Inventory
Inventory are the raw materials, work-in-process goods and completely finished goods. Inventory represents one of the most important assets that most businesses possess, because the turnover of inventory represent s one of the primary sources of revenue generation and subsequent earnings for the company’s shareholders or owners. The are five major and legitimate justifications reasons for holding Inventory: pipeline, cycle, safety, anticipatory and speculative. In efficient companies, materials arrive just in time for production : just-in- time inventory.
JIT (Just-in-Time) inventory is the big thing right now in operations. This, along with lean operations and six-sigma are the buzz words being talked most about. But what exactly is the deal with JIT operations?
First of all, JIT is a form of providing supplies for customers just in time. For example, Dell has become famous for its JIT model which involves not even being in possession of the raw materials needed to fulfill an order until that order is placed and yet they are still capable of filling orders in a short period of time.
Another example of a JIT system is McDonald wherein McDonald's doesn't begin to cook until a customer has placed a specific order. Both of these companies do is they provide a customer with their order as fast as possible while having the finished product sitting in inventory for as short as possible. The major benefits are better food at a lower cost.
Why use JIT? There are two major parts to JIT inventory operations: lowering the ratio between ordering costs and holding costs and shortening lead times.
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