Just In Time
|Just-in-time inventory system is designed to ensure that materials or supplies arrive at a facility just when they are needed so that storage and holding costs are minimized. The just-in-time system requires considerable cooperation between the supplier and the customer. The customer must specify what will be needed, when, and in what amounts. The supplier must be sure that the right supplies arrive at the agreed-on time and location.|
JIT is an inventory strategy implemented to improve the return on investment of a business by reducing in-process inventory and its associated costs. The process is driven by a series of signals, or Kanban, that tell production processes when to make the next part. When implemented correctly, JIT can lead to dramatic improvements in a manufacturing organization's return on investment, quality, and efficiency.
New stock is ordered when stock drops to the re-order level. This saves warehouse space and costs. However, one drawback of the JIT system is that the re-order level is determined by historical demand.