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The Business Alternative to the Just-In-Time Supply Chains

Blog Post
December 14, 2021

Today, many businesses are looking for better ways to manage their inventory. Not all companies have access to warehouse and storage options, so they’re continually turning to alternative solutions for housing their products.

One of these management strategies is just-in-time (JIT). Developed by Toyota in the 1970s in response to changing industry trends, the JIT management solution keeps low inventory levels and replenishes stock as needed. This eliminates the need for bulk buying and warehousing.

One of the key benefits of JIT is that it prevents companies from purchasing more stock than they need, ultimately saving them money. Businesses operating on a budget tend to favor the JIT method because it allows them to buy only what they need when they need it.

Warehousing is expensive, and holding excess inventory adds to these costs, making JIT ideal for companies that can’t afford to pay for large storage spaces. Managing less inventory can be easier for everyone across the board.

However, JIT isn’t all rainbows and sunshine, and it comes with certain downsides that businesses must consider before jumping right in. Being aware of these disadvantages can help companies decide if JIT is the right fit for their businesses.

Let’s take a closer look at JIT and the top alternatives.

Drawbacks of JIT

Despite its advantages, JIT comes with significant risks. At its core, this strategy requires a level of alignment between businesses and vendors that isn’t always controllable. A stock disruption can completely devastate the process, leaving companies without critical inventory and forcing them to search elsewhere for order fulfillment solutions. Basically, it leaves them at the mercy of the supply chain.

Additionally, many companies that use the JIT method rely heavily on forecasting. They study the data and make predictions based on current and future trends, ordering the appropriate amount of stock as needed. While forecasting can provide additional help in determining the correct stock levels, businesses need to understand that forecasts can and do change over time or even prove to be flat-out wrong. As such, it is not enough to make a guess and hope for the best—it’s always better to have extra stock on hand, just in case. Of course, extra stock equals extra costs, but this is often preferable to coming up short and disappointing customers.

Something else to keep in mind is that the JIT strategy generally trusts in constant stock prices. Businesses following this method might purchase limited stock one day, assuming that they can buy additional stock at the same price the next, only to find that prices have since shot up and can no longer afford that extra inventory. On the other hand, warehousing and buying in bulk can help mitigate the risks associated with fluctuating industry costs.

The Pros and Cons of Warehousing

Considering the drawbacks of JIT, it’s understandable that businesses would look to other solutions to fulfill their inventory management needs. Holding stock in a traditional warehouse setting can be ideal for many reasons.

First and most obviously, a warehouse offers space and security. Technological advancements, including computerization and enhanced safety measures, have made warehousing an excellent option for those looking to protect their inventory physically. Also, many warehouses have access to loading dock areas that aid in transporting stock to and from the site.

Perhaps the best reason businesses use warehouses is that they allow for greater stock storage. Rather than keeping all stock at the office, companies can house their products at a separate, secure location that provides plenty of room for large stock quantities. Warehousing allows businesses to expand their inventory capabilities and hold more stock for future use. It also helps with price control, enabling companies to buy at one price and fulfill as needed.

But there’s no way around it—warehousing is expensive. Aside from the initial setup costs, simply maintaining the site can incur high fees over time that not all businesses can afford. Finding an appropriate warehouse can be challenging in and of itself, especially for businesses that aren’t located near any major industrial sites. In short, it can be burdensome for companies to find an accessible warehouse at a reasonable price.

Consider a Third-Party Logistics Provider

Accounting for the myriad of problems related to JIT and traditional warehouse solutions, what is a business to do? Is it possible to reap the benefits of both strategies while avoiding their pitfalls?

Enter third-party logistics (3PL) partners like Teksetra, who help companies find middle-ground solutions to their inventory needs. These partners provide a lifeline of support for any business experiencing growing pains, helping them outsource logistics and fulfillment services. 3PL partners utilize software and systems to ensure that businesses receive a steady stream of stock and even provide warehousing services—which can be enormously helpful for businesses that lack the funds or resources to install and maintain their own warehouse sites.

Along with warehousing and inventory management, 3PL partners assist with picking, kitting, and packing. When an order is placed, a worker picks the selected item and brings it to a packing station to be kitted and packed. Kitting refers to the optional addition of custom inserts such as brochures and manuals, and packing entails packing the materials into a box and sending it off to be labeled and shipped to the end customer. By choosing to outsource to a 3PL, your trusted partner will coordinate the shipping of your products, ensuring quality and speed.

The benefits of working with a 3PL are vast and significant. They use real-time inventory tracking tools to maintain adequate inventory levels and immediately update “out of stock” notices on websites. Businesses can save money by working with a 3PL, as these partners are responsible for the infrastructure and practices involved with inventory stocking and fulfillment.

3PL providers are experts at understanding the challenges of fulfillment, warehousing, and shipping. As such, they make it a point to keep abreast of the latest trends and emerging technologies within the space. Companies that rely on 3PLs can rest assured that they’re getting comprehensive, scalable storage solutions to suit their needs, whatever they happen to be at any given moment. These are just some of the reasons why businesses should consider partnering with a 3PL.

Remote Deposit Capture

Does your financial institution offer remote deposit capture? Trying to manage the logistics surrounding RDC can be difficult, but 3PL services can help.

Teksetra is a 3PL partner that offers quality services to help businesses implement and grow with RDC. Teksetra’s warehousing helps RDC programs scale, optimize, and deliver quality customer service. Reach out to us today to learn more about our 3PL services, how we can help you manage your inventory and warehouse needs.

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