A just-in-time inventory (JIT) system keeps inventory levels low by only producing for specific customer orders. The result is a large reduction in the inventory investment and scrap costs, though a high level of coordination is required. Here, we’ll tell you everything you need to know about JIT, so you can determine whether it’s worth for your business.
What is a JIT system?
JIT means “just in time.” It’s an inventory control method used by businesses to simplify stock-outs and expedite purchases, plus minimize material scrap. JIT keeps inventory levels low by only producing for specific customer orders.
It’s important to point out that a JIT system for manufacturing will not be the same as that for retail. The idea behind these systems is that, if an employee shows up to work with materials they don’t need, they will lose their job. For example, if a production schedule has a need for 30 widgets but only 15 are currently in stock, the employee who is showing up to work with that 15 will be out of a job.
Benefits of a JIT system
You can cut inventory and scrap by half.
Fewer orders mean fewer items to create, and less waste, making your business more productive.
The arrangement keeps your stock levels low, reducing the chance that product gets out of date.
If you have a larger JIT system, you can produce less product than you would if you had the traditional method, such as the “4 wall” approach. This makes your inventory look better.
It’s easy to get started.
Drawbacks of a JIT system
A true JIT system requires thorough coordination between both the company that produces the item and the one that uses the item.
The process must also allow for the shipping of the product within a short period of time so that the buyer doesn’t run out of it.
A traditional inventory system is useful because it’s quick and simple to enter the right data for each of your clients and potential clients.
You don’t have to worry about clients’ individual needs and requirements and must only provide the right products in the right quantities for your customer.
It saves you time and reduces your sales costs.
JIT is not as efficient since it requires people to constantly monitor the output.
In the next blog, we’ll learn how to implement a JIT in your business.
