'Just In Time' (JIT) - Inventory Management Solutions
At InterBULK USA, LLC., we are focused on providing clients with responsive service and exceptional pricing for bulk bags. InterBULK also provides customers with a unique inventory management strategy--called Just In Time (JIT) in which InterBULK facilitates clients' receiving custom bulk bags only as they are needed in the production process. JIT inventory management promotes the most cost-effective stocking system and reduces inventory costs, while remaining highly tailored to customer requirements.
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Applying the science of inventory stocking, shipping and volume purchasing
A potential customer in the sand and gravel industry was accustomed to placing larger and larger bulk bag orders to secure the lowest price per bag possible from a competitor. When they approached InterBULK for a quote, the buyer shared that the company normally purchases 40 pallets of bags per order (7,800 bags total)--an order which usually lasts approximately 18 months. The buyer explained that the sand and gravel company took on the responsibility of maintaining the full inventory of bags on-site for the duration.
As part of the quote process, InterBULK analysts helped the client better understand that real costs of managing a large bulk bag inventory in this manner were two-fold: First, on-site warehouse space becomes needlessly occupied by slow-moving inventory. Second, a sizable amount of working capital becomes unnecessarily tied up.
Case Study Summary
- Service Description
- Just In Time (JIT) Inventory Management Consulting Case
- Problem
- A customer in the sand and gravel industry was accustomed to placing larger and larger bulk bag orders to secure the lowest price per bag possible.
- Example
- The buyer noted that the company normally purchased 40 pallets of Bulk Bags per order (7,800 bags total) which lasted approximately 18 months. The sand and gravel company received and maintained the full inventory of bags on-site for the duration.
- Analysis and Solution
- Responsive to the client's sensitivity to price, InterBULK analysts recommended breaking out the acquisition to ship in four smaller orders of 10 pallets across five month increments. With the price point remaining the same as receiving the 40 pallet order in full, InterBULK analysts noted that a more nimble inventory management strategy would free up both space and capital.
Our potential customer was still concerned, however, about additional freight charges associated with this strategy (since it would double to $4000 the original $2,000 freight charge they paid for a single full load delivered). InterBULK analysts pointed out that by retaining the 'lump sum' working capital (in this case, $100,000) and allowing it to generate interest in the meantime, the savings in finance charges would actually amount to approximately $6000. Dividing the payments out over time would allow the client to maximize the 'time value of money' with a net savings of approximately $4000.