What is Just in Time Inventory? Examples, Importance, Advantages

A company that uses this strategy may be ill-equipped to handle a sudden surge in demand for a product. The lack of backup inventory means customers must wait for the company to receive supplies and manufacture the product. This can mean extended delays, dissatisfied customers, and potential forfeit of part or all of an order if any supply chain issues arise.

It can help you organize your warehouse, track inventory movement across multiple locations, and even integrate with your other business solutions (like your point-of-sale or accounting software). The goal would then be to time your production rates and forecast demand so you receive your replenishment order just in time to avoid a stockout. Following this pattern on an ongoing basis ensures you don’t have to store more components than you actually need. Just in time inventory reduces stock liability but also comes with its risks.

What is the difference between just-in-time vs. just-in-case (JIC) manufacturing?

If you’re interested in using JIT to improve the way you operate, JIT inventory management software is worth considering. It can automate your processes and make it easier to take advantage of this strategy. While there are many JIT software options on the market, some of the best include Netsuite ERP, ShipBob, Zoho Inventory and Sortly.

If a raw-materials supplier has a breakdown and cannot deliver the goods promptly, this could conceivably stall the entire production line. A sudden unexpected order for goods may delay the delivery of finished products to end clients. The just-in-time (JIT) inventory system minimizes inventory https://www.bookstime.com/articles/what-is-an-accountant-and-what-do-they-do and increases efficiency. JIT production systems cut inventory costs because manufacturers receive materials and parts as needed for production and do not have to pay storage costs. Manufacturers are also not left with unwanted inventory if an order is canceled or not fulfilled.

What is the just-in-time method of inventory control?

Taiichi Ohno, an industrial engineer at Toyota, developed kanban in an effort to improve manufacturing efficiency. Realistic planning and scheduling use the frequency for changing just in time inventory examples setups for the purpose of managing the material flow and it leads to JIT manufacturing. JIT production is considered for products that have repetitive quality in nature.

The Bailey Seat Company supplies GM with all the seats it needs for the production of its full-size trucks. The Bailey Seat Company and GM work closely together so that the seats arrive at the assembly plant as they are needed for each truck being built. The seats are never stored at GM’s assembly plant, waiting to be installed onto the trucks. The seats are delivered to the plant and are immediately installed into the new trucks. In a Kanban system, you’d attach a card (either physically or digitally) to every component or raw unit. Once the component is used to complete a finished product, the card is removed and sent back up the production line.

Supply Shocks

Because a manufacturer does not have to store excess materials on-site, they are not required to pay for a storage space or experience product waste. The space and capital can be used for other productive means, while all resources are utilized most effectively to produce items as they are needed. Production runs are short, which means that manufacturers can quickly move from one product to another. Companies also spend less money on raw materials because they buy just enough resources to make the ordered products and no more. The central goal of a just-in-time inventory strategy is to cut the total cost of the supply chain in order to reduce an organization’s inventory and capital footprint. A well-run JIT inventory system makes it possible to function effectively with virtually no inventory.

• The main demerit to this strategy is that eager consumers have to wait for the items to hit the stores that result in potential loss of sales.
• It is a manufacturing process through which instead of keeping an excess inventory, organizations prefer to manufacture goods as an order is received.
• Shopify POS comes with tools to help you manage warehouse and store inventory in one place.
• On-demand publishing is an exemplary of the JIT inventory method that has become popular with independent and self-publishing operations.
• Because there is no inventory buffer, business can suffer greatly if any one element of production is delayed.