Just-in-Time

 The cost of buying, storing, and moving inventory can be significant for companies. To
reduce inventory costs, many companies use a just-in-time management system.
Companies with JIT management systems buy raw materials and complete finished
goods just in time for delivery to customers
 In traditional manufacturing systems, raw materials are ordered in large quantities to
obtain volume discounts and to have surplus raw materials on hand in case some of the
raw materials turn out to be defective. Under the JIT management system, the
manufacturer contract with suppliers to deliver small quantities of raw materials as
needed
 Deliveries are small and frequent, and the suppliers must guarantee a close-to zero defect
rate. Because of zero defect rate add quick delivery, manufacturers can hold small
number of raw materials in the warehouse and still be assured they won’t run out of raw
materials and have to shut down production. For JIT management to work, relationship
with suppliers of raw materials must be very reliable to ensure that the company has raw
materials just when they are needed to manufacture products.
 Because products are made as ordered, finished goods inventories are kept to a minimal
amount. This reduces the company’s cost to store and insure inventory. It also allows the
company to minimize the resources it has invested in raw materials and finished goods
inventories.
 Just-in-Time is a system of inventory management with an approach to have zero
inventories in stores. According to this approach, materials should only be purchased
when it is actually required for production.
 Just- In-Time costing is a costing system that simplifies accounting for companies.
 Tracks cost after the units are completed
 Combines Raw Materials Inventory and work-in-process inventory into Raw and In-
process Inventory.
 The conversion costs account combines direct labour and manufacturing overhead costs.

 Just-in-time is based on two principles

 Produce goods only when it is required
 The product should be delivered to customers at the time only when they want.
It is also known as ‘ Demand pull’ or pull through system of production. In this system,
production process actually starts after the order for the products is received. Based on the
demand, production process starts and the requirement for raw materials us sent to the purchase
department for purchase.