Chapter 8: The Just-in-Time (JIT) Method
Table of Contents
The just-in-time (JIT) inventory strategy is one of the most famous modern inventory management techniques. It’s a production management philosophy developed and popularized by Toyota focused on eliminating waste, inconsistencies and unnecessary requirements. While developed as a production method, it has broad applications for manufacturing plants, warehouses and any company involved in inventory management.
What Is the Just-in-Time Method for Inventory Management?
The JIT method is one of the most popular inventory management techniques in the supply chain sector. It’s based on the principle that inventory is inherently costly, taking up time, money and space, and that it should only arrive just in time to meet customer demands. A common goal of inventory management is to have items in the right place at the right time in the right quantity — in other words, just in time, no sooner nor later.
Using the JIT approach, a business lowers the volume and quantity of inventory on hand. It usually involves ordering small amounts of inventory they know they can move quickly and then reordering from suppliers regularly. This can have immense cost savings because they do not invest in unnecessary inventory or spend more resources managing items in store.
This method is also called a pull inventory system because manufacturers and distributors wait for customer demand to “pull” inventory through the supply chain. They make new purchases just days before they’re needed for resale or distribution, meaning inventory spends very little time in storage. It comes with the inherent risk of stockouts or delays because a supplier lead time delay can result in inventory arriving late.
Another risk, particularly among manufacturers who use JIT, is that defects cut into the supply. Since manufacturers only order raw materials for jobs as needed, they may not have the excess stock to account for assembly errors. While JIT offers many benefits, increased risk in the supply chain has made some supply chain leaders rethink the strategy.
Advantages of JIT Inventory Management
The primary benefits of JIT inventory management are cost and space savings. Cost savings from JIT inventory management include:
- Preventing over-production and overstocking.
- Reducing investments tied up in non-liquid stock and improving cash flow.
- Reducing staffing needs for inventory management, which lowers wage and salary expenses.
- Lowering warehouse costs by owning or renting a smaller storage facility.
- Reducing the risk of inventory becoming damaged, obsolete or stolen while in storage.
Space savings provide other advantages. With a smaller warehouse, you’ll save time managing inventory. You’ll also reduce movement waste among warehouse staff who do not have to travel long distances to collect, count or move inventory. Saving space and movement can also improve worker satisfaction and reduce the chances of muscle strains and other injuries.
How Finale Inventory Helps You Manage JIT Inventory
Finale Inventory is a time-saving inventory management tool that can help you move inventory through your supply chain just in time. With advanced 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. By integrating 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.
Our solution also supports integration with a shipping manager to allow you to schedule customer shipments based on your available stock. This feature lets you manage drop shipping, so you can order inventory and have it delivered directly to customers. Contact our team to schedule a one-on-one demo to learn how we can support your JIT inventory system.