A Simple Guide to the Lean Manufacturing System

Posted on February 9, 2018 by Alla

The Lean manufacturing system is an effective way to reduce waste and boost profits.

Do you want to decrease waste and increase the quality of your products?

How about decreasing your cost of inventory and increasing your profit margins?

You’d probably like to boost your productivity too, right?

These improvements are usually hard to come by in manufacturing.

But companies around the world are reaping these benefits by implementing one proven manufacturing method…

The Lean manufacturing system.

We’ll show you what this system is, the key principles behind it, the major waste reductions you can expect from it, and the essential tools you’ll need to implement it.

By the end, you’ll have a firm understanding of Lean manufacturing and how it can transform your factory into an efficient powerhouse.

What is the Lean Manufacturing System?

The Lean manufacturing system, often referred to as Lean manufacturing, Lean production, or simply “Lean” is a system for maximizing product value for the customer while minimizing waste without sacrificing productivity.

One of the first major pioneers of “Lean thinking” (although he didn’t know it) was Henry Ford who was a major sponsor and promoter of the assembly line.

But Lean manufacturing as we know it today has its roots in the Toyota Production System (TPS), which was created by Taiichi Ohno and Eiji Toyoda in Japan between 1948 and 1975.

Before it was known as TPS, they simply called it just-in-time manufacturing.

There were 3 things the Toyota Production System attempted to prevent:

1. Muda

Muda is the Japanese term for “waste.” Muda is everything in your manufacturing process that creates waste or causes constraints on creating a valuable product.

According to the Lean Enterprise Research Centre (LERC), 60{cb377218d5687e54e8ee9149518f87201a393a7c1db5e8076e9d750029ec0dc3} of all activities in manufacturing production add no value at all.

According to TPS, there are 8 wastes you should work to eliminate:

Defects – The mistakes that require additional time, resources, and money to fix.
Overproduction – When those who receive the output aren’t ready for it or don’t need it because workers continue to produce more unnecessarily.
Waiting – When work has to stop because someone is overwhelmed, something broke down, you’re waiting for approval or materials, or because you’ve run out of something.
Not utilizing talent – Under-utilizing peoples’ talents, skills, and knowledge (not part of the original TPS wastes, but is increasingly sighted as a waste by current Lean manufacturers).
Transportation – Too much transportation, leading to increased costs, wasted time, and the increased likelihood of product damage and deterioration.
Inventory excess – When there is supply in excess of real customer demand, which masks real production.
Motion waste – Any excess movement, whether by employees or machines, that doesn’t add value to the product, service or process.
Excess processing – Any task that is processed more than required

These 8 wastes can be remembered using the acronym DOWNTIME.

2. Mura

Mura is the Japanese term for “unevenness in operations.” Mura is everything that creates inconsistent and inefficient work flows.

An example of Mura would be if you stocked a truck with fewer pallets than it can hold for one trip and then stocked it with more pallets than it could adequately hold for a second trip – resulting in longer lead times.

3. Muri

Muri is the Japanese term for the “overburdening of people and equipment.” Muri is all tasks or loads that put too much stress on your employees or machines.

Muri can cause employee burnout – as in the case of having too much work to do and not delegating a portion of it to someone else.

Or, Muri can cause the total breakdown of a factory machine – as in the case of running production for too long or with too many products than is allowed by the standards of that machine.

By minimizing or eliminating Muda, Mura, and Muri the proponents of TPS and the Lean manufacturing system believe you can produce the highest-quality products while increasing your revenue and productivity.

We’ll take a look at the tools that help you prevent “unevenness in your operations” and stop “overburdening your people and equipment” in a moment, but first, let’s take a look at how the philosophy of TPS gave way to the 5 cornerstone principles of Lean manufacturing.

What Are the 5 Key Lean Manufacturing Principles?

In 1996, the book Lean thinking was published, forever solidifying a whole new way of manufacturing.

The authors – James P. Womack and Daniel T. Jones – distilled the lessons they learned from observing TPS down to 5 Lean manufacturing principles.

These 5 principles are still at the core of any Lean manufacturing system.

The 5 principles are:

1. Value

The first principle of Lean manufacturing is value, which says a company should deliver the most valuable product to the customer. Value is therefore determined by the customer, not the company or its managers.

2. Value Stream

The second principle of Lean manufacturing is value stream, which says that after you’ve determined the value you’re going to provide your customers, you should map out the steps and processes required to manufacture those valuable products.

In a Lean manufacturing system, you should actually draw out every step of your process, from raw materials to finished product.

The goal is to identify every step that doesn’t create value and find ways to eliminate those steps.

3. Flow

The third principle of Lean manufacturing is flow, which says that after you’ve eliminated most or all of the waste from your system you undergo the process of ensuring all of your value-adding steps flow smoothly without interruptions, delays, or bottlenecks.

4. Pull

The fourth principle of Lean manufacturing is pull, which says that products should be built on a “just-in-time” basis so that materials aren’t stockpiled and customers receive their orders in weeks, instead of months.

5. Perfection

The fifth principle of Lean manufacturing is perfection, which says that you should make Lean thinking and process improvement a core part of your company culture.

Lean is not a static system, it doesn’t work the same for all companies, and managers aren’t the only ones who implement Lean – employees play an active role in making companies Lean, too.

To make the Lean manufacturing system more concrete and less abstract, let’s look at a few tools you’ll need to implement Lean in your business.

What Are the Most Useful and Actionable Lean Manufacturing Tools?

To get rid of Muda, Mura, and Muri there are a variety of tools you’ll need to implement and learn how to use.

Here’s a short list of some of the most important tools in the Lean manufacturing system:

The 5S System

The 5S system is a method of organizing your workplace materials for quicker access and better maintenance. This system is essential for eliminating waste that is produced by poor workstations and tools in poor condition.

The 5 S’s are:

Seiri (Sort) – Remove all unnecessary items for your current production, leaving only what is necessary.
Seiton (Set In Order) – Organize remaining items and label them accordingly.
Seiso (Shine) – Clean and inspect your work area and everything in it every day.
Seiketsu (Standardize) – Write out your standards for the Sort, Set In Order, and Shine steps above.
Shitsuke (Sustain) – Apply the standards you’ve set for your company and make them habits for everyone in your organization.

Plan, Do, Check, Act (PDCA)

PDCA is a 4-step method of continual improvement in your process and products. It applies the scientific method to manufacturing so that you can iterate the best results over the life of your business.

Here is each step:

Plan – Determine the goals for a process and needed changes to achieve them.
Do – Implement the changes.
Check – Evaluate the results in terms of performance.
Act – Standardize and stabilize the change or begin the cycle again, depending on the results.

