What are the pros and cons of JIT inventory control?

JIT Inventory stands for “Just in Time” Inventory. Just In Time Inventory is an inventory system in which companies order just enough of the supply that they need from their suppliers, no more no less. JIT Inventory is useful for several reasons which I will highlight below. However, it is also important to note that there are some cons with this system that I will point out as well. Nonetheless, there are ways in which business owners can combat the cons of this system, especially if they believe this will be the best inventory system for their type of business.

Some businesses that use the JIT Inventory System include: McDonald’s, Dell, and Wal-mart. The JIT system is beneficial to these companies because:

  • By using the JIT inventory system, McDonald’s and Dell are able to make customer orders, when they order.
Ex. Instead of trying to sell customers pre-made burgers or computers that get old quickly, these companies prefer to make it right when the customer orders, and not before.
  • Companies are able to satisfy customers order the way the specific way any individual customer may request.
Ex. Because the company does not pre-make their final product, they are able to allow the customer the opportunity to custom tailor their order the way the customer wants it to be made.
  • JIT inventory allows orders to be satisfied quicker.
Ex. If companies are in the habit of producing products generically, it would probably take them longer to produce a product that is tailored individually. If the company is already in the habit of producing custom tailored orders, it does not take them as long comply with the request, and thus they are able to earn money quicker, because they are able to meet individual requests quicker.
  • JIT inventory allows the company to satisfy orders at a lower cost to the company and to the customer.
Ex. Because companies that use JIT complete orders right when their customers order, instead of before their customers order, they only make enough complete orders to satisfy the exact amount of demand that they have for that particular product. Thus they do not end up wasting a lot of product, because what they only make enough orders for what they will sell. The company orders supplies, only when they know they are about to run out and need to restock, even then, they only order a small amount of supply. Because the company is not wasting their supplies, they are able to keep their prices low for customers.
  • JIT Inventory allows customer satisfaction to be increased overall.
Some Con’s to the JIT Inventory System:
Companies who are dependent on one main supplier can be easily set at a disadvantage because:
  • The supplier could drive up the cost of your supplies because there is no other resource available for you to get your supply needs met.
  • If the supplier has a disruption in their company, it could cause a disruption in your company because they cannot meet your needs due to issues within their company.
Ways to Combat the Aforementioned Issues:
In order to try to prevent the cons of JIT Inventory System from affecting your company, business owners could keep the following tips in mind when deciding how to go about securing Just In Time Inventory:
  • Businesses could try to secure more than one companies that supply their needs at competitive prices.
  • If a business decides to go into contractual agreement with a supplier, the business should try to keep the sign short term contracts, in order to keep the supplier doing all that they can to keep your business, instead of vice versa, in which the company feels as though they can do whatever they feel to  because you’re locked into a long term agreement.
If all else fails, companies can always manufacturer of their own supplies so that they do not have to depend on outside sources for their supplies, and thus decrease the risks associated with the JIT Inventory System.
“McDonald’s A Guide to the Benefits of JIT”

Inventory Management Review

Charles Atkinson on Inventory Management

Website: http://www.inventorymanagementreview.org/justintime/


Date Retrieved: 5/6/2011

“The Risks of Being Just In Time”

By: Nick Koletic


Website: http://www.inventorymanagementreview.org/2005/10/the_risks_of_be.html

Date Retrieved: 5/6/2011


Explain the impact of fraud and why it impacts small businesses to a greater extent than large businesses. What should the owners or managers do to prevent from fraud from happening in the first place?

In the article titled, “Small Businesses Face More Fraud in Downturn,” Simona Covel explains how several small business owners came face to face with fraud within their own company. Small businesses that do not have a checks and balance system in place for employees who handle money are subject to become victims of fraud, especially during these tough economics times. During the economy’s downturn, employees may feel under pressure more often to keep up with their bill payments on time, and to just survive with gas prices steadily rising, and with inflation on consumer products. Employees who have access to company cash and credit accounts can easily dip into a company’s money if they know that no one is paying close attention to their actions or keeping close account of transactions and purchases made by them.

Simona Covel had the opportunity to interview three business owners who all had one thing in common. They had allowed one person in their company too much power.   Simona’s article mentions several helpful tips from worthy sources to help business owners pay attention to employees, and whether their business could be in jeopardy of fraud.

