General Discussion
In reply to the discussion: What happens if our leaders "open up" the economy and nobody comes? [View all]ProfessorGAC
(64,995 posts)JIT is not intended to be an inflexible construct.
But, it became a CF, when quarterly profit meant unsold inventory was a terrible thing, even in stable, nonseasonal demand products.
So, safety stock levels are always cut to the bone & when a demand spike hits, there's no quick recovery.
I certainly get it, regarding perishable stuff, but paper towels? Hard surface cleaners?
The profit loss by incremental increases to not yet sold inventory is miniscule.
The added profit I generated by process optimization was more in a month, than a "reduce safety stock" initiative for 10 products would save in 2 years.
And I found two big hitters a year, for 15 years. Use that extra cash to boost inventories!
But, no. What will the analysts say is days sale on hand goes from 12 to 18? Ignore them. Profits are rising more than revenue. DSOH is a statistic used by people who don't really understand business operation.
The problem isn't JIT inherently. It's a terrible execution of the principle.