Heijunka (Production and Demand Leveling)

Heijunka (production and demand leveling) is a technique specifically designed to reduce Mura (unevenness) by producing goods in smaller batches at a constant rate.

This helps reduce lead times and reduce inventory since each product or its variant is manufactured more frequently at a predictable rate.

Kaizen (Continuous Improvement)

Kaizen is the practice of continually observing, identifying, and implementing incremental improvements in the manufacturing process.

It encourages all managers and employees to be involved in the process of manufacturing improvements.

Kaizen ensures that waste will be gradually reduced through the collective talents and knowledge of everyone in the company working together to change the smallest inefficiencies daily.

Kanban (Pull System)

The Kanban (pull system) allows employees to “pull” work into their work station when they’re ready. This prevents Muri (overburdening employees) and allows managers and employees to focus on the right tasks at the right times without wasted effort or time.

How Do You Track Inventory in a Lean Manufacturing System?

Holding inventory is typically seen as a problem in Lean manufacturing. The closer you can get your inventory to zero, the better.

But you still need a way to manage the inventory coming into your warehouse, along with your purchase orders, customer orders, etc.

Since Lean manufacturing requires you to be flexible and fast when orders come through, it’s necessary to have an inventory management system that can respond quickly and fulfill orders as fast as you need them.

You won’t get that from manual spreadsheet inventory management.

But you can get it from cloud-based inventory management.

Find out how below…

Make Lean Manufacturing Easier with DEAR Inventory

DEAR will automate purchase orders to get goods quickly when you need them, track essential KPIs for continual improvement in your processes and workflow, and give you in-depth insight into your production costs for reduced waste and increased productivity. If you’re serious about going Lean, DEAR will make the process that much smoother.

Start your free 14-day trial of DEAR Inventory today!

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Out of Stock? Here are 5 Ways to Prevent Stockouts for Good

Posted on February 2, 2018 by

Running out of stock is one of the leading reasons for loss of revenue.

In business, there’s one phrase you never want to say:

“We’re out of stock.”

But we’ve all said it.

And every time we say it, we tell ourselves we won’t say it again.

Until we do.

You shouldn’t beat yourself up about it, though. Small business owners like you aren’t the only ones who suffer from stockouts.

Walmart executives reported they were leaving almost $3 billion on the table as a result of going out of stock.

What you should be concerned with is the incredibly high cost of regular stockouts.

In 2015, it was estimated that out of stocks cost retail businesses $634.1 billion in lost sales – 39{cb377218d5687e54e8ee9149518f87201a393a7c1db5e8076e9d750029ec0dc3} higher than in 2012.

And those losses were estimated for just one industry.

Think of the billions lost across all industries due to stockouts…

To help you combat the cost of going out of stock, we’ll show you how stockouts happen and how to prevent them from happening to you.

But first, let’s briefly define “out of stock” and describe in more detail how it hurts your business.

What Does “Out of Stock” Mean?

Being “out of stock,” or OOS means that the inventory for a particular product is completely depleted.

Out of stocks typically occur when a business owner doesn’t order enough inventory to satisfy customer demand.

But not being able to sell when a customer wants to buy is only one major problem of stockouts. Read on to find out more.

What Are the Effects of a Stockout?

There are many negative effects of going out of stock. Here are a few:

Lost sales
Lost customers
Negative customer reviews
Damaged brand and reputation
Slow or declining business growth

Now, stockouts aren’t caused by mysterious forces. There are measurable reasons why you run out of inventory. We’ll tell you why you experience stockouts in the section below.

Causes of Stockout Situations

Stockouts have many causes, and understanding the causes will help you find better solutions.

Here are 3 reasons why you run out of stock:

Inaccurate Data

From sales numbers to stocktakes, inaccurate data will always lead to bad decision-making and poor business outcomes.

The numbers will help you predict the future and learn from the past. If they’re wrong, then you’re destined to fail.

Inefficient Product Ordering

Inaccurate data inevitably leads to inefficient product ordering.

If you don’t order enough product, you won’t keep up with customer demand – resulting in stockouts.

Manual Spreadsheets

If inefficient product ordering is caused by inaccurate data, then what causes inaccurate data?

Excel inventory management, or manual spreadsheets in general

In a study of errors in 25 sample spreadsheets, Stephen Powell from the Tuck Business School at Dartmouth College found that 15 workbooks contained a total of 117 errors.

While 40{cb377218d5687e54e8ee9149518f87201a393a7c1db5e8076e9d750029ec0dc3} of those errors had little impact on the businesses studied, 7 errors caused massive losses of $4 million to $110 million, according to the researchers’ estimates.

One of our customers, Urban Couture, cited manual spreadsheets as the main problem in their business – causing stockouts and other issues.

You can read their story here.

5 Out of Stock Solutions

Knowing the causes of stockouts will point you in the right direction, but you’ll need actionable solutions if you hope to keep your warehouse well-stocked.

Here are 5 out of stock solutions to help you decrease and prevent stockouts:

Use RFID Tags

Radio Frequency Identification (RFID) tags allow you to easily track every product you store.

It makes your stocktaking process faster and more efficient. You can quickly search and find the products you need to retrieve. And RFID tags allow you to scan any item and find out in real-time how much of that item you still have in stock.

Researchers at the University of Arkansas found that RFID technology helped reduce stockouts by 16{cb377218d5687e54e8ee9149518f87201a393a7c1db5e8076e9d750029ec0dc3}. If you want to reduce stockouts too, then implement RFID tags.

Forecast Demand

We pointed out earlier that stockouts are caused by inaccurate forecasting.

So, to avoid going out of stock, you should follow demand forecasting best practices.

Some best practices include:

Determining what to measure and how often (i.e. competitors sales data, POS data, frequency of stockouts, etc.)
Integrating data from all of your sales channels, especially if you’re running an omnichannel ecommerce strategy
Creating a repeatable monthly process that analyzes previous forecasts and compares them to actual market results

Use a Reliable Order Point Formula

A reorder point formula tells you approximately when you should order more stock – when you’ve reached the lowest amount of inventory you can sustain before you need more.

You can stop being a victim to market spikes and slumps by using a proven, mathematical equation to help you consistently order the right amount of stock each month.

Here’s the reorder point formula you can use today:

(Average Daily Unit Sales x Average Lead Time in Days) + Safety Stock = Reorder Point

Order Safety Stock Inventory

Safety stock inventory is a small, surplus amount of inventory you keep on hand to guard against variability in market demand and lead times.

It will help you protect against unexpected spikes in demand, compensate for inaccurate market forecasts, add a buffer for longer-than-expected lead times, and ultimately, prevent stockouts.

