Less production mishap : Due to the fact that stock arrives just in time for the production of goods, the likelihood of making mistakes is less. Finished goods are made on-demand and based on the stock of raw materials ordered, so the business does not experience pressure to sell out overstock by reducing the price. As less stock is held and only requested when needed during the production process, there is no need or cost to bear for the use of a warehouse.ĭetermination of price: This method of inventory management is great in terms of pricing.
Inventory management is a part of the procurement or purchase stage in a business, which involves choosing suppliers and negotiating contracts with them in regard to stock, payment, and delivery.Ĭost reduction: This approach to stock control has the advantage of cost reduction to a business. It involves the process of sourcing raw materials used for production and storing finished products manufactured by the business. Inventory management is a systematic way of sourcing, storing, and selling raw materials and finished goods. Definition of Just-in-time Inventory Management As the name 'just-in-time' implies, the stock used arrives just in time to be used in the production of finished goods. Just-in-time inventory management is an approach to managing stock, seeking to reduce the amount of stock held by a business. Just-in-Time Stock ManagementĪll businesses hold stock of raw materials, finished goods, or both. We will look at two major methods of inventory management, so r ead along to identify which is used by your favourite shops. Have you ever wondered what happens behind the scenes of a business and how its products are supplied? How do businesses manage to get their raw materials and products in time for production and supply? This is where inventory management comes into the picture with the sourcing and storage of raw materials and products.
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