In the pre-pandemic world, eCommerce companies generally understood supply and demand. Businesses primarily relied on the just in time delivery method to meet the demands of their customers. Supply chain disruptions happened, but they were few and far between compared to what the pandemic presented to eCommerce companies. Therefore, the just in time strategy that eCommerce businesses utilized before may not be the correct method now. So, what does just in time delivery mean for eCommerce businesses in a pandemic world?
What is just in time (JIT) delivery?
Just in time, or JIT, delivery was the tried-and-true method for many eCommerce companies. But what does it mean? JIT is an inventory management strategy that aligns product delivery to specific sales cycles. This system allows companies to have the minimum amount of inventory to effectively meet consumer demands. ECommerce companies use JIT to stay nimble in the face of changing consumer desires.
While it is effective, it can be hard to maintain as we continue to see changes unfold that can affect inventory management and accuracy. However, another inventory strategy that can combat the ongoing changes that businesses have experienced during the pandemic is just in case delivery.
For many businesses like yours, it’s time to have a conversation on shifting your inventory management mindset.
What’s an alternative to JIT in eCommerce?
Just in case (JIC) delivery is an inventory management system that can support businesses during uncertain times by holding contingency inventory. By implementing this strategy, your business has a surplus of inventory to withstand any supply chain breakdown or unusual customer purchasing demands.
Many businesses have switched to a just in case inventory management system as supply chain disruptions continue to happen. However, this shift isn’t as easy as it may seem. You’ll face extra costs in manufacturing, labor, and shipping to increase your inventory and build surplus. This expenditure can be daunting and potentially detrimental to your company as you wait to sell your surplus. So, it’s important to look at your business’s financial status, current demand trends, and supply chain news to determine if there needs to be a shift in your inventory management mindset.
When does just in time delivery make sense for an eCommerce business?
For some businesses, just in time delivery is still a viable inventory management system, but many other businesses have considered switching to just in case strategies. Even though supply chain disruptions might be the main cause of the switch, there are both pros and cons to working with a JIT strategy.
Pros of JIT delivery
- Reduced storage requirements. A JIT inventory management system relies on the bare minimum inventory to meet customers’ demands. This reduces the need to have additional storage as required by the just in case method’s surplus inventory.
- Increased order accuracy. The speed of items coming in and eventually leaving your warehouse reduces the risk of items being misplaced, lost, or damaged.
- Lowered labor costs. Lowered and accurate inventory means that there doesn’t need to be an increase in warehouse staff.
- Improved inventory management. A JIT strategy can help businesses lower their inventory carrying costs through eliminating overproduction. By utilizing this strategy, your business reduces the risk of dead stock.
Cons of JIT delivery
- Increased risk of disruptions. As we’ve seen during the pandemic, supply chain disruptions turned businesses on their heads. With material shortages and shutdowns, a JIT strategy can break and lead to delayed shipping and disgruntled customers.
- More out of stock/backordered items. Another thing we saw at the beginning of the pandemic was an increase in online orders. Businesses using the JIT strategy were not equipped to handle the influx of orders and ultimately had to place “out of stock” and “backorder” on their websites. Meanwhile, with a just in case strategy, businesses were fully stocked to tackle changes in consumer demand.
- Slower delivery times. We’ve hit on it before, but we will hit on it again. With the uncertainty that the post-pandemic world has presented, a just in time inventory management system can cause slower shipping and delivery times. And a JIT strategy can be hard to handle and maintain — a disorganized system can cause a decrease in order accuracy and shipping speeds while increasing labor costs.
- Increase in costs for technology. Businesses that use a JIT strategy need to utilize advanced tech to ensure everything runs smoothly. Without this pricey technology, businesses won’t be able to respond quickly to surges in demand and provide accurate sales forecasts that could further impact their bottom line.
Is JIC a better choice for your business?
If the risks of JIT are too great, it might be time to consider a JIC inventory management system. Why? JIC gives businesses the ability to be prepared for anything that might happen within the supply chain. If your manufacturer can’t produce more materials or customer demands spike, businesses that utilize a JIC strategy are well-prepared and can make adjustments without scrambling.
The downside of a JIC strategy is an increase in storage costs. However, you can address this by offering discount codes on bulk orders. And with bulk storage, your business can create additional marketing efforts on popular products, such as bundles, samples, and sales promotions.
How can RSF help?
It can be difficult to shift mindsets on your inventory management system. At Red Stag, we’re here to help you with that decision. We’ll pair you with our expert team to determine the next steps for your inventory management and monitor changes in customer demographics.
With our strategically placed warehouses, we provide U.S. fulfillment to 96% of addresses in the contiguous U.S. in two days or less. By doing this, we can properly distribute your products to the regions that see the most customer purchasing demand. Picking the ideal warehouse location for your business can reduce shipping costs and cut shipping times. This increases customer happiness and loyalty.
Picking the right inventory management system can be difficult and pull you away from other business operations, but you don’t have to be alone. Let us help you grow and scale your business.