To help you calculate safety stock, here’s the formula we recommend using if you’re just starting out:

(Max Daily Sales x Max Lead Time in Days) – (Average Daily Sales x Average Lead Time in Days) = Safety Stock Inventory

Use a Cloud-Based Inventory System

A cloud-based inventory management system lets you track your inventory in real-time from anywhere in the world. You’ll know up-to-the-minute when stock is low or sales are high.

With that kind of insight, you’ll be able to send out purchase orders right when you need them.

But if you don’t want to manually send out those orders, you don’t have to. Cloud-based inventory management allows you to set an automated reorder point. Since the software automatically tracks your inventory, it’ll know when to automatically send out a purchase order for you, too.

Plus, it integrates with top business apps like Xero so you don’t need to operate multiple apps on multiple screens – you can do everything on one platform.

What kind of cloud-based inventory management system do we recommend?

DEAR Inventory, of course.

How to Prevent Stockouts for Good

Preventing stockouts isn’t easy and it won’t happen overnight.

The tips we gave you in this post will help you in big ways if you implement them correctly.

Beyond that, you’ll have to continue to test solutions and pay attention to your market.

To do that, you’ll need a tool that can collect and analyze all the data you want to be measured for accurate forecasts.

DEAR Inventory can do that for you. And you can test drive the software for 14-days free. Just click the button below to learn more.

Cloud-Based Inventory Management That Helps You Finally Stay “In Stock”

From real-time inventory tracking to automated sales reports to accurate demand forecasts, DEAR Inventory is the tool you need to effectively manage your supply chain, stock your warehouse, and satisfy your customers.

Start your free 14-day trial of DEAR Inventory today!

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5 Demand Forecasting Best Practices for Smarter Predictions and Better Results

Posted on January 26, 2018 by

Better understand what’s coming with these demand forecasting best practices.

Demand forecasting is a tough job with a lot of errors.

The people who attempt to tell the future of your customers’ buying decisions are usually wrong.

But sometimes they’re right.

And in those instances, they’ve saved you from buying too much or buying too little – leading to obsolete stock, and from buying too little – leading to stockouts.

Their job is necessary but very difficult.

To help you do the job of forecasting demand better, we’ll go over a few demand forecasting best practices so you can increase your chances of forecasting demand correctly – increasing profit margins and decreasing costs of inventory.

Before we do that, let’s define demand forecasting.

What is Demand Forecasting?

Demand forecasting is a process of predicting what your customers will buy, how much they’ll buy, and when they’ll buy it.

You can use informal methods (i.e. guessing) or quantitative methods, such as analyzing past sales data.

From production planning to inventory management to entering a new market, demand forecasting will help you make better decisions for managing and growing your business.

But to make demand forecasting as accurate as possible, you’ll need to follow demand forecasting best practices.

Read on to discover these best practices.

Demand Forecasting Best Practices

Demand forecasting is an imprecise science, but that doesn’t mean you can’t improve the process.

Here are a few tips to help you forecast demand effectively:

Create a Repeatable Monthly Process

An increase in demand forecasting accuracy requires a consistent, monthly process that systematically analyzes previous forecasts and compares them to actual market results.

Through this process, you’ll have data on when your predictions were right or wrong, and what market demand has been.

Then, you can sort those “deviations” (when you were right or wrong) from highest to lowest and evaluate the top 20{cb377218d5687e54e8ee9149518f87201a393a7c1db5e8076e9d750029ec0dc3} to determine why you were wrong and how to be right next time.

By following a monthly process and evaluating your past successes and failures, you can minimize future errors.

Determine What to Measure and How Often

You can measure virtually anything in your business, but to accurately forecast demand, you should focus on the most relevant data points.

Here are a few data points you should consider measuring:

Competitors sales data
POS data
Amount of obsolete stock
Frequency of stockouts
Shipments
Orders

Feel free to add any more relevant data points to that list. Then, depending on your industry and rate of inventory turnover, choose whether to measure those data points on a weekly or monthly basis.

Integrate Data From All of Your Sales Channels

If you have multiple sales channels – like an omnichannel ecommerce strategy – then you should aggregate all the data from every sales channel for each individual product into a single data set.

Once you’ve done this for all of your SKUs, you’ll be able to see which channels offer the highest ROI for each product, and what your shipping and order requirements will be – helping you make smarter decisions.

Measure Forecast Accuracy at the SKU, Location, and Customer Planning Level

According to Gartner, only 17{cb377218d5687e54e8ee9149518f87201a393a7c1db5e8076e9d750029ec0dc3} of respondents to their study indicated that they forecast demand at the SKU, location, and customer planning level.

This is unfortunate because a primary driver of demand volatility is increased customer requirements.

Mr. Steutermann, the research vice president at Gartner said, “Customer or sales forecast accuracy should be measured for continuous improvement and accountability. The appropriate place to measure for continuous improvement is in the sales and operations planning (S&OP) review process.”

If you measure demand error down to the customer level, you’ll be able to better understand the source of the error – allowing you to improve your process.

Maintain Real-Time, Up-To-Date Data

You can’t accurately forecast demand if you don’t have accurate data.

Demand forecasting best practices revolve around up-to-date inventory data, sales data, raw materials data, finished goods data, etc.

To make smart forecasts, you’re going to need that data as close to real-time as possible so you don’t calculate demand with any missing data points, and so you can continually forecast demand on a weekly or monthly basis with fresh information.

So how can you track your POS, financial, and inventory data all at once within the same platform?

By using a cloud-based inventory management tool that integrates with all of your business apps.

In other words, DEAR Inventory.

Better Demand Forecasting Requires Better Inventory Management

Through real-time insight into your sales orders, stock levels, and past customer demand, DEAR Inventory allows you to track trends and forecast demand using accurate and up-to-date data from all areas of your business. Without this tool, you’ll struggle with spreadsheets and un-integrated apps – leaving you disorganized and without precise metrics. WIth DEAR Inventory, your apps will be integrated into a single platform and all of your data will be automatically calculated and charted for you. That’s why 7,503 small businesses and startups use us to grow their businesses.

Start your free 14-day trial of DEAR Inventory today!

Try DEAR for Free

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Pros and Cons of Dropshipping: Here’s What You Need to Know

Posted on January 13, 2018 by dearsyst

Do you want to start an ecommerce business with low overhead and no warehouse and still make a profit?

Then dropshipping is the business model you’re looking for.

But starting a dropshipping business isn’t the right choice for every entrepreneur. There are significant tradeoffs between dropshipping and traditional wholesaling.

