Just-In-Time (JIT) Inventory Management ~ Increase Efficiency and Decrease Waste

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Just-in-time (JIT) inventory management, also know as lean manufacturing and sometimes referred to as the Toyota production system (TPS), is an inventory strategy that manufacturers use to increase efficiency. The process involves ordering and receiving inventory for production and customer sales only as it is needed to produce goods, and not before.

This type of inventory management provides many benefits, but is not without its downsides, and relies heavily on factors such as a strong, fast and efficient network of suppliers.

The Purpose of JIT

Ordering inventory on an as-needed basis means that the company does not hold any safety stock, and it operates with continuously low inventory levels. This strategy helps companies lower their inventory carrying costs, increase efficiency, and decrease waste. JIT requires manufacturers to be very accurate in forecasts for the demand for their products.

Just-in-time inventory management is a positive cost-cutting inventory management strategy, although it can also lead to stockouts. The goal of JIT is to improve a company’s return on investment by reducing non-essential costs.

Some competing inventory management systems exist, including short-cycle manufacturing (SCM), continuous-flow manufacturing (CFM) and demand-flow manufacturing (DFM).

The JIT inventory system represents a shift away from the older “just-in-case” strategy, in which producers carried much larger inventories of stock and raw goods, in case they needed to produce more units because of higher demand.

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