Just In Time Inventory (JIT)
What is Just in Time Inventory?
Just in time inventory is an inventory management strategy in which businesses cut down on maintaining inventory by only procuring raw materials after obtaining a sales order. Materials arrive right when production is scheduled to begin, but no sooner than that. The goal is to produce at a high volume while also limiting inventory storage and waste.
If you have a proven and reliable supply chain, JIT management might be right for your business.
How Does Just in Time Inventory Management Work?
Just in Time Inventory Management works by having stock and/or raw materials arrive as soon as it is needed for production to meet your customers’ demand and not a moment sooner. In order to implement this type of system, you’ll need to factor in a few crucial steps.
- Knowing your customers’ buying habits.
- Understanding exactly how your product is made.
- Conduct a Total Quality Management (TQM) review.
- Educate your team on the best production methods.
- Establish positive vendor relationships.
- Refine the process by reducing the number of steps it takes to make the product.
- Review the system and ensure there are no bottlenecks or blockages.
But before you start to use JIT management, you’ll need to be sure that you have the people, partnerships, and resources in place to successfully handle the system without sacrificing the quality of your product.
Advantages of JIT Inventory Management
If done well, there are plenty of advantages to using Just in Time Inventory Management. Some of the most common advantages include
- Reduced Waste
- Improved Efficiency
- Greater Productivity
- Smooth Flow of Production
- Lower costs
- Higher quality products
There are many other advantages of JIT inventory management, though this system does come with certain risks.
Disadvantages of Just in Time Inventory Management
While it may seem most beneficial to use JIT inventory management, you are opening your business up to some risks. Those include:
- Supply chain disruptions
- Your staff not being prepared to make the switch
- Order issues
- Missed opportunities
- Relying on forecasts too much
- Supplier dependence
- Acts of nature
- Local sourcing costs
What Types of Companies Use JIT Inventory Management?
The types of companies that use JIT inventory management range from those in apparel to those in the automotive industry, to those that work in construction and even in fast food. Some specific companies using JIT inventory today include:
- Dell Technologies
- Kellogg Company
- Toyota Motor Corporation
While these are all major corporations, common e-commerce businesses can also use this system.