We’ll look at the pros and cons of dropshipping and help you make the right choice for your business today.

What Is Dropshipping and How Does It Work?

Dropshipping is a business model that allows you to sell and ship products you don’t own and don’t stock.

Your suppliers – wholesalers or manufacturers – produce the goods, warehouse them, and ship them to your customers for you.

The process is simple:

– You receive an order

– You forward the order to your supplier

– Your supplier fulfills the order

While dropshipping has many benefits, it also has many drawbacks. We’ll explore both in the sections below.

What Are the Pros and Cons of Dropshipping

Many people start a dropshipping business because they think it’ll be easy to run.

“No inventory, no problem!” they say.

The truth is, it’s not “easy.” It comes with its own set of problems.

With that said, dropshipping also solves many problems for retailers and wholesalers.

Let’s take a look at the pros and cons of dropshipping to see if it will solve your business problems or if it will add to them.

Pros of Dropshipping

1. Low Startup Costs

It requires a lot of capital to stock a warehouse. You can eliminate the risk of going into debt to start your business by using dropshipping.

Instead of purchasing an extensive inventory and hoping that it sells, you can start a dropshipping business with zero inventory and immediately start making money.

2. Low Cost of inventory

The cost of inventory is one of the highest costs you’ll have if you own and warehouse stock.

You may end up with obsolete inventory – forcing you to find ways to reduce your stock – or you’ll end up with too little inventory – leading to stockouts and lost revenue.

Dropshipping allows you to avoid these issues and focus on growing your customer base and building your brand.

3. Low Order Fulfillment Costs

Order fulfillment usually requires you to warehouse, organize, track, label, pick and pack, and ship your stock.

Dropshipping lets a 3rd party take care of all of that.

Your only job in this arrangement is to make sure they get your customer orders. Everything else will be handled by them.

4. Sell and Test More Products with Less Risk

Without the constraints of a physical inventory and the costs associated with it, dropshipping allows you to update your inventory quickly, easily, and cheaply.

If you know a product is doing well for another retailer or reseller, you can immediately offer it to your customers without waiting for it to arrive in your warehouse.

Dropshipping allows you to test new items without the risk of carrying obsolete inventory. You only pay for what you sell.

Cons of Dropshipping

1. Less Control Over Order Fulfillment and Lead Times

Even though you don’t carry the cost of warehousing stock, you will pay for dissatisfied customers.

The manufacturers and wholesalers you do business with are responsible for managing and shipping your stock. If they screw up, the customer complains to you or buys from your competitor.

If you start a dropshipping business, make sure you work with high-quality partners.

2. Reliance on Other People’s Stock

Being able to offer new products immediately or stop selling slow-moving products is a major benefit of dropshipping.

The drawback to this perk is that you don’t control your supplier’s inventory. If they run out of stock, YOU run out of stock.

This will result in longer lead times and lost customers.

3. Less Profit

The hidden “cost” of dropshipping is the lack of bulk pricing.

You will likely pay more for each item you sell as compared to paying less for a large inventory of items – leading to less profit.

If you want to earn a lot of money using dropshipping, then you’ll have to sell more products than you otherwise would have if you owned and warehoused them yourself.

4. Poorer Customer Service

If your supplier delivers products late, damages them, delivers the wrong items, or otherwise screws up your customer’s order, the customer will take it out on you.

We already mentioned this problem when it comes to order fulfillment and lead times. But it extends farther than that.

You won’t be able to maintain the personal touch that retailers who manage their own inventory can provide customers. You won’t be able to quickly solve customer issues without overseeing the inventory yourself – you’ll have to deal with your suppliers to solve problems for your customers.

This “man-in-the-middle” way of helping your customers can lead to issues with your suppliers who may take a long time to do what you ask them to do, and with your customers – who will quickly get tired of waiting a long time for their problems to be solved.

Here’s What You Need to Make Dropshipping Easier

Now that you know the pros and cons of dropshipping, it’s important for you to know about a tool that you can use to make dropshipping work better for you.

We mentioned that one of the cons of dropshipping is not being in control of the inventory you’re selling – leading to potential stockouts.

But, you can use a cloud-based inventory management software that integrates with your supplier’s software so that both of you know how much inventory is in stock at any time.

This helps you as a dropshipper synchronize your marketing and sales campaigns with your supplier’s stock.

So, when any of your supplier’s customers make a sale (including you), it will update the amount of inventory in your supplier’s warehouse automatically.

If you want to minimize some of the issues with dropshipping and make it more worthwhile, then you need an inventory management system that tracks your stock levels in real-time.

Where will you find such a system?

Right here at DEAR.

Start your free 14-day trial today

Cross Docking: What It Is, How It Works, and If It’s Right for You

Posted on October 28, 2017 by

Cross docking eliminates the need to hold inventory – improving speed and efficiency.

See if you can answer this question:

What does the U.S. military and Walmart have in common?

Here’s a hint:

They both value efficiency and expediency.

Still don’t know?

Alright, we’ll tell you.

The military and WalMart both used cross docking to improve the effectiveness of their organizations.

They both run operations on a massive scale, and they both look for any tools they can use to streamline their logistics.

Cross docking handles all of that for them.

And it can do the same for your business.

We’ll show you what cross docking is, how it works, and its pros and cons.

By the end, you’ll have a much better grasp on whether or not cross docking is right for your business.

What is Cross Docking?

Cross docking is a system that virtually eliminates the need to hold inventory.

Products are delivered to a warehouse where they are sorted and prepared for shipment immediately – usually being reloaded onto other trucks stationed at the same warehouse.

While cross docking does expedite the shipment process, you shouldn’t skip critical steps like quality control and inventory tracking. It still requires a lot of careful planning and handling.

Which brings us to the next question…

How Does Cross Docking Work?

Cross docking isn’t complicated, but it’s not easy.

It requires military-like precision and perfect organization (it’s no wonder the U.S. military started using it back in the 50’s).

Here’s how it work:

Truckloads arrive at the entrance docks to the warehouse
The goods are unloaded and sorted and loaded into trucks waiting on-site
The newly loaded trucks deliver the goods to the customers

That’s pretty much it.

You can pick and choose what products you want to cross dock and what products you want to handle traditionally.

If you own your warehouse, you’re in complete control.

If you outsource your warehouse and shipping, you can talk to your 3PL provider about implementing cross docking in your business.

Now let’s take a look at the pros and cons so you can decide if cross docking is the best solution for your business.

Pros of Cross Docking

Greater Efficiency

Cross docking is made to be a quick and speedy process for distributing your goods.

