Keeping track of your stock system, operating your supply chain and managing your device life cycle(s) all impact on the success of your business. Implementing a Just In Time (JIT) inventory management strategy in your organization could help you transform your IT procurement. We show you how in this post.
What is Just In Time fulfilment?
Just In Time fulfilment is an inventory management technique that focuses on efficiency and reduces wastage. Originally conceptualized in Japan, as a solution to maximizing the country’s modest amount of natural resources, JIT is occasionally referred to as the Toyota Production System. In today’s modern business environment, JIT methodologies have become attractive to small, medium and large businesses for its lean inventory methodology. E-commerce, and the attendant development (and rise in) dropshipping, has also driven interest in JIT fulfilment. Dropshipping allows retailers to sell a product before they purchase it themselves, and then have it delivered straight to the customer.
Doing JIT fulfilment right for your business
Not every business is a retailer. However, JIT inventory management offers many benefits for all types of businesses. Especially if you’re a business that is looking to set up a presence in Europe. The continent is made up of 44 countries and is by no means homogenous. But it’s a fairly accurate generalisation to make that the cost of commercial real estate in Europe is expensive. As you incur the costs for your European move, it’s only logical to examine how you can achieve maximum ROI for your move to EMEA. The best way to do that is to look at the pros and cons of JIT inventory management from an IT procurement point of view.
IT procurement and JIT inventory management
You can enjoy the following benefits by implementing a JIT inventory management strategy in your business:
- Reduction in costs to hold inventory - a JIT strategy reduces the need to store a significant volume of IT hardware for your staff for long periods of time. Not having to ensure adequate storage space to keep IT resources immediately reduces capital expenditure and increases ROI on your European real estate.
- Improvement in cash flow - you can invest the cash you save on reduced storage costs elsewhere in your business.
- Reduction in unwanted stock - IT requirements can change in a very short space of time. Existing supplies can quickly become redundant, but still need to be stored. A JIT strategy ensures you only bring in the supplies that are needed in real time.
These benefits have the power to completely transform your business. However, a JIT strategy needs to be thoroughly investigated before you move ahead. JIT fulfilment has some potential disadvantages. These include:
- Order fulfilment problems - JIT is a lean inventory management system. There’s a risk you might not have the IT equipment you need as and when your company’s employees require it. (Robust planning mitigates a lot of this risk.)
- The margin for error is small - effective JIT inventory management requires accuracy. Using historical information to build, and maintain, up-to-date demand forecasts helps predict demand (from both internal and external customers) and optimize inventory. Data driven procurement is transformative.
- Limited room to absorb price shocks - A JIT system means no time to wait for sales or discount prices. You have to purchase supplies at the point when you need them. This can result in a decrease in profit margins as you may have to purchase IT infrastructure at a high price, depending on when the demand comes through.
How do I know if my IT procurement function is ready for a JIT strategy?
Ensuring the success of a JIT inventory strategy in your business for your IT procurement function relies on how agile your business can be. Ask yourself the following questions:
- How quickly can I order IT supplies?
- How quickly can IT supplies be delivered to me?
- Can I rely on my suppliers to get the products I need to me every time?
- Do I understand the demand trends and cycles my internal customers go through and their IT requirements?
- Do my internal customers experience seasonal fluctuations in their IT needs?
- How efficient is my order fulfilment system?
- Can I guarantee that I can get orders to my internal customers on time?
- Is my inventory management system flexible enough to manage supplies as and when I need to?
Answering yes to all, or most, of these questions is a strong indication that a JIT fulfilment strategy could be beneficial for your company.
IT procurement and digital transformation
Digital transformation is a big topic for businesses right now. Failing to digitally transform your company can result in loss of competitiveness and having to shut down. But digital transformation is also confusing. Few companies are doing it well, and there’s a lack of clarity over what exactly digital transformation is. That’s because digital transformation is far more a state of mind than a website or app. And adopting a JIT fulfilment approach in your business could be the start of a digital procurement function that future-proofs your company.
You don’t need to be a retailer to know that we live in an “I need it now” consumer climate. Internal customers within your organization bring this mindset to their IT requirements to do their job. JIT inventory management is a way for IT procurement to work in alignment with this mindset, while realizing big benefits for your company. Understand more about your inventory needs, track spend and distribution and fulfilment cycles, and you can boost staff productivity while keeping your company’s ROI on costly European real estate healthy.
If you’d like to learn more about how to make your IT procurement work when you scale from the US, read our eBook.