From the course: Foundations of Working Capital Management
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Just-in-time inventory (JIT)
From the course: Foundations of Working Capital Management
Just-in-time inventory (JIT)
- In a manufacturing setting, just-in-time, JIT, is a process by which only enough materials to satisfy immediate production are shipped to the production site. As the name implies, materials are delivered just in time for production and goods are manufactured just in time to meet customers' needs. The results of JIT implementation are often dramatic and wide ranging. Manufacturing time goes down, quality goes up, and on-time delivery to customers increases. Benefits such as these occur because companies that have adopted JIT have been able to avoid buildups of parts and materials and still ensure a smooth and orderly flow of goods to customers. Using a JIT system, nothing is produced until customers demand it. At all stages, inventories are eliminated or reduced to the lowest possible level. Obviously then, progress towards successful implementation of JIT is inventory related. However, inventory reduction is not…
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