Tuesday, February 4, 2014

Just-in-Time to Just-in-Case to Just-on-Way

Just-in-Time to Just-in-Case to Just-on-Way

The current business world is not comprised of the firms that procure, manufacture and supply all their products themselves rather it is more of “Global Manufacturing & Supply”. The world’s major portion of sales is shifting from real time to online due to rapid and large expansion of web-based companies. Most of these companies exist virtually with no physical presence – no manufacturing facility or warehouse. These companies are smart to efficiently manage their supplies and sales without any delays or hurdles. This approach is also saving these companies from high capital investments in infrastructures and inventories.

This approach is taking companies one step ahead from the concept of keeping suppliers in the vicinity or keeping the supply chain smooth to the concept of managing supply chains in the most efficient manner fulfilling requirements of the customers with less risks and more returns owing to less investment and minimal operating expenses. These firms are adopting the concept of “virtual inventory”, which can be defined as: “virtual inventory is drop shipping merchandise orders directly from vendors’ stock rather than the more traditional stocking merchandise in anticipation of demand.” – (http://www.tullyandholland.com/t-h-publications-page/items/virtual-inventory-increases-enterprise-value.html). Virtual inventory approach saves a lot of time for these organizations to concentrate on their primary operations/ activity – “look for customers”.

Knowing these facts one must conclude that virtual form of business is much more profitable than the traditional manufacture-stock-supply kind of organizations based on its being less capital extensive and higher returns BUT then why do we see traditional companies retaining major market shares in most of the industries?

The answer lies in two major advantages these “stock & ship” firms have:
1.       More cost effective owing to control on production.
2.       Better service delivery based on the confidence of having goods in physical custody.



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