Just-in-time (JIT) inventory is a dream come true for most supply chain professionals. As long as the supply can match customer demand, most professionals appreciate this strategy because of its ability to increase efficiency and decrease waste. As a result, inventory costs are also minimized. However, the JIT inventory system is not always implemented successfully. Therefore, this post is going to explain how JIT inventory works and then examine which industries would benefit the most from using this system. After this, I will talk about Whole Foods’ and their recent implementation of a JIT inventory system.
How Just-in-Time Inventory Works
Basically, the JIT inventory system is implemented by scheduling orders and deliveries so that the products are only delivered or provided when needed. Because of the complexity involved, careful planning, efficient ordering, and reliable suppliers are very necessary in order to implement a successful system. In addition to this, the JIT inventory system works best in industries such as the automobile industry and the fast food industry.
In the automobile industry, cars take days if not weeks to assemble. Because of this, all of the necessary parts are not needed on the first day of assembly. Therefore, a JIT inventory system will schedule the delivery of parts on the day that part is needed. For example, if the frame of the car is put together on Monday, the doors won’t be needed until Tuesday, and then the windshield may not even be needed until Wednesday. Therefore, automobile companies that use a JIT inventory system will schedule the delivery of the doors for Tuesday and the delivery of the windshield for Wednesday. This will save them storage costs as well as increase efficiency within operations.
In the fast food industry, JIT inventory is almost a universal system. Although the actual food, condiments, and utensils are kept on hand, the food is not prepared until the customer places an order. This is in contrast to having a bunch of pre-made meals ready to hand out whenever. This eliminates waste for a fast food company because it eliminates the risk that the pre-made meals will go unordered.
Issue with Whole Foods’ New System
Now, although a JIT inventory system may benefit a lot of companies, it could prove to be a problem for some. Take Whole Foods for example. A little over a year ago, Whole Foods decided to change their supply chain to something similar to JIT inventory called “order to shelf.” Basically, according to the article, this system orders goods once inventory levels fall to a specified amount. Whole Foods adopted this system in order to promote fresh foods and reduce the time that goods are kept in the stock room before hitting the shelves. Theoretically, this is an amazing idea with many benefits. However, Whole Foods has struggled to implement it flawlessly. Recently, shoppers have experienced many shortages on a variety of foods due to the new system. One shopper claimed that there were no grapes for her to buy in three straight visits to Whole Foods. This is unacceptable for a company such as Whole Foods whose mission states that they “aim to set the standards of excellence for food retailers.”
So what do you guys think? Should Whole Foods resort to a more traditional approach and buy in bulk so that shelves will always be stocked? Or should Whole Foods iron out the kinks to this new system?