What is zero inventory?
Many times you heard about no inventory or zero stock but might be you don't know what does no inventory mean? In short, No inventory or Zero stock is also known as zero inventory.
This technique is mostly used by manufacturers to improve supply chain efficiency by minimizing inventory as much as possible, and by connecting inventory purchases to consumer orders and shipping requests.
A good way to understand how it works is to look at a zero inventory example. Most dropshipping stores do not maintain any inventory and ship orders directly from manufacturers, they directly take orders from visitors (like your Shopify store), connect with the manufacturers or sellers (sometimes you sell directly), and then deliver the items to the customer.
Here, the sellers or stores owner act as middlemen. They tie up with certain suppliers or manufacturers and send their products without stocking them. Konigle's dynamic pricing solution helps dropshipping stores maintain profit margins as cost of goods increase/decrease.
Konigle also has an inventory management tool for Shopify and Shopee stores that help improve profit margins for the stores by helping minimize dead stock. You may also watch this video to see the tool in action:
Benefits of zero Inventories
Reduced Costs: By reducing carried inventory quantities, you reduce your costs significantly for your online store.
Efficiency: Having items shipped just in time reduces wasted time and energy (efforts).
More Time: zero Inventories provide you some extra time to focus on your store to grow more.
Flexibility: With the help of zero inventory, you have the flexibility to change your item lines quickly.
Does JIT mean zero inventory?
Just-in-time (JIT) is an inventory management method in which products are received from suppliers only as they are needed. The main goal of this method is to reduce inventory holding costs and increase inventory turnover.
A just-in-time technique eliminates overproduction, which happens when the supply of goods in the market exceeds the demand and leads to an accumulation of unsalable inventories.
What is the main risk in zero inventory?
The main two risks in zero inventory are as follows:
1. Delay in Supply Risk
If there is a big distance between your supplier and the actual shipped location, then there is a high risk of delay in delivery and Due to this, you may lose your customer forever. If you don't use zero inventory, then you can deliver without delay.
2. Delay in Production Risk
If you are manufacturing your own items then production may be delayed due to some factors. For example, there is a shortage of laborers or other materials.