The only way to make cross docking work is by simplifying and streamlining your loading and unloading systems to swiftly move goods from one truck to another, which results in faster shipments to your customers – a powerful edge over your competition.

Reduced Warehouse Cost

Cross docking provides a dramatic reduction in your cost of inventory.

There’s virtually no stock that you’re storing for any length of time – everything is transferred from one truck to another, almost immediately.

You might hold a few items while waiting for a truck, but if it’s in your cross docking warehouse, that means it will be leaving just as soon as it arrived.

When you cross dock, you simply receive the products, scan them into your OMS, and then ship them off.

No inventory to worry about becoming obsolete. No reordering. No stockouts. No shrinkage.

Reduced Labor Cost

With cross docking, you no longer have to pick and put away stock.

This equals a major reduction in labor costs. Less work required means fewer workers needed.

Decreased Lead Time

Lead time reduction is a significant benefit to cross docking.

Your products are being moved faster and more efficiently, which means they’re reaching your customers more quickly.

This improves your customer service and reputation for fast delivery times.

Cons of Cross Docking

High-Cost of Precise Organization

Precise organization demands high-quality technology, efficient work processes, and fast workers.

You may be saving money on inventory and warehouse costs, but you’ll have to buy forklifts, pallet trucks, conveyor belts, and anything else required for smooth and speedy operations.

You may also need electronic data interchange (EDI) to streamline the purchasing process and SCM software to track your goods from suppliers to your docks and onto your customers.

And, because multiple deliveries happen throughout a single day, every product has to be unloaded and reloaded within precise time slots. Otherwise, the dock will become congested, leading to potential damage or loss of goods.

Increased Cost of Trucks and Docks

Cross docking relies on a fleet of trucks and other transport carriers.

You’ll need space outside the warehouse to house the trucks if you plan on owning them and not outsourcing them.

Similarly, you’ll still need to purchase docks to implement this system.

Suppliers May Not Be Able to Do Cross Docking

Some suppliers may not be able to handle the tight deadlines that cross docking demands.

There’s very little room for error in both quality of goods and lead time. If you want to make cross docking work, you should have trustworthy and reliable suppliers.

Inefficient for Low-Turnover Businesses

If you’re selling office supplies, for example, and your rate of inventory turnover is relatively low, then you don’t need to invest in cross docking and the tracking technology, transportation carriers, and warehouse space that comes with it.

Cross docking is best used by high turnover businesses in industries like food, medical, and retail fashion.

How to Know if Cross Docking Is Right For You

Cross docking requires efficient organization, streamlined transportation processes, up-to-date technology, high turnover, and low lead time.

If you can handle that, or find a 3PL that can provide it, then cross docking is right for you.

If you can’t handle those things, then perhaps you should stick with a more traditional warehouse approach.

Of course, if you do choose a more traditional approach, you’ll probably need a cloud-based inventory management system along with a few other tools for effectively running your business – in which case, you’ll need DEAR Inventory.

What You Need if You’re Not Cross Docking

If you’re running a traditional warehouse, you’ll need software that can easily manage growing product volumes, streamline your stocktaking process, integrate with critical business apps such as Xero and WooCommerce. Our cloud-based inventory management system will give you real-time insight into your inventory levels, automate reorders, and generate reports for accurate forecasting.

Start your free 14-day trial of DEAR Inventory today!

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Lead Time Reduction: Why It’s Important and How to Do It Right

Posted on September 23, 2017 by dearsyst

Are you tired of sitting on your hands, waiting for your products to arrive?

You may need to implement a few lead time reduction strategies.

Lead times vary from industry to industry, but they should still be consistent and relatively short.

If you’re not receiving shipments as quickly as you should, you won’t be able to serve your customers as well as you could – and you’ll lose revenue in the process.

To help you improve your customer service and increase your revenue, we’ll show you why lead time reduction is so important, and give you a few tips you can implement by the end of this post.

Before we get to that, let’s make sure we’re on the same page by defining lead time.

What is Lead Time?

Lead time is the time it takes to process an order and receive the shipment of your products. It’s a critical tool for calculating safety stock inventory, and for applying a correct reorder point formula.

It’s both dependent on your process for taking and placing orders – an Excel inventory management system vs a cloud-based inventory management system – along with how efficient your supplier can prepare and ship your stock.

For example, if you placed an order today, and receive a shipment in 8 days, your lead time for that specific order with that specific supplier is 8 days.

Your lead time will most likely vary for each order, but if you want to know your average lead time, you can use this formula:

The total number of lead times divided by the total number of orders placed.

i.e., if you order stock once a month for 6 months, your total number of orders placed would be 6.

Following this example, let’s assume these were your lead times:

January	8 Days
February	11 Days
March	9 Days
April	6 Days
May	7 Days
June	5 Days

Add up all the lead times (8+11+9+6+7+5) = 46.

Now just use our formula:

The total number of lead times (46) divided by the total number of orders placed (6) = 7.67

7.67 is your average lead time for this example.

Relative to your industry, the faster your lead time, the more efficient your entire supply chain will be – which is just one of a handful of benefits of lead time reduction.

Lead Time Reduction Benefits

The major benefits of reducing lead times are reduced carrying costs, streamlined operations, and improved productivity.

But the list doesn’t end there.

Here are a few more specific benefits of lead time reduction:

– Flexibility during rapid shifts in the market

– The ability to outpace your competitors with faster, more efficient output

– Quicker replenishment of stock to avoid stockouts, lost sales, and lost customers

– Meeting deadlines consistently and easily

– Increases in cash flow because of increased order fulfillment

This isn’t an exhaustive list, but gives you an idea of what you stand to gain if you can make even marginal reductions in your lead time – which we’ll cover in the next section.

Lead Time Reduction Strategies

If you want to reduce your lead time, here are a few strategies to get you started.

1. Create a Lead Time Contract With Every Supplier

You probably have a contract with your current supplier, but have you stipulated your terms and expectations on lead time?

Probably not, and you should.

Any supplier can make bold claims about their lead times, but many won’t live up to the hype.

When you ask your supplier to legally agree to predefined lead times, they may hesitate and become uneasy.

That’s good.

It means they’ll be more realistic in what they can offer you, and will be more likely to push themselves to maintain the agreed upon lead times.

Before this discussion takes place, you should already know your ideal lead time.

Once you’ve got that figured out, here’s what should be in your contract:

– Lead times for each specific order/stock

– The penalty for delayed or late shipments

– The penalty for damaged goods during transportation

– A notice in advance of a shortage of stock, discontinuations, or price changes

2. Order Inventory More Often

Many businesses place large bulk orders once every few weeks. This is predictable, and leaves you with plenty of stock in your warehouse.

