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Supply Chain Just in TIme

The just-in-time (JIT) inventory system is a management strategy that aligns raw-material orders from suppliers directly with production schedules.

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Mudit Garg
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155 views2 pages

Supply Chain Just in TIme

The just-in-time (JIT) inventory system is a management strategy that aligns raw-material orders from suppliers directly with production schedules.

Uploaded by

Mudit Garg
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as DOCX, PDF, TXT or read online on Scribd
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What Is Just-in-Time (JIT)?

The just-in-time (JIT) inventory system is a management strategy that aligns raw-material


orders from suppliers directly with production schedules. Companies employ 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.

How Does Just-in-Time Inventory Work?

The just-in-time (JIT) inventory system minimizes inventory and increases efficiency. JIT
production systems cut inventory costs because manufacturers receive materials and parts as
they are needed for production and so do not have to pay storage costs. Manufacturers are
also not left with unwanted inventory if an order is cancelled or not fulfilled.

One example of a JIT inventory system is a car manufacturer that operates with low
inventory levels but heavily relies on its supply chain to deliver the parts it requires to build
cars, on an as-needed basis. Consequently, the manufacturer orders the parts required to
assemble the cars only after an order is received.

Pros and Cons of Just-in-Time (JIT)

JIT inventory systems have several advantages over traditional models. Production runs are
short, which means that manufacturers can quickly move from one product to another. Also,
this method reduces costs by minimizing warehouse needs. Companies also spend less money
on raw materials because they buy just enough resources to make the ordered products and no
more.2

The disadvantages of JIT inventory systems involve potential disruptions in the supply chain.
If a raw-materials supplier has a breakdown and cannot deliver the goods in a timely manner,
this could conceivably stall the entire production line. A sudden unexpected order for goods
may delay the delivery of finished products to end clients.1

Example of Just-in-Time
Famous for its JIT inventory system, Toyota Motor Corporation orders parts only when it
receives new car orders. Although the company installed this method in the 1970s,2 it took
20 years to perfect it.1

Sadly, Toyota's JIT inventory system nearly caused the company to come to a screeching halt
in February 1997, after a fire at Japanese-owned automotive parts supplier Aisin decimated
its capacity to produce P-valves for Toyota's vehicles. Because Aisin is the sole supplier of
this part, its weeks-long shutdown caused Toyota to halt production for several days. This
caused a ripple effect, where other Toyota parts suppliers likewise had to temporarily shut
down because the automaker had no need for their parts during that time period.
Consequently, this fire cost Toyota 160 billion yen in revenue.4

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