ABC and JIT Inventory Management: Optimizing Stock and Production

ABC Model

The ABC model sorts by the relative importance of various stocks of a company when it has a large inventory with a wide variety of products and cannot devote the same time or the same resources to each. It is based on classifying stocks into three categories:

• Existences A: Items are most important for the management of supply, 20% of store items, overall, 60-80% of total stock.
• Existences B: Stock less relevant to the company, but must maintain a control system (less strict).
• Existences C: Stocks with very little relevance, control them specifically enough to more simplified methods.

JIT System

The Just-In-Time (JIT) system is an integrated management of production and supply developed in Japan in the 1980s. Currently, it is used in major industrial companies worldwide. This system is based on the company not manufacturing any product until it is necessary, that is, until there is a firm customer order or production order.

Aims to spend minimal resources to maintain inventories, reducing the time of production and delivery to customers.

Implementing the JIT System

To implement the JIT system in a company:

• Greater involvement of staff to identify periods of production and procurement and to propose solutions and dynamics.
• Develop and have important applications of engineering to adapt production systems and supply specifications and system needs.
• Applying a system that affects the continuous improvement of production processes and supply.

TME 8: Commercial Function

The commercial function includes all necessary activities to get the consumer products and services for the company.

Most Important Functions

• Planning and Control: This is to clarify future actions and then compare actual results with forecasts made earlier to draw conclusions from this comparison. For example, a quote from LAN.
• Market Research: This study provides information that enables the company to set the direction of its policy and make decisions on that basis.
• Promotion and Advertising: Advertising reveals the product to the customer, informs them of its characteristics, and highlights the main attribute that differentiates it from our competition.
• Sales: Sales is to organize and direct the relationship with distribution channels "intermediaries". The most important function of all that are carried out is to collect the sales department incomes, expenses and generate all through its sales.

All these functions are intimately interrelated with other areas of the company.