However, that stock will quickly increase your carrying costs, and if it’s not sold, will become obsolete and will have to be dramatically discounted or discarded – and you’ll be stuck eating that cost.

Ordering smaller amounts of inventory more often – based on accurate sales data and realistic forecasts – helps you increase your rate of inventory turnover, lowering the overall cost of carrying inventory.

This method is best used by companies trying to implement a just-in-time inventory management solution, but it can also be used by companies who simply don’t want to order more than they need.

3. Share Sales Data With Your Supplier

If you keep detailed records of your sales data, and use these reports to order stock from your supplier, you can share it with them to increase your collaboration.

If they can see your sales data, they can anticipate an incoming order. They may even have your stock ready to be shipped the moment you send your purchase order if your orders are fairly consistent.

Sharing the burden of order quantity gives you the benefit of lower lead times, and gives your supplier the benefit of knowing how to best serve you alongside their other customers.

4. Automate Your Inventory Management

Forecasting demand, generating sales reports, and calculating lead times are much easier to accomplish when you aren’t wasting your time manually entering data and writing purchase orders.

Inventory management software can automate your stocktaking process, optimize your supply chain management, and help you balance your working capital.

Keeping track of purchase orders, stock levels, sales data, and carrying costs is simple and straightforward.

If you want to reduce lead times and streamline your operations, then we have the inventory management solution you need.

Start your free 14-day trial today

3 Ways Excel Inventory Management Hurts Your Business

Posted on September 9, 2017 by

Excel inventory management is good at the start but doesn’t end well.

Excel inventory management is good for one thing:

Running a small business with little growth.

If you’re just starting out or maintaining a small business without trying to expand it, then excel inventory tracking would work fine for you.

If you run a simple 1-4 person operation with little inventory and only 1-2 people inputting inventory information, an excel inventory system will give you what you need.

But if you’re trying to grow your business year after year, release new and exciting products, or expand into new markets and countries, then you’ll need a far more robust supply chain management (SCM) software.

Without a system that can handle increasingly complex orders, purchases, and stocktakes, you’re going to experience serious issues.

3 Problems with Excel Inventory Management

Error-prone

In a study of errors in 25 sample spreadsheets, Stephen Powell from the Tuck Business School at Dartmouth College found that 15 workbooks contained a total of 117 errors.

Mistakes are easy to make, especially if you’re working with various spreadsheets and multiple people are manually inputting or copying information.

But sometimes the program itself is to blame for mistakes.

For example, a study of leading genomics journals revealed that Excel’s automatic functions were changing the names of genomes without the scientists’ knowledge.

The study revealed that one-fifth of papers with Excel gene lists contain erroneous gene name conversions.

This means Excel itself can cause errors in your reporting, and it can enhance the errors that humans naturally commit.

Lack of Real-Time Reporting

A lack of real-time inventory reports means that you are constantly behind in your inventory tracking.

Stock is being purchased and received, inventory is being sold and shipped, and your numbers haven’t been updated since yesterday.

If you think you have enough stock to cover a sudden spike in sales but find out you don’t, you lose customers.

If your assistant manager forgets a crucial part of your stocktaking process – like updating your data – and today is when you typically make purchase orders, you may order too much and run into the problem of obsolete stock or order too little and experience stockouts.

Even if you can update inventory information regularly every day, it will never be as instant or reliable as a cloud-based inventory management system.

Difficult to Scale

One of the primary reasons for keeping detailed reports is to generate accurate and useful business intelligence (BI).

To accurately forecast the future, you need to gather correct information in the present. Excel inventory management is subpar precisely because it is imprecise in organizing data due to its own flaws, and the errors caused by its users.

While Excel and Microsoft Office may offer BI tools, it requires you to learn how to use those tools and input the data without making mistakes.

According to “A Pilot Study Exploring Spreadsheet Risk in Scientific Research,” most spreadsheet errors don’t arise from mistakes in programming the spreadsheet – they arise from the misapplication of programming logic which is a result of most spreadsheet users having no formal training.

You’re an expert in what you sell, not in using Excel. Because you – like most users – aren’t an expert, you’re going to misuse or ineffectively use the program, leading to unseen errors and costly mistakes.

What’s the Alternative to an Excel Inventory System?

A program that automates the calculation of data and the generation of reports.

A system that keeps an up-to-the-minute account of your inventory.

A software that integrates with your ecommerce and accounting apps seamlessly.

In short:

DEAR inventory.

Leave Excel for the Little Guys – DEAR Is for Businesses Ready to Grow

Through barcodes and RFID technology, you’ll be able to keep your inventory up-to-date with the simple wave of a scanner. Our cloud-based inventory management system allows you to easily manage large and growing product volumes and generates real-time reports on sales, trends, and forecasts. With DEAR inventory, you’ll be able to streamline your stocktake, manage multiple locations, and ditch the outdated and error-prone method of Excel inventory management.

Start your free 14-day trial of DEAR Inventory today!

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4 Reasons Why Batch Tracking Is Crucial for Quality Control

Posted on September 2, 2017 by

Batch tracking will help you maintain high-quality goods

Do you have a traceability system in place that minimizes accounting errors?

Can you verify the history and location of a set of goods in case of a product recall?

Are you aware of which of your products are close to expiring and which aren’t?

If you don’t have a system that can deliver the answers to these questions immediately, or worse, if you don’t have a system that can answer these questions at all, then you need a batch tracking system.

To help you streamline your supply chain and improve your relationships with your customers and suppliers, we’ll help you understand what batch tracking is, why it’s so beneficial, and how you can implement it in your business today.

What is Batch Tracking?

Batch tracking is sometimes referred to as lot tracking, and it’s a process for efficiently tracing goods along the distribution chain using batch numbers.

A “batch” refers to a particular set of goods that were produced together and which used the same materials.

For example, a batch of milk is a set of individual containers of milk that used the same ingredients and has the same expiration date because they were produced together, at the same time.

From raw materials to finished goods, batch tracking allows you to see where your goods came from, where they went, how much was shipped, and when they expire if they have an expiration date.

What are the Benefits of Batch Tracking?

Almost every business uses batch tracking because it offers numerous benefits.

Here are just a few:

Easy and Fast Recall

iSeeCars analyzed new vehicle sales data and recall data from the National Highway Transportation Safety Administration (NHTSA) from January 1985 through September 2016.

They found that the industry average of car recalls was 1,115 per every 1,000 cars sold.