Tips mentioned in the article include:

Being alert to employees who live above their means; employees who guard accounting software, and those who never take vacations. Simona’s source, Mr. Sklar, who is an accountant, also states that business owners should also review every canceled check and look at the signature on the back of them. Furthermore, Mr. Sklar says that business owners should review bank statements every month and check for unusual transfers.

To check out the article mentioned in this post visit:

The Wall Street Journal

“Small Businesses Face More Fraud in Downturn”

By: Simona Covel

Website: http://online.wsj.com/article/SB123501158460619143.html

Discuss the advantages and disadvantages of buying a business as opposed to starting one from scratch. What two ways can one buy a business and which one is preferable? Why?

There are many advantages and disadvantages that can come with buying a business as compared to starting one from scratch. I will answer this question in regard to my personal choice of business which is the movie and media industry:


Some advantages of buying a film company instead of starting one on my own would be that I already have the equipment and facility that I need, and possibly employees who are well trained with the equipment and the way in which the business runs.

The business may already have a strong customer base that will probably transfer over once someone new buys the company, as long as the same quality or better service is provided.

The business has already been established and may be making a profit. It should not take as long to start a profit when you buy a company that is already up and running versus taking all the time and steps needed to even get the company established, not to mention marketed to the public.


If the facility or equipment is really old, you may have to immediately invest in renovations and equipment updates before you can carry 0n with the business or profit.

It may be harder to mold the company into your own idea or vision because the old vision and mission of the company are still instilled in employees and customers of the past who you are still dealing with.

Even though there are some disadvantages that can come with buying a business as compared to starting a business from scratch, I believe that it is important for a person to make the best decision for them. Depending on the individual, you may be able to turn those negatives into positives when it comes to buying a business.

What is typically provided by a franchisor to its franchisees? Why would these typically be valuable to a nascent entrepreneur? Why is the failure rate lower for franchisees than it is for independent businesses?

Franchisors provide franchisees with the opportunity to make a profit off of their business concept. Typically, a franchisor provides the franchisee with its logo, business model and guidelines, access to branding material like uniforms, recipes, slogans, marketing and promotional items. Franchisors usually also offer advice, trainings, and support for the franchisees throughout their specified contractual period.

Sometimes franchisors are able to provide their franchisees with the business location and employees; however, if this is the case, franchisees must be careful to take into consideration the condition of the facility and the attitudes and behaviors of the employees.

Most entrepreneurs starting from scratch have to work hard to secure an affordable location for their business, as well as employees, and marketing for their product or service. On top of that, they are not sure whether their product or service will be successful in a competitive market. Entrepreneurs of this sort are usually taking a very big risk when they decide to go into business. Not to mention all of the money that they have to invest as start up capital on a venture that they have no proof will succeed.

All of these reasons, are why franchising can seem a worthwhile opportunity to a person looking into entrepreneurship. The fact that the business that they are investing is has been proven to be useful, necessary, and/or successful in the market can give a new entrepreneur confidence that he/she will be successful. Franchisors know that they are decreasing their level of risk as compared to an entrepreneur starting from scratch, simply because they have a franchisor to guide and help them on the road of their proven model of success.

If there were a market for it, would you consider entering an international market for a product/service which you offered in your own enterprise? Why or why not?

I am considering entering the international market with my business services because there is a market for it. The film industry is booming in various countries throughout the world.  Movies and media can be distributed all of the world. Furthermore, they can make an impact on individuals differently in other areas of the world outside of the U.S. Hollywood is the number one film industry in the world, but there is also Bollywood, and Nollywood. Bollywood is the second largest film production industry and its from India. Nollywood is the third largest film production industry in the world, and its from Nigeria. I want to reach out to Nollywood, and possibly even Bollywood to make a connection. Maybe one day I can make movies that will be popular in their movie industry, and maybe movies from their industry will become more popular in America’s Hollywood. Even though America’s Hollywood films are well known and accepted around the world, I believe that we have yet to make that happen in America with other movie industries from across the world. This would be true globalism in the movie industry. I hope that I can have a part in not only making a profit from movies that are Hollywood inspired, but also Nollywood or Bollywood inspired.

