A Business Encyclopedia

Just-in-Time System

Definition: The Just-in-Time or JIT is an inventory management system wherein the material, or the products are produced and acquired just a few hours before they are put to use. The Just-in-time system is adopted by the firms, to reduce the unnecessary burden of inventory management, in case the demand is less than the inventory raised.

The objective of Just-in-time is to increase the inventory turnover and reduce the holding cost and any other costs associated with it. This concept is again popularized by the Japanese firms, who place an order for the material, the same day the product is to be produced.

Thus, the JIT system eliminates the necessity to carry large inventories and incur huge carrying cost and other related costs to the manufacturer. To avail the benefits of this method, there should be a proper synchronization between the delivery of material and the manufacturing cycle. The JIT requires a proper understanding between the manufacturer and the supplier in terms of the delivery and the quality of the material. In the case of any misunderstanding, the whole production process may come to a halt.

The success of just-in-time depends on how you manage your suppliers. A lot of pressure is exerted on them, as they have to be ready with an adequate quality material to supply it to the manufacturer, as the need arises.

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