Almost every car manufacturer had recalls, but here’s why being able to recall your products quickly is so important:

In a study conducted by The Relational Capital Group and reported on by The Motley Fool, 87{cb377218d5687e54e8ee9149518f87201a393a7c1db5e8076e9d750029ec0dc3} of survey respondents said they’d be “more likely to purchase and remain loyal to a company or brand that handles a product recall honorably and responsibly, even though they clearly made mistakes that led to a safety or quality problem.”

Which means, consumers understand that recalls happen, but if you do a poor job recalling the product, then you’ll be chastised by your customers.

So, if you’re a car manufacturer, you would want to make sure that you proactively recall any defective vehicle and publicly or privately apologize and do everything possible to appease your customers.

Regardless of what business you’re in, if you want to be able to recall defective products quickly and easily, then you’ll need a batch tracking system that can give you the detailed information you need to identify every defective product within the batch so you can easily trace them down and retrieve them.

Streamlined Expiry Tracking

Quality control is critical if you’re a food wholesaler.

One of the most important factors for maintaining a high-quality food product is knowing the expiration date for every product you sell, and making sure your customers know this information as well.

Batch tracking allows you to automatically know the expiration date of each product and gives you the power to develop a stronger quality control system in the case of any issues like a product recall.

Improved Relationships with Suppliers

Batch tracking software allows you insight into the quality of your finished goods by tracking the raw materials your suppliers are providing you.

This gives you the ability to identify your best and worst suppliers, which gives you greater control over who you’ll purchase your material from.

Fewer Accounting Errors from Manual Tracking

A manual batch tracking system is extremely time-consuming and error-prone.

It’s very easy to enter incorrect data, omit data, misinterpret data, or misplace your data.

An automatic batch tracking system allows you to enter information that is generated across all products within your batch and puts that information at your fingertips if you need to access it quickly, as in the case of a product recall.

How Can You Start Batch Tracking Today?

The best way to start batch tracking is with a cloud-based inventory management system.

This will allow you to assign batch numbers, expiration dates, and serial numbers to your finished products.

But it will also allow you to track the purchase orders and sales of your batches for easy accounting.

And, because this inventory management system is cloud-based, you can track your batches from anywhere in the world.

If you want to do batch tracking efficiently, then consider using DEAR’s cloud-based inventory management system.

The Inventory Management System that Makes Batch Tracking Easy

Effective batch tracking is just one of the many features of our cloud-based inventory management system. You’ll also be able to create product categories, export product data across all your ecommerce stores automatically, operate multiple locations, streamline your stocktake, and generate real-time inventory reports. Everything you need to optimize your inventory management and batch tracking is right at your fingertips with our system.

Start your free 14-day trial of DEAR Inventory today!

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The Power of Safety Stock Inventory and How to Calculate It

Posted on July 29, 2017 by

Calculating safety stock inventory is easier (and more beneficial) than you think

What would happen if there was a sudden spike in market demand for your products?

Would you have enough inventory to satisfy your customers?

Or would you have to hang up the dreaded “out of stock” sign?

If you’re unsure, then you probably need to invest in safety stock inventory.

Even if you think you could handle that type of situation, your business is still vulnerable to uncertain shifts in the market and supply chain.

One of the best ways to safeguard your business and satisfy your customers is to have safety stock inventory.

We’re going to go over some of the benefits of safety stock and show you how to use one simple formula to calculate it.

But first, let’s define safety stock inventory.

What is Safety Stock Inventory?

As the name implies, safety stock inventory is a small, surplus amount of inventory you keep on hand to guard against variability in market demand and lead times.

If you’re trying to implement just-in-time (JIT) inventory, then you probably won’t want to invest in safety stock.

But, if you’re like the majority of retailers and wholesalers who use a just-in-case (JIC) inventory strategy, safety stock is critical to your business operations and offers many benefits to your bottom line.

What are the Benefits of Safety Stock Inventory?

Safety stock plays an integral role in the smooth operations of your supply chain in various ways.

Here are just a few:

Protection against unexpected spikes in demand
Prevention of stockouts
Compensation for inaccurate market forecasts
And a buffer for longer-than-expected lead times

You probably noticed that the benefits of safety stock are all tied to mitigating problems that could seriously harm your business.

That’s because without safety stock inventory you could experience:

Loss of revenue
Lost customers
And a loss in market share

With safety stock, you can safely avoid most of these problems.

Of course, despite its benefits, too much safety stock can incur substantial carrying costs, in which case you’ll need to reduce inventory or increase your rate of inventory turnover.

This is why it’s crucial to know how to order just the right amount to safeguard against variability in the market and supply chain, while not ordering too much and risk losing capital over the long-term.

To get it just right, let’s look at how to calculate safety stock inventory using a proven formula.

How Do You Use a Safety Stock Formula for Accurate Calculation?

A safety stock formula is relatively straightforward and requires only a few inputs for calculation.

Here’s the formula we recommend using if you’re just starting out:

(Max Daily Sales x Max Lead Time in Days) – (Average Daily Sales x Average Lead Time in Days) = Safety Stock Inventory

To take this out of the abstract and show you how it works, here’s an example to demonstrate this formula:

Suppose there’s a store in the USA called Harry’s Honey Shop. Harry sells honey that’s imported from Brazil.

On average, he sells about 5 bottles of honey every weekday. On the weekends, he operates a stand at his local farmers market and sells about 10 bottles of honey.

His average lead time to get a fresh shipment of Brazilian honey is 40 days. Although, because of the limited availability of flowers and other environmental factors, it can take up to 50 days to receive a shipment (maximum lead time).

If Harry wants to make sure he always has enough honey in stock to satisfy customer demand, he can use this formula to figure it out:

(10 x 50) – (5 x 40) = 300

If Harry sells about 45 bottles a week (5 every weekday, 10 on the weekends) equaling 180 bottles a month, then with these calculations he would have enough stock to last him about a month and a half.

If Harry orders honey every month, he would have plenty of safety stock. Maybe even too much.

Now that Harry knows how much honey he needs to have, and how much extra he would probably have left over, he can slightly reduce the amount of honey he orders to guarantee a nice buffer in case there’s a spike in demand or longer lead times.

Now, this is a pretty basic safety stock formula that will get you up and running quickly. But, you should never solely rely on basic formulas like these to calculate safety stock.

Use them as a baseline, test them, and expand your calculations with more nuanced formulas to deal with large volumes of inventory, different types of stock, and volatile market demands.

If you want to dive deeper into safety stock formulas, you should check out this excellent article that will help you handle more complex variances, deviations, and variables in your calculations.

How Do You Make Calculating Safety Stock Easier?

A safety stock formula is only useful if you have accurate inventory metrics.

If you don’t have an effective SCM software, a successful stocktaking process, or a proven perpetual inventory system, then you run the risk of having inaccurate forecasts, inefficient stock counts, and error-ridden data.

