Many businesses employ a “just-in-time” (JIT) production method. In the JIT strategy, supplies are ordered just in time for production so items are manufactured just in time for shipping them to the customer. The reason this system is popular is because factories do not have the expenses of maintaining large warehouses. Using funds to purchase and store unused inventory means those funds are not easily available for other opportunities.
Care must be taken when manufacturers employ the JIT method. If not enough stock is stored then deliveries, and associated delivery charges, increase. Also, the variations of cost prices can affect manufacturers to a greater degree.
A number of years ago when I realized that I had toilet paper stored in every closet and cupboard (when I counted them, I had over 200 rolls), and I always seemed to run out of shampoo, I realized that I had to start employing the JIT method for my household supplies.
The JIT process
Estimate how long it takes to use up the item. To help you estimate, when you open a package, write the date on the lid or underside of the box or bottle with a permanent marker. When you have used up the item, you’ll see the date and get a fairly accurate estimate. For example, depending on your household, you may use 1-2 rolls of toilet paper per week per bathroom. A 250mL (8oz) bottle of shampoo may last a month. It might take 3 months to use up 500m (500yds) of plastic wrap. Consider seasonal and situational changes as well in your estimations. You might use more plastic wrap during the school year when you are making children’s lunches. You might use less shampoo after you get your hair cut.
Estimate repurchasing time. The time it takes to purchase replacement items may not be an issue if you can easily pick the items up during your weekly grocery shopping. However, if you purchase items from a specialty store that you visit infrequently or order items online and have them delivered, you may need to plan well in advance. For example, our family loves Kraft Caesar salad dressing from Canada. It takes us about two months to use up a bottle. We have an open bottle in the fridge and we store one extra bottle in the cupboard. As soon as I open the bottle from the cupboard, I order another one because it takes about 3-4 weeks to ship from Canada to the UK.
Allocate storage space. The storage space that you have will determine the amount of product that you purchase and how frequently you need to repurchase. You may determine that you don’t need to store as much as of some items as you thought. (I really didn’t need 200 rolls of toilet paper!) This may allow you to free up some space to store other items that take more time and energy to purchase. For example, storing an extra bottle of your favourite salon shampoo would result in fewer trips across town to the factory outlet.
Hone your forecasting methods. It isn’t always easy balancing how much of certain items you need with the storage space that you have. Certain changes can affect your forecasting such as changes in household routines as well as changes in the products, such as package size and price. If you keep the JIT method in mind, over time you’ll determine what is right for your needs.