Inventory management within your supply chain often includes a complicated web of data being managed through multiple systems. High cost, inefficient inventory, and distribution management practices are unfortunately quite typical for retail businesses that are experiencing growth,

As a result, they often suffer from inefficient operations, low customer satisfaction, and stock issues that stem from a lack of proper order and item information, creating critical business problems such as reactive warehouse planning, slowed inventory turn times, and/or ordering excess inventory to compensate and reduce the risk of stock-outs.

Ensuring that your orders are consistently fulfilled on time to meet customer expectations must be a top priority. To do this effectively, however, you need a solution that keeps all of your inventory in check and confirms you are always able to replenish in time.

Enter Just-in-Time inventory

Just-in-Time inventory management (JIT) is a management method that helps reduce excess inventory and product, so you only keep what you need in stock and on hand. JIT allows you to hold minimal stock supplies during peak selling times without fear of stock-outs.

Essentially, JIT can help you to make better business decisions because you always have the right inventory management system in place to ensure real-time inventory visibility.

Effective implementation of a JIT inventory management process offers many advantages that enable companies to process inventory quicker and more efficiently, but doing it right is critical.

Pros and cons of utilizing a JIT approach

Getting JIT right can create a positive ripple within your operations. However, there are also some disadvantages to JIT. If you’re asking yourself how to implement Just-in-Time, keep this in mind: executing it poorly can lead to disruptions in your supply chain and leaves little room for error. Here are some pros and cons to consider.

Benefits:

• Lowered inventory costs: Keeping less inventory on hand equals lower labor and storage expenses that were once necessary to store and manage inventory.
• Larger Open-to-Buy Budget: Ability to spend on other items you might not have the budget for without a JIT approach.
• Fewer markdowns: Reduction in need to offload unsold products using markdowns. Resources can be re-allocated to pursuing growth-oriented opportunities.

Drawbacks:

• Late Deliveries resulting from poor communication: For JIT to work, deliveries need to arrive ‘just in time.’ This level of synchronization and communication requires tightly integrated systems, such as an order management system, and active vendor/partner management.
• Imprecise forecasting risk: JIT inventory needs accurate forecasting of expected customer demand, but if these calculations are wrong, as in the case of a stock-out, you could risk losing sales.

You can do so much more when you have greater visibility into your inventory data

JIT is just one approach that you can take in gaining more control over your inventory management. The right inventory management system can equip retailers with real-time inventory data to quickly respond to changing market conditions – critical to a business’ cash flow and profitability, and ultimately, customer happiness.

For over 20 years, SPS Commerce has helped retail businesses of all sizes gain control and visibly with their vendors and within their supply chain, and we can help your business too.

 SPS Supply Chain Performance Suite is a full-service approach that focuses on eliminating supply chain inefficiencies between retailers and vendors. This is possible through the facilitation of accurate and timely data exchange with visibility and insights at every stage of the order process.

Our retail specialists help to consult you at every step of your order management process, from analytics and insights sharing, and more, to ensure rapid adoption across your supply chain.

Ready to learn more? Visit SPS Commerce for insight or Speak with one of our retail supply chain experts for a no-hassle consultation.

Imagine this scenario: a supplier has its products in several retail stores, and they’re seeing fairly brisk sales in all but one store. The supplier feels like something is off, but they can’t be sure. They’re just not seeing the volume they expected. After a few weeks, the month’s sales figures arrive, and the supplier realizes sales are 10% lower than their projections, but they still can’t figure out why.

People throw out suggestions — we didn’t advertise enough, the weather is too hot/cold, it’s the economy — but it’s not until they do some digging and make several phone calls that they discover the answer: one of the stores failed to put the products out on the floor, and they never sold.

The power of real data

This is where real data analytics could have made a real difference. Solutions offered like the analytics products from SPS Commerce can look at data on an ongoing basis, and flag unusual patterns, oftentimes before they would catch the attention of a human being. It’s even possible to set up an alert to notify the retailer and vendor when a store’s sales dip below expected levels. The vendor can be notified, and contact the retailer in a day, not after several weeks.

But data analytics can do more than just recover lost sales opportunities. One of our clients, a manufacturer of a popular line of insulated drinkware and coolers, used the analytics on our platform to make some manufacturing decisions that positioned them to stay ahead of demand based on seasonality.

By having that data, they were able to make decisions that helped them with demand planning in order to avoid running out of product that resulted from seasonal surges. Because their retailers shared real data with their suppliers, everyone made more money. The manufacturer was able to get funds to make more product for the predicted demand, and as a result, they didn’t run out of inventory. And the retailer was able to makes more sales because the producer didn’t run out.

That also preserved relationships with the retailers (and consumers), because the manufacturer was able to provide the goods and the retailers (and consumers) didn’t go looking for someone else to fill in the shortfall.

Can You Trust Your Own Inventory?

Sometimes we run into issues where we can’t even trust a retailer’s online inventory counts. A little while back, one of my SPS colleagues, Andrew Domeier, gave a talk to the supply chain master’s course at the Carlson School of Management at the University of Minnesota, and took a quick poll. Nearly the entire class had the experience of seeing online that a store had a particular product in stock, but when they arrived at the store for the item they learned the store was actually out of stock.

That’s an incredibly frustrating experience for every shopper. The customer looked online and the store said they had it. That customer spent a bunch of time in the store looking for an item but fail to find it. When they asked an associate, they were told that it was out of stock even though the site indicates otherwise. The customer feels lied to and is forced to take their business elsewhere. That customer is also less likely to trust the retailer’s website in the future. The retailer has just lost customer trust, loyalty and revenue.

Inventory accuracy is a matter of import for retailers who are trying to manage customer expectations, especially now that consumers are expecting more and more from their shopping experiences. People need to know when products are truly available, and when the inventory isn’t available. Not only do retailers and suppliers need to share real data, but they need to be able to analyze data quickly and easily, in order to understand it and use it to its greatest potential to satisfy consumers.

If you would like to learn more about using analytics to help with inventory management, detect early problems and patterns, and to avoid uncovering surprises weeks too late. You can read more about how our analytics solution has helped businesses succeed, or contact one of our sales professionals today.