Just In Time Inventory Management System example essay topic

Devising an efficient system of counting and maintaining a stock of inventory items has long been an arduous task for many business owners. The old method of cataloging by part or item number has all but disappeared since the proliferation of electronic catalogs and the use of computer software and web-based ordering / monitoring systems. Inventory management is necessary for owners who want to maintain a stocking service for quick turnaround to help ensure total customer satisfaction. An item on a managed inventory list must be maintained to avoid shortages of frequently used items. Even when utilizing an inventory management system, occasional shortages will still occur. To be successful in today's fast-paced, highly-competitive environment, business' need to have the necessary parts in stock or have reliable suppliers to meet customer demands at a moment's notice.

Either way, shops must have a practical, efficient method for managing inventory in order to stay in business and satisfy their customers. The most efficient way to get this done is through the use of a Just-In-Time (J-I-T) system of inventory management. The service that Cardinal Health provides is an example of this type of J-I-T system which allows them to get the right quantity of goods to the right place and at the right time. Efficient inventory management is essential in order to provide the customer with a high level of service. The ability to ship inventory on schedule and get just the right amount of product where it needs to be in a timely manner is one of the major factors that helps determine customer satisfaction. Consumers do not like to wait in lines, come back later, or shop somewhere the product is often out of stock.

These are the types of problems that lead to a customer walking across the street to the find a particular product somewhere else. In addition, efficient inventory management leads to a more cost-efficient operation (Reid Ch 12, 2002). The goal is to keep inventory on the shelves for the least amount of time as possible. This prevents a high percentage of capital from being tied up in inventory. Through the use of automation and computer based systems, companies are able to control their inventory based on real-time needs instead of historical projections. This helps reduce the guess work in how much inventory to stock and when to stock it.

Regardless of whether or not the system used is an automated Just-In-Time system or not, the importance of inventory management can not be overstated. An efficient and effective system helps lead to a cost-efficient operation and a high degree of customer satisfaction. Next, the focus of many industries today is shifting towards more and more automation and reliance on computers. The World Wide Web has altered the way companies and individuals interact with each other. What was once thousands of miles away or days in the future can now be obtained instantly with the click of a mouse button. That being said, the Just-In-Time system is one of the many ways companies can manage their inventory.

This type of system can only exist through the use of automation and many advances in technology. The purpose and goal of this type of system is to eliminate wasted inventory and remain extremely flexible to the ever changing business environment (Reid Ch 7, 2002). The idea is to take a much broader view of operations where inventory is not only controlled by managers but also by the salesmen and sometimes even the consumer himself. J-I-T management strives to eliminate wasted time and money spent in unnecessary material handling and overstocked shelves. By allowing the consumer to drive the inventory a company can simplify the entire process and decrease mistakes. This type of system is only possible through the use of technology, automation, and flexibility.

This must come from the company providing the product or service and all of the suppliers that are involved in the process. Further, J-I-T inventory management is based on the idea of flexibility. The retailer must be able to ramp up and down to meet demand and have the ability to make changes to the inventory on the fly without it negatively affecting the entire supply chain. In many ways, this is an "ideal" system that may not be 100% attainable.

However, a real-life J-I-T inventory management system is not and can not be perfect but will continue to strive to identify deficiencies and work hard to get better. A great example of this type of system exists with Cardinal Health. They use the latest technology to bring the idea of "the right product at the right place and time" to life. Every night Cardinal Health service teams make more than 40,000 deliveries somewhere along the supply chain (Frederick, 2003).

They deliver 2.5 million pharmaceutical products to 33,000 locations each day (Frederick, 2003). Their company in itself does not use J-I-T inventory management. In fact they stock an inventory of more than 75,000 products (Frederick, 2003). J-I-T inventory management is the service they provide to the doctors, pharmacies, and hospitals they supply.

Cardinal Health is a simply a series distribution centers tasked with getting a product to a customer. The idea is simple but the way they get the job done is a benchmark in the industry. They invested over $300 million to enhance, automate and upgrade the capacity of their distribution centers (Frederick, 2003). This investment helped to modernize the distribution centers, increase the efficiency of the entire operation, and increase overall capacity. In the long run, this investment will also serve to reduce operating costs which ultimately are passed along to the consumer. Cardinal Health stated, .".. the company's supply chain capacity makes it possible to help our pharmacy customers order efficiently, contain costs, monitor purchases, and improve patient outcomes" (Frederick, 2003).

These are precisely the goals and advantages that J-I-T inventory management can attain. In addition, the automated e-systems that Cardinal Health provides allow the customer and store owner / operators to place orders quickly, get rapid delivery, and monitor the shipment as it moves through the supply chain (Frederick, 2003). Through the use of their website, cardinal. com, pharmacies have real-time access to pricing, order confirmation, their own purchase history, and many other inventory related services. In addition, Cardinal offers mobile technologies to their customers. Orders can be placed and received through the use of a handheld scanning device that uses Pocket PC technology (Frederick, 2003). The Cardinal ASSIST process that some of the larger pharmacies and hospitals utilize offers all of these wireless and internet services as well as the ability to automatically track inventory and replenish the stock when needed without any interaction between humans (Frederick, 2003).

In fact, Cardinal Health has stated that more than 90% of their pharmaceutical transactions are done electronically now through the Just-In-Time inventory management system that they provide. In conclusion, inventory management in general is vital to the success of a company. The efficient use of resources to operate and manage the supply chain makes for a cost-efficient operation. Stock that is sitting on a shelf in a store ties up capital that could be used for other business related activities. Beyond keeping costs down, good inventory management is key to customer satisfaction. The consumer is not likely to return if the product they desire is out of stock or the store is unorganized.

The consumer wants to make one stop, select their product, and check out without the hassle of long lines or confusion. This is directly related to how the inventory is managed throughout the supply chain. Just-In-Time inventory management is an attempt to create the perfect inventory system. The idea of getting the right product to the right place and at the right time is at the core of this system. Although not always perfect, the goal is to identify problems and always strive to make it better. This can only be implemented through the use of automation and technology.

Cardinal Health has integrated handheld technology, wireless web, the internet, and many other cutting edge technologies to provide just this type of service. They provide inventory management that is flexible, relatively simple, and gives power to the consumer to help control inventory based on what is actually needed instead of historical models or guesswork.

Bibliography

Frederick, James (2003).
Upgraded distribution network grows supply chain, inventory capacity. Drug Store News, pg 15. Reid & Sanders (2002).
Independent Demand Inventory Management. Operations Management, Ch 12. Reid & Sanders (2002).