Just in Time (JIT) is a ‘pull’ system which was originally designed for use in the manufacturing environment as a means of producing or delivering the goods just when they are needed by the customer. Demand-pull enables an organisation to produce only what is required, in the correct quantity and at the correct time.
The JIT philosophy is now employed as an inventory strategy to increase efficiency and decrease waste by receiving goods only as they are needed and thereby reducing inventory costs.
JIT means that inventory levels of RMs, WiP and FGs can be kept to a minimum. This requires a carefully planned scheduling and flow of resources throughout the process.
An example of JIT inventory is an automotive manufacturing organisation. They hold very little inventory and rely heavily on the supply chain to ensure that the RMs required to build the product are delivered as and when they are required at the point of use.
However, as with any system, there are risks. The key risk of JIT management is that it simply pushes inventory up or down the supply chain. The automotive sector sees this a lot with suppliers holding additional buffer stocks and then stockpiles of finished vehicles.