6 Key Benefits of Just-in-Time (JIT) Inventory Management

May 18, 2021

Inventory management ensures that the right amount of supply is available to meet customer demand. With the right inventory management systems and processes, the business can accurately predict and meet customer demand. Effective inventory management requires gathering and analyzing data across the supply chain including purchases, reorders, shipping, warehousing, storage, customer satisfaction, asset turnover etc. The goal is to generate the maximum profits from minimum investment in inventory without impacting the customer experience. Inventory management can help avoid problems, such as stock-outs or overstocking.

What is Just-in-time (JIT) Inventory?

Just-in-time inventory ensures that there is just the right amount of inventory to produce only what you need, when you need it. The goal is to achieve high production volumes with minimal inventory on hand, thus increasing efficiencies and eliminating wastage. Many businesses have adopted just-in-time inventory to save costs and stay competitive.

Benefits of JIT Inventory Management

Reduce Wastage

The JIT inventory management model eliminates excess inventory and overstocking. You can have low inventory levels, significantly reducing the risk of inventory going unsold and sitting unused in the warehouse. You can also minimize the losses incurred due to defective products by easily identifying and addressing defective inventory items when production volumes are low.

Improve Efficiencies

The JIT model reduces the costs of procuring, managing and storing excess raw materials and inventory. This results in a higher inventory turnover which in turn prevents inventory from sitting in your warehouse for too long and becoming obsolete. You can also receive and store deliveries in the smallest possible quantities, virtually eliminating excess raw material inventories. Local sourcing ensures that your suppliers are located near your company’s production facilities, enabling timely deliveries and reducing the need for safety stock.

Increase Productivity

JIT inventory management increases productivity by reducing the time and resources required for manufacturing. This ensures faster production and shorter production runs. You can also implement product changes quickly as there is less raw material stock. Product damage is also reduced because of having lower inventory levels.

Optimize Production

JIT inventory management can eliminate bottlenecks and delays across the entire production cycle, by reducing product defects and automating processes. Shorter production cycles enable on-time deliveries and increase customer satisfaction. JIT production scheduling ensures that jobs are scheduled exactly when they are needed, meaning that your production runs start and end just in time for shipping.

Reduce Costs

As it requires very low inventory levels, JIT inventory reduces the working capital required for inventory purchases as well as storage costs. Your business can purchase raw material only when needed, so any available cash can be better utilized by the company. Labor costs are also lower as fewer factory workers are required in JIT manufacturing as compared to full-time production.

Improve Quality

JIT inventory management involves having fewer items moving on the shop floor at any given time. This allows your management to focus on optimizing processes and building high-quality products. High-quality products with fewer defects improve customer satisfaction and reduce wastage. In the JIT manufacturing model, suppliers guarantee quality, so the deliveries go directly to production and avoid any delays due to inspection.

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