As we have seen in class, Just-in-time inventory (JIT) is a system based on a quick response to the consumer’s demand and a minimum inventory level. Companies respond to what consumers want at the real time. By doing this, companies reduce total costs.
How can we respond to any variation of the demand and maintain a minimum inventory level? Doing that the orders arrive exactly in the moment when are required. The problem is that if there is just one disruption in the supply chain, there will be no way to respond to the demand because you will be without stock.
This method is very effective in industries such as automotive, in which is not difficult forecasting. However, in other industries like health care, this system incurs in some risks.
The article explains how, for example, if a patient needs an implant but it’s unavailable on time, the effects on the patient can be fatal. For that reason, it’s necessary to have some cushions in their inventory.
Despite the risks, hospitals will not stop using just-in-time systems because the cost savings are too great.
By: Sergio López
Source: Health Care Finance News