This technique offers extreme efficiency--as long as the process moves along as expected.
When major disruptions to supply chains make headlines, business writers are quick to blame just-in-time (JIT) strategies for the problems. JIT was coined in the mid-1980s when Americans first started studying Japanese manufacturers. Compared to what they saw in American factories, Japanese plants seemed to have no inventory.
Low inventories--raw material, work in process and finished goods--can be advantageous, reducing tied-up cash as well as avoiding inventory damage, shrinkage and obsolescence. The strategy doesn't revolve around seeking zero inventory or timed-to-the minute delivery of parts, though. The goal is to maintain just the right amount of inventory to keep operations flowing.
Small buffer inventories before bottleneck operations, for example, prevent even momentary pauses from creating instability downstream. Strategic inventories of certain materials cushion against price variability. "Supermarkets" in the plant may hold an hour's or half-day's worth of inventory to prevent unnecessary transportation to the line.
Small companies have even more reason to keep inventories low to conserve cash, but they have less leverage to get suppliers to deliver what they need, when they need it, in the amount they need. So small companies have to search out suppliers--perhaps other small companies--willing to work in partnership to keep inventory at optimal level.
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