About JIT or Just In Time
JIT, or Just In time, is an inventory management formulation where suppliers take goods only when needed. The main goal of this method is to minimise inventory costs and boost inventory turnover. In addition, JIT or Just In Time imposes careful planning of the whole supply chain and the use of superior software to run the entire process to make delivery, increasing efficiency and eliminating the error rate in monitoring each process.
Most Significant Effects of a JIT or Just-In-Time Inventory Control System:
- Diminishes Wastage of Stock-
A JIT or Just-In-Time strategy prevents overproduction, which occurs when the allotment of an item on the market exceeds demand and leads to an increase in unsold stocks or dead inventory, increasing waste and depleted storage space. You only order what you need in a fair time system, so there is no risk of compiling unusable stock.
- Lower Your Warehouse Maintenance Cost-
Warehousing is costly, and surplus inventory can double your maintenance costs. For example, if a company does not pay for raw materials until an order is received, it has enabled the company to maintain minimal inventory, reduce costs, and quickly adapt to changes in the market without worrying about the existing stock.
- Local Sourcing-
Because Just In Time does not require you to start production until an order is placed, you must source your raw materials locally as they will be transmitted to your unit much earlier. This increases the need for many corresponding firms to operate in parallel, improving employment rates in that particular population group.
- Nominal Investments-
In a JIT model, only crucial inventory is procured and therefore, low operating capital is necessary for financial acquisitions. Therefore, the organisation’s ROI would be high due to the lower inventory level. Just-in-time models use the “right the first time” concept.
How does JIT or Just In Time work?
Just in the time cycle, if we try to analyse how Justintime works, we have the following mechanism to observe. First, a potential customer places an order with the manufacturer to deliver him goods. Then, when the manufacturer accepts the order, he places an order with his supplier. Then provide the manufacturer with the necessary materials to fulfil the customer’s order. The manufacturer then receives the raw materials, assembles them and sells them to the customer.
Disadvantages of JIT or Just In Time
The just-in-time model recoups a lot of costs for the employing companies, but it also has some disadvantages:
1. Minimal and only based on original customer orders.
2. The model depends on the performance and punctuality of suppliers, which are difficult to ensure; in addition, the manufacturer requires to cover a sudden surge in raw material prices as they can’t wait to place orders at better prices.
3. Since the JIT model requires many round trips between supplier, manufacturer and customer, it can harm the environment through excessive consumption of fossil fuels and packaging.
4. In the event of disruptions, a JIT model can significantly impact the business. Since there is no surplus stock, the sale can be stopped.
5. A just-in-time mechanism must be precisely looked at, controlled and organised, which is troublesome when done manually.
6. Software should be approved as it makes the whole technique more manageable. However, even when good software helps you, it can be a bit tricky and expensive to introduce and train a new software system.
Frequently Asked Questions
✅ What does JIT imply?
✅ What are the benefits of JIT?
✅ Who uses JIT?
Some of the successful companies using JIT include Toyota, Apple and McDonald’s.
