you having to reduce the price just to clear the stock (if possible) and ultimately cutting into your profit margins. With a JIT system you won’t be left babysitting high levels of stock that have reached the end of their product life cycle.

Less outright investment in inventory

If you’re a young retailer trying to make your way on the scene, the chances are you don’t have shipping containers full of cash.

Buying large volumes of inventory means that you’re tying up funds in inventory that you have to wait to pay itself off.

A JIT inventory management system means you’re not putting down large amounts of cash on stock that you may or may not need down the line. Instead, those resources are used in other areas that can give your business a competitive edge in a dog-eat-dog environment.

Improved quality control

It’s a simple equation:

Less inventory = higher chance of finding production mistakes.

Trawling through pallets of product trying to spot errors or problems is time consuming and takes you and your staff away from what they’re being paid to do. If you have fewer inventory items to go through, it stands to reason that you’ll spend less time sorting through them all.

More space on the warehouse floor means that material handlers are less likely to fall victim to the ‘bump and spill’, damaging your product before it has a chance to get to the customer or on the shop floor and costing your business big bucks in wasted stock.

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