Before you can optimize your inventory ordering process and factor in safety stock, you should upgrade your inventory management system.

Accurately Calculate Your Safety Stock Using Proven Inventory Management Software

Our cloud-based inventory management software will track all your sales, generate real-time reports on buyer behavior, forecast spikes and slumps in demand, and monitor every piece of inventory the moment it arrives and the moment it’s used or sold. If you want to reap the rewards of safety stock inventory, then you should invest in a powerful inventory management system.

Start your free 14-day trial of DEAR Inventory today!

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Just-In-Time Inventory: How to Reap Big Rewards with Lean Production

Posted on July 8, 2017 by

Save time and costs with a just-in-time inventory management system

Just-in-time (JIT) inventory was developed in post-world war II Japan when the country had few resources, little money, and high unemployment.

It helped Toyota become one of the dominant car manufacturers in the world by making every step of the production process as “lean” as possible by eliminating overproduction, obsolete stock, and wasted time.

By the mid 80’s, the concept of just in time inventory was being tested by American companies with excellent results.

In 1983, Omark Industries – which produced chainsaws, ammunition, and log loaders – saved itself an estimated $7 million in inventory carrying costs with its own version of JIT called ZIPS (Zero Inventory Production System).

Use of just-in-time inventory continued to grow through to the 90’s…

In 1999, Daman Products reported in a case study a 97{cb377218d5687e54e8ee9149518f87201a393a7c1db5e8076e9d750029ec0dc3} reduction in cycle times, 50{cb377218d5687e54e8ee9149518f87201a393a7c1db5e8076e9d750029ec0dc3} reduction in setup times, lead times dropped from 4-8 weeks to 5-10 days, and their flow distance was reduced by 90{cb377218d5687e54e8ee9149518f87201a393a7c1db5e8076e9d750029ec0dc3}.

Today, just-in-time inventory can be observed in places like fast food restaurants, where all the ingredients for a burger are kept ready – but a burger is only made the moment it’s ordered, or on-demand publishing, where a master manuscript is kept ready – but a book isn’t printed until a customer order comes through.

To help you fully understand the power and potential of just-in-time inventory, we’re going to concretely define it, look at some of its benefits and drawbacks, and give you some principles and practices on how to implement it into your own production process.

What is Just-In-Time Inventory and How Does It Work?

Just-in-time inventory is simply making what is needed, when it’s needed, in the amount needed.

Many companies operate on a “just-in-case” basis – holding a small amount of stock in case of an unexpected peak in demand.

JIT attempts to establish a “zero inventory” system by manufacturing goods to order; it operates on a “pull” system whereby an order comes through and initiates a cascade response throughout the entire supply chain – signaling to the staff they need to order inventory or begin producing the required item.

While a just-in-time inventory system is not easy to create, the benefits are worth the extra effort.

Benefits of Just-In-Time Inventory

When first trying to implement just-in-time inventory, you’ll notice that you’ll find mistakes throughout the production process which are made more obvious when you try to make your system more efficient.

After some initial trial and error, you’ll begin reaping at least a few of the benefits listed below.

Minimize costs such as rent and insurance by reducing your inventory
Less obsolete, out-dated, and spoiled inventory
Reduce waste and increase efficiency by minimizing or eliminating warehousing and stockpiling, while maximizing inventory turnover
Maintain healthy cashflow by ordering stock only when necessary
Production errors can be identified and fixed faster since production happens on a smaller, more focused level, allowing easier adjustments or maintenance on capital equipment

Even though just-in-time inventory offers high rewards, it also brings with it high risks. If you want the benefits, you’re should know what the potential drawbacks could be.

Drawbacks of Just-In-Time Inventory

The risks associated with just-in-time inventory should be seriously considered before implementing a JIT inventory plan for your company.

Below is a list of problems you may run into when you adopt this policy of lean manufacturing and production.

Stockouts due to sudden changes in market demand when you don’t have excess inventory
Vulnerability to alterations in your supply chain which could disrupt your business operations if you don’t have backup options
More stockouts could occur if there is a breakdown in communication within the business, or between the business and the rest of the supply chain
Lack of control over order fulfillment due to a dependency on your supplier’s timeline – potentially delaying how quickly your customer receives their order
Increased need for planning and precise processes – which, if you don’t setup correctly, could cause a major loss in revenue after only a few errors.

Some of these risks will depend on your industry and the volatility of whatever market you’re serving. But, all of these risks pose serious threats to the longevity and profitability of your business.

However, they’re only risks.

If you think the benefits outweigh them, then let’s take a look at how you can start implementing a just-in-time inventory management system.

How do you Implement Just-In-Time Inventory

Creating and implementing a just-in-time inventory management system will depend in large part on the size and complexity of your business and industry.

Below, we’ve listed some common principles and practices which will give you a better idea of what’s required for a high-functioning JIT inventory system.

Develop a strong relationship with your suppliers – and possibly an exclusive agreement regarding stock quantity and delivery time period – to ensure consistency in your supply chain
Find a long-term supplier for each purchased part who delivers small batches according to your long-term purchasing forecast
Work on shortening the production cycle first to make room for shortening the materials cycle (this helps mitigate the problem of late deliveries when first implementing just-in-time inventory)
Separate your repetitive business from your one-stop orders and develop a special production method for your repetitive orders – using particular machines for particular tasks and processes, separated by order frequency
Institute or improve your quality-control program to manage and solve manufacturing problems that inevitably reveal themselves when implementing just-in-time inventory

These action steps are just some of the things you should consider doing when making the switch from just-in-case to just-in-time inventory.

The actual steps you’ll take will once again depend heavily on your unique business and its needs.

However, if you haven’t already, there’s a crucial first step you will want to take before officially implementing a JIT strategy.

Do This Before Implementing Just-In-Time Inventory

Just-in-time inventory requires a great level of planning and insight.

You need to be able to understand and track customer demands, market trends, and sales numbers.

Essentially, you should know everything possible about your inventory – how much you need to buy, when it will arrive, how often it sells, etc.

Excel spreadsheets aren’t going to cut it if you want to optimize your business processes for lean performance.

To operate an efficient, effective, and profitable just-in-time inventory system, you’re going to need to…

Upgrade Your Inventory Management System to Reap the Benefits of JIT

Our cloud-based inventory management system can deliver up-to-the-minute reports, automate your tracking, and integrate with all your sales channels. You’ll know when you need to order more inventory, what times of year you experience spikes in demand, and how to organize and coordinate the rest of your supply chain.

Start your free 14-day trial of DEAR Inventory today!

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