Costco also employs a just-in-time inventory management system, which includes sharing data  directly with many of its largest suppliers. Companies like Kimberly-Clark calculate re-order points  in real time and send new inventory, as needed, to replenish store shelves. Costco also works to  redesign product packaging to squeeze more bulky goods onto trucks and shelves, reducing the  number of orders Costco needs to place with suppliers. Occasionally, the company leverages its 75 million square feet of warehouse space to reduce  purchasing costs. For example, when Procter & Gamble recently announced a 6% price increase for  its paper goods, Costco bought 258 truckloads of paper towels at the old rate and stored them  using available capacity in its distribution centers and warehouses. These inventory management techniques have allowed Costco to succeed in tough times while  others have failed. Costco turns its inventory nearly 12 times a year, far more often than other  retailers. With many suppliers agreeing to be paid 30 days after delivery, Costco often sells many  of its goods before it even has to pay for them! Inventory management is important because materials costs often account for more than 40% of  total costs of manufacturing companies and more than 70% of total costs in merchandising  companies. Analyse the role of just-in-time in inventory replenishment for Costco. Note: you are required to paraphrase your understanding of the concept before  you provide at least 2 application points to Costco.

Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
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Costco also employs a just-in-time inventory management system, which includes sharing data 
directly with many of its largest suppliers. Companies like Kimberly-Clark calculate re-order points 
in real time and send new inventory, as needed, to replenish store shelves. Costco also works to 
redesign product packaging to squeeze more bulky goods onto trucks and shelves, reducing the 
number of orders Costco needs to place with suppliers.
Occasionally, the company leverages its 75 million square feet of warehouse space to reduce 
purchasing costs. For example, when Procter & Gamble recently announced a 6% price increase for 
its paper goods, Costco bought 258 truckloads of paper towels at the old rate and stored them 
using available capacity in its distribution centers and warehouses.
These inventory management techniques have allowed Costco to succeed in tough times while 
others have failed. Costco turns its inventory nearly 12 times a year, far more often than other 
retailers. With many suppliers agreeing to be paid 30 days after delivery, Costco often sells many 
of its goods before it even has to pay for them!
Inventory management is important because materials costs often account for more than 40% of 
total costs of manufacturing companies and more than 70% of total costs in merchandising 
companies.

Analyse the role of just-in-time in inventory replenishment for Costco.
Note: you are required to paraphrase your understanding of the concept before 
you provide at least 2 application points to Costco.

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