Just-In-Time Inventory

Written by Fmi.Online Friday January 6, 2023
Just-in-time inventory (JIT) is a management strategy that aims to increase a firm’s operating efficiency and decrease the level of waste by only keeping enough stock on hand to fulfill current orders or maintain production. With a JIT inventory system, the firm purchases only the level of inventory that it uses in the production process.

Explanation :

JIT inventory requires good planning of production and an accurate estimate of consumer demand . By relying on long-standing contracts with suppliers, the strategy eliminates the problem of switching between suppliers to lock the lowest price.JIT lowers the inventory levels by setting up fast equipment times, lowering scrap levels, and using local suppliers; therefore, it minimizes the working capital and eliminates obsolete and/or defective inventory. On the other hand, if not implemented properly, it may cause a shortage in the raw materials  and a delay in production.

In a nutshell :

  • The just-in-time (JIT) inventory system is a management strategy that minimizes inventory and increases efficiency.
  • Just-in-time manufacturing is also known as the Toyota Production System (TPS) because the car manufacturer Toyota adopted the system in the 1970s.
  • Kanban is a scheduling system often used in conjunction with JIT to avoid overcapacity of work in process.
  • The success of the JIT production process relies on steady production, high-quality workmanship, no machine breakdowns, and reliable suppliers.
  • The terms short-cycle manufacturing, used by Motorola, and continuous-flow manufacturing, used by IBM, are synonymous with the JIT system.
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