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Zero Inventory

What Is Zero Inventory?

This is an inventory management strategy used by manufacturers to optimize a supply chain by minimizing inventory entries as much as possible without sacrificing other business objectives, such as responding to consumer orders and shipping requests. Although it’s known as zero inventory, you’ll still find companies keeping some supplies in their inventory.

Zero Inventories Philosophy

The philosophy of zero inventories follows nearly the same principle as just-in-time (JIT manufacturing is when the company has an inventory only when the consumer needs the goods. There is no inventory or supplies when consumers don’t need the products).

Zero inventory management can also extend to collaborations with dropshipping companies, especially when a strong marketing brand is involved in between. Typically, the marketing brand finds customers who want a product, places an order with the manufacturer, and the dropshipping company fulfills the order.

The zero stock approach is ideal for any company that has:

  • Stable market influence;
  • Narrow product range;
  • Dependent suppliers with fast-cycle operations;
  • High volume manufacturing capacity;
  • Consistent, high-quality management.

Zero Inventories Advantages

Just like a JIT approach, zero inventory manufacturing has several business benefits, as opposed to traditional processes. Operational benefits realized by zero inventory companies include:

  • Swift flexibility when reacting to market changes;
  • Streamlined administration work and costs;
  • Optimized production by eliminating waste;
  • Better market forecasting;
  • Optimized supply chains on the need basis.

Zero Stock Examples

As a production and logistics strategy, zero stock minimizes the need or number of SKUs in a fulfillment center in a bid to cut down operational costs. The best zero stock examples include Amazon, Alibaba, and Walmart, all of which are eCommerce retail stores that take consumer orders online and send them to respective manufacturers via an automated inventory management system.

Frequently Asked Questions About Zero Stock

Is it possible to achieve zero inventories? Why or why not?

Well, this is highly unlikely because a business needs to stock some inventories for backup during emergencies or bangled deliveries.

How to achieve zero stock?

You can achieve zero stock by ordering just the right amount of raw materials or wholesale products when there is an active order request in the supply chain.

Is zero stock business model good for my business?

This approach is ideal if your business falls under the zero inventory industry. This can include an eCommerce store, food processing business, print-on-demand services, or even business consultancy.

How to manage zero inventory production?

You can manage zero inventory using the Kanban production technique, which automatically tracks production to order new parts and raw materials. The technique was invented by Taiichi Ohno.

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