JUST IN TIME (JIT)

NURHANIS AINA BINTI MOHAMED NAIM

2017608172
AC1105C
 INTRODUCTION

• The just-in-time (JIT) inventory system) is a

management strategy that aligns raw-material orders
from suppliers directly with production schedules.
• Companies apply this inventory strategy to increase
efficiency and decrease waste by receiving goods
only as they need them for the production process,
which reduces inventory costs.
• This method requires producers to forecast demand
accurately.
JUST IN TIME PURCHASING

• Just-in-time purchasing (JIT purchasing) is a cost

accounting purchasing strategy.
• You purchase goods so that they’re delivered just as
DEFINITION they’re needed to meet customer demand.
• With JIT, when you get customer orders, you plan
purchases. You purchase the minimum number of items
to meet customer demand.

• The goal of JIT purchasing is to reduce the carrying cost

of inventory.
GOAL • Less inventory on hand means you pay less in storage
and insurance costs.
• JIT also requires less cash in the short term.
 Purchasing also must ensure that high-quality
products are provided on time, at a reasonable
JUST IN TIME PURCHASING
price.

A comparison of critical elements associated with JIT

The function of purchasing is to provide a firm with
purchasing and traditional purchasing approaches
component parts and raw materials. follows:

REDUCTION IN ORDER COSTS

OPEN ORDER
RECEIVING RECEIVING
NEGOTIATION STATUS EXPENDING TRANSPORTATION
COUNT INSPECTION
PAPERWORK

TRADISIONAL APPROACH

NEGOTIATION TRANSPORTATION

JIT APPROACH
JUST IN TIME PURCHASING BENEFIT

• By using technology can aggressively decrease

ordering and carrying costs.
• Technology give chance to create and approve
TECHNOLOGY purchase orders, upgrade inventory records, and pay
for inventory electronically.
• Technology also allows many firms to have access to
real-time inventory quantities

• By having a contract long-term with a supplier, it lock in

an inventory price and the amounts to be purchased
LONG-TERM over time.
CONTRACTS • Eliminate price fluctuations, that makes planning easier.
• Able to secure discounts by entering into a long-term
contract.
JUST IN TIME PURCHASING RISK

•Purchasing allows you to carry fewer inventory items. Some of

carrying costs may be fixed.
•If carry less inventory, it won’t need as much storage. But if have a
lease on storage space, we’re paying the same amount for storage
until the lease ends.
CARRYING COST •JIT purchasing means that by spread the same lease cost over fewer
units in inventory. The carrying cost per unit increases.

• If place smaller orders more frequently, supplier may

need to increase the cost per order to cover their costs.
• For example, if you change from 5 orders a month to
50, the supplier may need to add some fixed costs.
ORDERING COST • The fixed cost might include more staff or an upgraded
computer system to process so many more orders.
JUST IN TIME PRODUCTION

DEFINITION

• Just-in-time (JIT) manufacturing, also known as just-in-

time production or the Toyota Production System (TPS),
was first developed and perfected within the Toyota
manufacturing plants by Taiichi Ohno.
• A methodology aimed primarily at reducing cycle times
of various activities within production system as well as
response times from suppliers and to customers.
JUST IN TIME PRODUCTION BENEFIT

• With JIT you have a faster turnaround of stock, in

which you do not need much warehouse or
REDUCED storage space to store goods.
SPACE NEEDED • This will ultimately reduce the amount of storage
an organization will need to rent or buy, freeing
up funds for other parts of the business.

• JIT inventory management is an ideal

methodology for small production facilities that
do not have the funds needed in order to
SMALLER
purchase huge amounts of stock at once.
INVESTMENTS
• Ordering stock when it’s needed enables you to
maintain a healthy and smooth cash flow.
JUST IN TIME PRODUCTION RISK

• Having to rely on the timelessness of suppliers for

each order puts a frim at risk of delaying firm’s
customers’ receipt of goods.
LACK OF • If the firm are unable to meet consumer
CONTROL OVER expectations, then they could take their business
THE TIME FRAME elsewhere.

• With JIT manufacturing, a firm does not carry as much

stock.
• This is because a firm base firm’s stock off of demand
forecast.
RISK OF • This is one of the most common issues with manufacturing
RUNNING OUT that utilize methodologies such as JIT and lean.
OF STOCK