Warehouse Management

What is Just in Time Inventory?

June 4, 2024

Let's dive right into the latest and greatest in inventory management and start with one of the best ones: the Just-In-Time (JIT) inventory management strategy.

What is Just in Time Inventory

What is JIT Inventory Management?

Just-In-Time (JIT) is an inventory-management methodology that will ensure that you receive goods exactly when you need them, minimizing your inventory costs and waste. It originated in Japan, where it was implemented by the automobile company Toyota in the 1950s. Initially, it encompassed many of the principles of continuous improvement or kaizen. Among the key ideas of kaizen, there are those that speak of maintaining the minimum stock levels possible, relying on a fast-paced delivery system of materials from suppliers. The main idea is simple: as much as possible, you would like to receive new stock when and only when you need it.

The Benefits of JIT: Why It's a Game-Changer

  • Cost Reduction
    One of its main advantages is the significant reduction of your inventory-holding costs. Think of your financial space: how much would you free up if your warehouses were empty, and all your money was now available for other purposes?

  • Waste Minimisation
    JIT reduces waste in your production by minimizing products that will remain unsold or that will become obsolete. This reduces the use of resources that otherwise might end up being wasted.

  • Enhanced Efficiency
    JIT makes your production more efficient; materials will arrive exactly when they are needed. Thus, with good planning, you will minimize the time goods spend stuck in storage.

  • Improved Quality Control
    Receiving the materials just in time allows you to immediately check their quality, ensuring that only the best materials make it to your production. This should decrease the risk of defective products reaching your customers.

How Does JIT Work?

To implement a Just-In-Time production process, you will need a well-planned strategy, together with reliable suppliers. Here are the steps:

  • Reliable Suppliers
    Work with reliable suppliers, those who can deliver faster and be able to do so at any time. Reliability is a key component that underpins a JIT system: if you do not receive materials when you expected them, your production schedule would essentially collapse.

  • Accurate Demand Forecasting
    Make accurate forecasts of customer demand. Ideally, this is where you would want to use sophisticated software tools that can forecast your expected demand accurately; the more accurate your forecasting, the easier it will be for you to implement a JIT system.

  • Streamlined Production Processes
    Put your production process in order, using as few steps as possible; the fewer, the better. This way, you will ensure that your process follows a fast-paced, simple flow of deliveries.

  • Flexible Workforce
    Train your employees to be flexible and fast. In this sense, a flexible workforce enables you to react to sudden changes in your production schedule, such as sudden increases in demand.

Potential Challenges of JIT

The biggest risk of JIT is disruption to your supply chain. Since everything works on a delivery-just-in-time schedule, the slightest delay from a supplier can delay your production for a long time and with significant inventory costs. You can manage this risk by having alternative suppliers and predefined contingency plans to counteract supply chain hiccups.

Is JIT Right for Your Business?

JIT is a particularly good business strategy when demand is predictable and your supply chain is very reliable. However, it takes a dedicated and organized management strategy to implement it.

Conclusion: Embrace the JIT Philosophy

Just-In-Time inventory management is a fantastic methodology that can transform your business, allowing you to optimize your stock levels to their maximum, reduce costs as much as possible, and increase efficiency.

When you embrace JIT, you arrive at any demand coming from the market. Think again about your stock levels and evaluate your supply chain capability. Are you ready for a more efficient and streamlined future?