It's a rare business owner who doesn't want to lift profits, reduce the cost of holding inventory and boost cash on hand. Two of the smartest, cutting edge ways of managing stock can help you do that -- the "just in time" and "accurate response" systems.
Just in time management involves planning shipments of material to arrive only when they are required. This saves money in inventory costs and increases production responsiveness and flexibility. In order for this concept to work, though, you've got to have effective lead-time management.
The accurate response approach focuses on forecasting, planning and production. The underlying premise of accurate response focuses on flexible manufacturing and shorter cycle times to better match supply with demand. This speeds up the supply chain process, allowing managers to delay decisions regarding raw materials, obtain more market information and better determine production requirements.
Smaller lot sizes. This allows your company to:
Tighter set-up times. By reducing set-up times (and associated costs), you can afford to produce smaller lot sizes. Also, if your company is inefficient on set-ups, you'll likely change products less often.
Flexibility. During bottlenecks or unplanned spikes in demand, a flexible work force is able to quickly reassign tasks.
Close supplier relationships. Suppliers must provide frequent, on-time deliveries of high-quality materials, so close ties with them are vital to the just in time system. Long-term relationships with suppliers promote loyalty and improved overall quality.
Humming machines. For companies with a high degree of automation, preventive maintenance is critical to just in time management. Unplanned downtime can be disruptive and costly, so a proactive approach to keeping things running is essential.
Quality control. Just in time systems are designed to control quality at the source, rather than later in the process. For that reason, production workers are responsible for their own work and if a defective unit is discovered, it's returned to the area where the defect occurred. This makes employees accountable and empowers them to produce higher-quality products.
Incorporating just in time and accurate response techniques can drastically raise your company's efficiency. Lowering inventory levels cuts operating capital needs and gives you a competitive edge. Reducing the expenditures for warehouses, employees and equipment produces a stronger balance sheet, income statement and improved cash flow.
Here's how three companies benefited by changing their inventory management:
Get in touch today and find out how we can help you meet your objectives.