Is efficiency the linchpin of success in the realm of multi-unit operations, and can ‘Just-in-Time Inventory’ be the key to unlocking it?

The ability to streamline processes, reduce costs, and maximize resources can make all the difference. And one of the most powerful strategies in the arsenal of multi-unit operators is indeed, Just-in-Time Inventory.

In this blog, we’re diving deep into the what, why, and how of Just-in-Time Inventory, unveiling the secrets to its effectiveness in the complex world of managing multiple units.

From its fundamental principles to real-world applications, we’ll guide you through the intricacies of this essential inventory management approach, helping you unlock new levels of operational excellence and profitability.

So, let’s embark on a journey to discover how Just-in-Time Inventory can revolutionize the way you do business, one unit at a time.

What is Just-in-Time Inventory? JIT Explained

Just-in-Time Inventory (JIT) is a strategic approach that empowers multi-unit operators to manage their inventory with precision. Rather than stockpiling excess goods, JIT relies on the principle of acquiring and replenishing inventory just when it’s needed.

This approach minimizes storage costs, reduces waste, and optimizes resource allocation, all while ensuring that products are available exactly when and where they are required across multiple units.

JIT Inventory has become a game-changer for businesses looking to enhance efficiency, cut expenses, and excel in the competitive world of multi-unit operations.

How does Just-in-Time Inventory Management Work?

Just-in-Time (JIT) Inventory Management for multi-unit operations is a strategy that aims to streamline inventory control and reduce waste while ensuring that products are available precisely when and where they’re needed. Here’s a brief overview of how it works:

1. Demand Forecasting: Multi-unit operators forecast the demand for each unit, relying on historical data and current market conditions.
2. Order Triggering: When inventory levels approach a predefined minimum (the reorder point), an order is triggered to replenish stock, ensuring that products arrive just in time to meet demand.
3. Supplier Relationships: Strong relationships with reliable suppliers are crucial, enabling prompt and frequent deliveries with short lead times.
4. Reduced Lead Times: JIT encourages the reduction of lead times to minimize the amount of inventory on hand.
5. Continuous Monitoring: Real-time monitoring of inventory levels and sales data, often facilitated by advanced software, helps in timely reordering.
6. Quality Control: Stringent quality control is maintained to prevent disruptions in production and service.
7. Waste Reduction: JIT minimizes waste by avoiding excess or obsolete inventory, resulting in cost savings.
8. Flexibility: Multi-unit operators remain flexible to adapt to changing market conditions and supply chain disruptions.
9. Employee Training: Staff members are trained to understand the importance of precise inventory management.
10. Continuous Improvement: JIT is an ongoing process that requires regular assessment and refinement of inventory management procedures.

JIT Inventory Management enhances operational efficiency, reduces costs, and allows multi-unit operators to respond swiftly to market changes while maintaining a lean and effective supply chain.

Advantages and Disadvantages of JIT

Advantages

1. Cost Reduction:

• Advantage: JIT reduces carrying costs, including storage, insurance, and obsolescence costs, as it minimizes excess inventory.
• Advantage: Reduced lead times can lead to lower transportation and handling costs.

2. Improved Efficiency:

• Advantage: JIT encourages streamlined processes and efficient resource allocation, increasing overall operational efficiency.
• Advantage: It minimizes the risk of overproduction, helping to maintain a lean and productive workflow.

3. Waste Reduction:

• Advantage: JIT minimizes waste by preventing the accumulation of obsolete or excess inventory.
• Advantage: Reduced inventory levels mean a lower risk of inventory spoilage or damage.

4. Space Optimization
   • Advantage: JIT reduces the need for large storage facilities and allows multi-unit operators to optimize their physical space. This can lead to cost savings in terms of rent and utilities, making better use of available real estate.

Disadvantages

1. Supply Chain Vulnerability:
   • Disadvantage: JIT relies heavily on suppliers and transportation networks. Any disruptions in the supply chain can result in stockouts and production delays.
   • Disadvantage: Sudden supplier issues or natural disasters can have a significant impact on operations.

2. Risk of Stockouts:
   • Disadvantage: Maintaining minimal inventory levels increases the risk of stockouts if demand unexpectedly spikes or if there are delays in the supply chain.
   • Disadvantage: In industries with highly unpredictable demand, JIT may not be suitable.

3. High Demand for Precision:
   • Disadvantage: JIT requires precise demand forecasting and constant monitoring, which can be challenging for businesses with fluctuating demand patterns.
   • Disadvantage: If not executed accurately, JIT can result in understocking, which may lead to lost sales and dissatisfied customers.

4. Higher Setup Costs:
   • Disadvantage: Implementing JIT initially may require significant investment in technology and training to establish efficient inventory management processes.
   • Disadvantage: Frequent, smaller shipments can sometimes result in higher per-unit transportation costs.

It’s essential for multi-unit operators to carefully evaluate their specific circumstances and industry demands to determine whether JIT is a suitable strategy, considering both its advantages and potential challenges.

