But for a clothing store, the cost of being out of stock of a particular item can be high. The heart of VMI or CRP is an agreement between the manufacturer and the warehouse or retail outlet on target inventory levels and the percentage of customer requests that the retailer should be able to fulfill. Something less than 100 percent fulfillment is the norm. The needs and purposes of inventory control differ yet again in the automobile industry, where some 5,000 to 7,000 parts may be required to build a single vehicle. Chrysler Corp. in Auburn Hills, Mich., requires suppliers to hook in electronically to keep track of the company's production schedules and supply the needed parts to the factory on time.
Paper is out.
Split-second timing has its benefits. JIT has a slightly different flavor in the health-care industry, a sector under extreme pressure to trim costs. Instead of abiding by the conventional hospital supply process, in which bulk orders are placed weekly or monthly and delivered to hospital warehouses, Baxter Healthcare Corp., a vendor in Deerfield, Ill., now sends supplies daily to nursing floors and clinic offices as they are needed. While customers see benefits in lower storage costs and improved availability of goods, vendors expect to gain by matching production to consumption. Storing raw materials and finished goods ties up capital and incurs warehousing expense.