Just in Time inventory is a specific type of inventory that keeps inventory levels low by only producing for specific customer orders. The result of this type of inventory is a large reduction in inventory investment and scrap costs. High levels of organization are required to pull this off as just in time inventory takes special coordination and understanding forecasting to create the orders required without massive inventory stored. With just in time inventory there are advantages and disadvantages
Let’s look at the advantages first with just in time inventory.
Minimal amounts of inventory, no inventory turnover and remaining stock becomes obsolete.
You can change production and production type to meet customer demands
Minimized warehouse space needed keeping overhead costs down
Mistakes with production can be easily spotted and corrected
Now let’s look at the disadvantages in just in time inventory.
The product does not get produced on time for the consumer and therefore could impact the production process.
Failed shipments on time or reasons for inventory not being received I time could take production down.
If a large order is created and the inventory is not available, then this could lead to long wait times for the consumer leaving them dissatisfied.
Just in time inventory has a different approach and can be extremely successful in many businesses and in others it would fail dramatically.
1. What factors should be present for the success of the JIT?