Are you better off buying in bulk or only ordering what is necessary to meet your current needs, as in a just in time (JIT) setup? There are advantages and drawbacks to each order management strategy.
You’ll often receive discounts for reaching a high threshold of items in one order, and you’ll save money on shipping fees. But you’ll also have higher carrying costs, more money tied up in inventory, and the potential for product spoilage if it sits on the shelf for too long. When you order smaller quantities, you will avoid unnecessary storage costs and be able to run a leaner warehouse. However, you need to have incredible precision in your inventory data because you risk running out of items if you order too few, and you will likely have higher shipping costs as you place more orders over time.
I’d like to share two personal experiences from my life that allude to the dangers of going to one extreme or the other, and the need for finding a healthy balance in your ordering strategy.(more…)