How Consolidated Concepts Can Help

While JIT brings numerous benefits, it can also present challenges like supply chain vulnerabilities and the need for precise demand predictions. Luckily for you, Consolidated Concepts has the power to help you solve supply chain issues, high costs, stockouts, and much more.

Success with JIT depends on industry specifics, a commitment to continuous improvement, and the ability to adapt. JIT is not just a strategy; it’s the compass guiding multi-unit operators towards efficiency, cost-effectiveness, and a competitive edge in the foodservice industry.

Consolidated Concepts can help you reduce costs, improve efficiency, and get you on the path to a smarter inventory process!

Pre-pandemic, restaurants were doing well! Products were available, prices are stable, and employers had the power. Then an unexpected punch to the gut happened when the supply chain took a major hit due to shortages and price increases.

What if we said there were things you can do today in order to keep costs low and improve your margins? That means that in a world where everything was all about marketing, sales, butts-in-seats, new locations…. is now all about cost reduction, streamlining efficiency and driving margin.

The biggest and brightest minds in the industry are shifting their focus from top-line revenue to margins and profitability.

Here are 5 steps that you can begin taking today to reduce your prime and operating expenses by 5% in the next 5 months putting you on the right path to profitability:

Integrate Technology

Are you calling your distributors every day to check on stock levels of your most pressing inventory? Many operators are finding out about substitutions only after the products have already been delivered to their restaurants. This does not work when you have been using the same ingredients since the day you opened your restaurant. By leveraging technology such as InsideTrack, you gain visibility into product sourcing and substitutions so you can prepare for menu changes ahead of time – instead of last minute.

What about carrying out core responsibilities in your restaurant such as auditing and price verification? That takes time and resources that not everyone has these days. Your in-house system of taking multiple spreadsheets and comparing them against each line item is no longer a very efficient way to audit. That manual process is too long and can lead to overlooked overcharges – which cost you money at the end of the day. By embracing technology in both your front and back of house, you can streamline operational tasks and reduce spend all at the same time.

Think About Outsourcing

Today, restaurant operators are having to do more with less and are being forced to outsource certain functions of their business such as Marketing, Legal, HR, Payroll, or Accounting.  So, why not outsource supply chain management and purchasing? This does not mean your current supply chain team is replaced. Instead, by partnering with supply chain experts you expand your resource pool and supplement your current staff. Most operators would love to add to their supply chain staff but the added cost to do so is too much, leaving them scrambling to manage the supply chain chaos on their own.

When you work with a supply chain management partner like Consolidated Concepts, Sundell and Associates, or even Restaurant Partners Procurement, you don’t have to pay for training, salary, insurance, and time off.  This is a popular option for many emerging and national chains, Private Equity firms, and even Publicly Traded restaurants.

Produce Management

Most operators don’t have the bandwidth, volume, or category expertise to efficiently manage their produce programs in-house. By leveraging a third party produce management company, you can reduce your produce spend by 5-10%.  On average, produce spend is about 15% of total food cost, so a 5-10% reduction in produce cost can lead to 100-200 basis points off your total food cost. Produce prices fluctuate throughout the course of a year due to things like seasonality and different growing regions. Yes, it’s true that you can occasionally buy better than the market but locking in contracted prices will protect you from volatility and you’ll ultimately be better off. Produce management companies such as Fresh Concepts or Produce Alliance will not only help you maintain, but improve your pricing, quality, food safety and traceability.

Operational Efficiency

There are many changes you can make, both big and small, within your operation that can help you cut costs without making it so obvious to your customers. Take trash liners for example. If they are too big for your trash cans, you are wasting money on buying bigger bags without maximizing the full value out of each liner. By buying liners that are the correct fit, you can save on costs and extract the full value of each trash bag. What about your TV’s? Are all your TV’s running at the same time – even the ones where no customers are being seated? What a waste of power and electricity. Turn unused TV’s off and save on your electrical bill. Don’t forget about your kitchen burners. If you aren’t making food right away, they don’t have to be turned on as soon as your staff is clocking in. All that is doing is heating your restaurant up, forcing the AC to kick on – using unnecessary energy.

Making changes to your utility usage such as turning of lighting and electronics in unused sections of your restaurant, buying the correct size trash bags, using energy saving light bulbs are all small changes you can make cut costs.

GPO

GPO’s sometimes have a bad rap. They can cost an operator money and sometimes require you to switch products and change distributors. But not all GPO’s are the same. GPOs are widely used in the Healthcare and Hospitality space and the adoption rate for restaurants has dramatically increase over the past few years. Finding the right GPO partner for your restaurant brand can reduce costs and broadliner purchases by 50-150 basis points or more, depending on how contracted you are. Work with a GPO partner that is distributor and manufacturer neutral – one that will not require you to switch products or vendors and will honor your contracts. Work with a GPO partner that you can call on when you are looking for new product suggestions or reporting and analytics on existing purchases.

If you implement any of these suggestions, you will reduce cost and improve your margins.  It’s just a matter of how much. At Consolidated Concepts, we can help you tackle each of these steps, reach your business goals, reduce your costs, and streamline your operations. Become a member today for FREE and start making smarter business decisions.