What are the pros and cons of doing business entirely online without a physical storefront or presence? Consider this question from selling a tangible product.

Because of the ease of access with internet shopping, many companies are now completely online utilizing a virtual store front instead of a physical storefront. Of course for business owners who have to take into account the cost of renting or purchasing property, upkeep, and maintenance, employee help for customer service, and leaving the house to go to work everyday, online business may seem to be very appealing. But what about for the customer who is not yet comfortable with internet shopping…Let’s look at a few of the pros and cons of online virtual store fronts.


  1. Customers don’t have to travel and spend gas money to get to your business.
  2. They don’t have to worry about waiting in long lines to make purchases.
  3. Running a business online can cost less because you don’t have a physical store location that you have to make payments on. An owner of an online business may only have to pay for storage space for their products.


  1. Customer’s may not feel that personal touch online. I think that online service based companies try their best to take advantage of their resources in order to provide a sense of personal touch to their customers. For example, intuit website builders try to call customers who sign up for their trials or services within the first 48 hours. Not only do they call to make sure you have ease of start up with their services, they also email you immediately to welcome you to their business.
  2. It is harder to  assess the needs of customers and make recommendations for other products to them because you are not physically there with them to listen to what they are looking for and why.
  3. Another con is that you cannot accept cash from customers. Customers who are weary of putting that credit card information online to make a purchase, or prefer to spend cash may be lost due to the store being completely online.
Entrepreneurs should take into account all of the above points before deciding whether the store will be completely online, or whether the store will offer some online shopping, or none at all.  Honestly, depending on the type of business and products sold, I would say that having a physical and virtual storefront is more than likely the best option for the consumer and the seller.

What is the difference between a franchisee and a company owned store within a franchise chain? Why might one prefer to be a franchisee or the manager of a company owned store?

The biggest difference between a franchisee and a company owned store within a franchise chain is ownership of the company. In a franchisee the person who invested in the franchisee is the owner of the particular store that he invested in. However, the person who runs a company owned store in a franchise chain is not the owner of that store, but instead an employee of the company that runs the franchise chains.
When it comes to deciding which role is better to have in the debate of becoming a franchisee or a company owned store manager, there are several factors to take into consideration.
One factor is ownership, responsibility and liability-Franchisee investors are solely responsible for success or failure of the company once they sign up and pay to be a franchisee. The franchisee puts up the money for the business, and the franchisee is the one who suffers if the business does not succeed. In essence, a franchisee is an entrepreneur who is using someone else’s proven business concept, tactics, and brands in an effort to generate a profit for themselves. However, they do have somewhat more freedom in the way that they decide to manage the company than does a company owned store manager.
A company owned store manager is someone who the main company put in charge of running another location of the exact same store. The store is owned by that company instead of the manager, and thus the manager does not have as much freedom to run the store the way he wishes. He has to run the store the way the company requires using their policies and procedures. responsible for the success or failure of the business. A company owned store manager does not have to invest money in the store in order to make a profit, he is paid by the company. He is not an entrepreneur, he is still an employee working for the company. If the store fails, the manager will not be held financially liable, the company will.
Some more pros to being a franchisee is that the franchisee is his own boss and has freedom to run and lead the company as he sees fit. A franchisee has a personal investment in the business and is more likely to want to work hard to see is grow because the success of the business is a direct reflection of the his personal success. A franchisee is an entrepreneur with a plan that is proven to work, so its not as big of a risk as it would be trying to start your own business idea that one is not sure will do well in the market. A franchisee is given everything he needs to be successful with the proven business model once he pays his start up cost.
Some more pros to being a company owned store manager is that he doesn’t have to pay start up costs to run the store. He will not be personally liable if the store does not succeed. He is not taking any major risk, and he has a boss and rules to lead and direct throughout his daily business ordeals.
Whether one decides to become a franchisee or a company owned store manager is up to the individual. Anyone considering whether or not to become a franchisee should carefully weigh the pros and cons against their own personal and professional goals in life in order to make the best decision.
“7 Eleven Continues to Convert Most Company-Owned Stores into Franchise Operations Convenience Retailer Offers Business Opportunity in Tough Economy.” PR Newswire (2008): Westlaw Campus Research. Web. 27 Apr. 2011.