Business & Finance Outsourcing

Is Your Reduced Inventory Size Lowering Your Productivity Ratios?

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Utilizing a Just In Time Inventory (JIT) Model

Just-in-time (JIT) refers to a collection of practices that is designed to eliminate waste. These organizational practices encompass the entire logistics flow of materials from purchasing through production and distribution. The elements of JIT may include shared product design with suppliers and customers, movement toward single sourcing, proximate suppliers and customers, reduced set-up times, preventive maintenance, reliance on analytic tools to identify sources of defects and plant optimization layout (re)configurations, among others.

The benefits are pervasive and can include lower total system costs and improved product quality when managed at optimum levels. But, what organization staffs a perfect crew? From time to time is your team unable to continue producing due to a missing piece or component and everyone is waiting for it to arrive? If so, what is that costing you?

A fair amount of evidence is available to support the claim of improved performance derived from the adoption of JIT or some of its components. Companies have reduced in-process inventory more than 50% and lead times by more than 80%. With this said, lets examine the relationship between JIT and what effect it has on employee productivity and/or job performance. Does JIT's ability to reduce inventory have a negative effect on productivity and in doing so is JIT creating negative job satisfaction amongst employees? Our thought is that an inventory system managed to the extreme with JIT principles correlates inversely with the level of labor efficiency.

Try and understand what results you expect to gain. Develop a plan and reduce your inventory in a practical manner. Every business is different and with so many variables, inventory reduction needs to be adjusted accordingly. When product availability interferes and slows production, you run the risk that operational costs could increase dramatically.

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