Just-in-Time (JIT) Inventory

Just-in-Time (JIT) is a form of inventory management that requires working

closely with suppliers so that raw materials arrive as production is scheduled to begin,
but no sooner. The goal is to have the minimum amount of inventory on hand to meet
demand.

YouTube Video: What is Just-in-Time Inventory Management

https://www.youtube.com/watch?v=zCTmN17ZDek

History of Just-in-Time Inventory Management

The just-in-time philosophy was initially known as the “Toyota Production

System” (TPS) or just-in-time manufacturing. The approach was developed in post-
World War II Japan, when car manufacturing faced shortages and had to minimize
resource consumption to survive and remain competitive.

Eiji Toyoda and Taiichi Ohno, Japanese industrial engineers, created the system
when Toyota Motor Company (TMC) recognized that U.S. carmakers of that era were
outpacing their Japanese counterparts. After some testing, they established the Toyota
production system and closed the gap between 1945 and 1970. JIT has continued to
grow as a practice worldwide. This system’s basic underlying idea is to minimize the
consumption of resources that add no value to a product.

How Does Just-in-Time Inventory Management Work?

JIT inventory management ensures that stock arrives as it is needed for

production or to meet consumer demand, but no sooner. The goal is to eliminate waste
and increase the efficiency of your operations. Since the main objective is often quality
and not the lowest price, JIT requires long-term contracts with reliable suppliers.
Steps in Cycle of Continuous Improvement for JIT Inventory

1. Design
2. Manage
3. Pull
4. Establish
5. Fine-tune
6. Build
7. Refine
8. Review

Advantages of JIT Inventory Management

1. Waste Reduction
2. Improved Efficiency
3. Greater Productivity
4. Smoother Production Flow
5. Lower Costs
6. Improve Quality

Disadvantages of Just-in-Time Inventory Techniques

JIT inventory management relies heavily on precise forecasting and strong relationships
with key suppliers. When something goes wrong with either of those, that’s a problem
because there are no backup options in place.

Potential Risks of Just-in-Time Inventory

1. Lack of Preparedness
2. Supply Chain Disruptions
3. Missed Opportunities
4. Unexpected Price Changes
5. Overreliance on Forecasts
 6. Order Issues
7. Local Sourcing Costs
8. Time Pressure
9. Undisciplined Staff
10. Supplier Dependence
11. Acts of Nature

Questions to Ask If You Are Considering JIT Inventory Management

1. Can my products be manufactured or supplied quickly?

2. Do I have enough confidence in my sales forecast to accurately depict fluctuating
consumer demand, including seasonality?
3. Do I have enough flexibility in my supply chain and manufacturing to adapt to
disruptions like supplier disruptions or natural disasters?
4. Are my suppliers reliable enough to deliver on time, every time? Is my order
fulfillment system efficient enough to get orders through on time even when they
have to compensate for supply chain delays?
5. Is my workforce committed and up to the task?
6. Does my inventory management software support JIT inventory management?

Why Use JIT Inventory Management?

Companies often adopt JIT inventory management as a cost-cutting strategy. When

implemented correctly, JIT can create more value than traditional methods that require
more extensive inventories. Learn more about inventory management controls.

KEY TAKEAWAYS

 The just-in-time (JIT) inventory system is a management strategy that minimizes

inventory and increases efficiency.
 Just-in-time manufacturing is also known as the Toyota Production System (TPS)
because the car manufacturer Toyota adopted the system in the 1970s.
 The success of the JIT production process relies on steady production, high-
quality workmanship, no machine breakdowns, and reliable suppliers.