JUST.IN.TIME: a new way to profit

D ROF IT depends. on eflficient f inventory control and just-intime delivery promises to increase both SKUs and turns with less inventory and fewer stock-outs.

Using the lumber wholesaler as an example of how a retailer can benefit from establishing a just-intime relationship with a supplier, Bruce Merrifield, president of Merrifield Consulting Group, Inc., briefed those attending his seminar at the National Home Center Show on the cost elficiencies and profits of justin-time inventory management.

He described the capability to stock more items to allow customers one-stop shopping in product lines and services they need and want as one advantage. Another benefit was the ability to stock less of each item, saving space and cutting investment.

Increased fill rates and reduction of stock-outs to improve customer service were additional just-in-time advantages pointed out, along with being able to perform at a higher turn earn ratio.

Considering total procurement cost is the key to efficient and economical buying, those in attendance learned. While buying direct from manufacturers may result in an initial lower purchase price, other costs associated with the purchase may increase. Acquisition and possession costs, the factors of total procurement costs, often can be lowered by developing a partnership type relation with a supplier. In turn, these savings have a noticeable impact on the bottom line.

Lumber wholesalers, for example, are helping retailers to achieve just-in-time delivery and more efficient inventory management by establishing more distribution yards. These yards bring products closer to the retail market, cutting the time needed for delivery. Distribution yards have increased by 250/o in the past flew years according to a North American Wholesale Lumber Association survey.

This view of wholesaler involvement helping a retailer is supported by the Kiplinger Washington Newsletler which called wholesalers "inventory managers, helping the end seller carry less stock while providing protection against running out if demand suddenly surges" in a recent article.

Story at a Glance

How just-in-time delivery increases turns and earnings ways a wholesaler can help a retailer by maintaining inventory. controlling total procurement costs.

ls Just-ln-Time Rbht For You?

Just-in-time delivery: a new buzz word or a concept to help dealers prosper in the competitive environment of the '90s?

Just-in-time (JIT) originated in Japan as an approach to improving manufacturing operations. Because there is waste in traditional bid-buy, confrontational procurement, the system created demands for major buying method changes.

JIT can benefit the lumber and home center retailer, Basically, it is intended to shorten the delay between a retailer's buy order and the arrival of the product he needs. Unnecessary paper work and communication steps between the buyer and seller are eliminated.

Retailers and suppliers must have a partnership relationship to make the system work. Since JIT principles tend to be developed individually between each retailer and his source of supply, trust, understanding and cooperation are needed.

A retailer shopping for a partner with whom to form a JIT relationship might do well to consider the following five traits deemed necessary in a supplier. They are taken from Just-ln-Time .for the '90s by John Flanagan and James P. Morgan.

(l) ability to meet specific schedules.

(2) ability to supply exact quantities.

(3) ability to supply quality.

R.

Using reload centers, office wholesalers are bringing products closer to retail markets. They then are able to respond to just-in-time delivery. " Reload centers are becoming more valuable to retailers who need to round out their inventories and who require fast access to commodity items," said Nicholas

Kent, executive vice president of NAWLA,

He cites figures indicating 60/o of a recent $300 million increase in office wholesaler lumber sales came from increased use of reload centers. Office wholesalers provide retailers economy through power bulk buying with virtually no overhead expenses, according to NAWLA.

"As most retailers seek to control inventory costs with just-in-time delivery practices, the importance and value of purchasing stock and processed raw materials from a wholesale distributor with products near the retailer's market dramatically increases," Kent said.

(4) ability to adjust deliveries and quantities to meet changing needs.

(5) ability to do all of the above with a minimum of paperwork.

Electronic purchasing including EDl, fax, PC to PC and telephone ordering has cut days off the ordering process, boosting turns and reducing inventory costs. Adding just-in-time delivery can further increase inventory turnover, improve in-stock position and simplify ordering procedures, cutting both paperwork and time.