What Is Just-In-Time Inventory Management?

What Is Just-In-Time Inventory Management?

reduce inventory

Finale Inventory is a time-saving inventory management tool that can help you move inventory through your supply chain just in time. Withadvanced demand forecasting capabilities, you can use the JIT approach along with a small amount of safety stock. This lets you ensure deliveries arrive just in time while also minimizing the risk of stockouts. Byintegrating Finale Inventory with your sales channels, you’ll gain a centralized database of all current sales obligations. This lets you schedule production or supply deliveries based on the sales you’ve already made.

MRP thus plays the role of planning adviser to the cell, setting the budget level in terms of the number of cards but not specifying the “expenditure” or release of the cards. The simple fact is that there is no need to choose between push or pull. These methods are not mutually exclusive, and each has its pros and cons.


If any other orders come in during that production time, the same steps are followed. This keeps the production chain moving quickly and keeps excess inventory from building up in your warehouse. These deliveries can be daily or even hourly as needed to keep the production or sales process going and keeping up with demand. Fishbowl Inventory Review 2023 Fishbowl is designed for manufacturing and warehouse inventory management. Large product orders are a bit of a gamble, since you have no guarantee that you’ll actually sell every item on your shelves.

Definition of Just-in-time Inventory Management

Just-in-time inventory systems are a great way to reduce costs and improve efficiency. A JIT strategy can not only lower your inventory storage expenses but also allow you to spend less at a time on your inventory—freeing up valuable capital to spend on other business expenses. Plus, with fewer items on hand, you lower the risk of overinvesting in product you can’t sell. Let’s say you’re running a manufacturing business, and you’ve currently got so much raw material on hand that it’s taking up space on your shop floor and slowing down the production process. To solve this problem, you might opt to use a JIT inventory management technique, like the Kanban system. Just-in-time inventory management reduces waste, improves cash flow, increases flexibility, optimizes human resources and encourages team empowerment.

By refusing to carry safety stock as a contingency, you’re placing a lot of faith on the reliability of your manufacturers, shippers, and fulfillers. This doesn’t necessarily make JIT any better or worse than other inventory management strategies, but it does mean that you have to be careful in how you implement JIT. JIT inventory management can eliminate bottlenecks and delays across the entire production cycle, by reducing product defects and automating processes. Shorter production cycles enable on-time deliveries and increase customer satisfaction.

It offers a centralized dashboard with drop-down menus so you can access any part of your inventory management system from a single screen, saving you time. In addition, customizable reporting allows you to access the information you need to improve your business and make data-driven decisions. These systems send SMS and email alerts to notify of various crucial business aspects.

Who Invented JIT Inventory Management?

This system typically relies on long-standing contracts within the local supply chain to deliver the different parts it needs to assemble an automobile. The components required to manufacture the cars arrive just as they are needed. Under JIT, each step in the production process is triggered by a notification, or kanban, that is provided to it by the downstream workstation that is a request for a specific quantity of an item. A workstation is only allowed to produce the exact amount of the authorization. If the downstream workstation issues no kanban, then the workstation will remain idle until notified. Thus, the pull concept massively reduces the amount of work-in-process inventory.

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In a push system, the caterer estimates how many steaks or lobsters are likely to be ordered in any given week. He reckons roughly how long it takes to broil a steak or serve a party of four; he figures out how many meals he can accommodate and commits to buying what he needs in advance. He can account for the special event that he knows is scheduled to take place in midweek.

Just in Time Inventory System – Explained

The JIT method of inventory control involves creating, storing and tracking enough orders to supply demand. JIT differs from other inventory strategies in that businesses don’t make and hold excess inventory in anticipation of future orders. The Just in Time Inventory management approach reduces storage and insurance costs, as well as the cost of liquidating or disposing of excess inventory.

  • While a just-in-time system is highly efficient and frees up capital, it isn’t ideal due to the uncertainties of business.
  • The just-in-time philosophy was initially known as the “Toyota Production System” or just-in-time manufacturing.
  • Inventory management systems that can support JIT give decision-makers the right tools to manage their inventory in an optimal way that generates higher profits.
  • They make new purchases just days before they’re needed for resale or distribution, meaning inventory spends very little time in storage.
  • So if your supplier charges extra for your order due to a recent natural disaster or national holiday, it’ll eat into your bottom line.
  • Hence, it affects all your commercial goals with you having limited control.

Eiji Toyoda and Taiichi Ohno, Japanese industrial engineers, created the system when Toyota Motor Company 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. This system’s basic underlying idea is to minimize the consumption of resources that add no value to a product.

This affects products with relatively short shelf life or may go out of style quickly. There was no reason to hold back, so they favored large-scale mass production. In this article, we’re going to look into the world of just-in-time inventory.

The birth of the Just-in-https://1investing.in/ philosophy may have come out from a necessity to survive. However, the concept had proved to be so effective that the Japanese identified it as an essential foundation to implement a truly lean process. Transaction costs would be comparatively high depending upon the frequency of transactions. Little room for mistakes, making re-work difficult in practice, as inventory is kept to a minimum level. JIT emphasizes on getting it right the first time and therefore rework, and inspection cost is minimized.

In this article, we are going to decode the history, technicalities, pros, and cons of this industrial marvel. At the end of the article, I also expect that our readers will be able to decide whether to implement it in their firms or not—dive in deeper to explore more. When implemented correctly, JIT inventory management with a just-in-case component can mean significant savings and greater flexibility, allowing for faster growth. Check with your accountant and SCORE mentor to determine if JIT is right for your business. Given the volatility of today’s supply chain, finding other resources is vital if and when your regular suppliers can’t fulfill orders. Leaders are enabled to make better, faster and more precise decisions that impact the entire company.

It then projects demand, the time it would take to meet it, and the materials needed. Establishing a strong relationship with reliable and efficient suppliers with the ability to source and deliver small batches of raw materials on time. When inventory lot sizes are so small , it makes more sense to place them in very small transport containers and move them to the next workstation by a conveyor belt. This eliminates a great deal of material handling personnel and equipment. In addition, management is more likely to move the workstations closer together, to reduce the amount of travel time on the conveyors. This, in turn, reduces the amount of work-in-process inventory traveling between the work stations.


The leather design studio you see in this article uses just-in-work in process stock to full effect. They manufacture high-end leather goods like bags, purses, wallets, and accessories. These are artisan goods, and so their raw materials are expensive. The business would be unsustainable if they made loads of stock in advance. It requires minimal up-front expenditure, low inventory levels, and quick-moving inventory.

Since you don’t have time to inspect goods every time they arrive, JIT suppliers are usually certified for quality. This means you can trust the materials that arrive are up to standard. Top 7 Free Inventory Management Systems for 2023 If an inventory management subscription just isn’t in the cards for your business, here are…


A variety of factors contribute to the cost of JIT’s local sourcing. It’s possible that a company’s desire for dependability is affecting its bottom line. Many organisations have embraced just-in-time inventories in order to save money and remain competitive in the marketplace. Businesses must choose an intelligent platform to address rising global supply chain needs when looking for the right… Good logistics is all about eliminating waste and promoting efficiency. These techniques were more or less suitable for managing retail operations, though even in those settings there were problems like the McDonald’s franchise on the day of a game.

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