The reduced need for space is a primary way to reduce costs and other bloat that harries supply chains. ![]() That means less money spent on acquiring, staffing, and upkeeping multiple facilities. Less inventory kept in holding means less need for space. JIT solves this problem and frees up money that would otherwise be tied up in overstock inventory. It ties up a business’s finances in things it can’t use, takes up space, and might not see a return for a long time. Even if it does get used, having stock sitting around, already purchased, and waiting for an order interrupts cash flow. ![]() Less Dead StockĮxpenses on stock that doesn’t get used are a drain on finances. By the end of the run, there won’t be any inventory left over to handle or write off. It turns product-run planning into an exact science, and it aligns spending on material with how many orders are expected. Only holding enough inventory for what they currently need to produce enables businesses to control the size of a run of products. JIT, on the other hand, results in several cost-cutting advantages for a business. Holding more inventory than you need costs money because you’re spending before you’ve received an order, you need extra space to store it, and holding extra inventory can become a tax liability. ![]() The primary problem that JIT solves is overstocking inventory, which is an expensive way to manage a supply chain. These chains can be long and complex, but the idea is that when an order is placed, internal requests for precisely the materials and parts necessary to complete the order move down the chain. JIT is an extremely advantageous, but delicate, strategy used by manufacturers and other types of industries that rely on chains of production in which raw materials are turned into component parts, and those parts are transported to facilities where they’re assembled into a finished product. Advantages of Just In Time Inventory Management It only took a few years for news of this process to start making its way overseas, and JIT was soon adopted by Western manufacturing industries. Just in Time was designed to make up for issues, such as a lack of space for additional factories and large warehouse storage, an economy still struggling to recover from World War II, and few natural resources. This necessity was born out of Japan’s post-war economic situation. Using JIT allowed them to do away with the need to hold excess stock, and it also allowed them to use a production facility for more than one model at a time, which further streamlined operations. The company needed to cut waste and make more efficient use of the limited natural resources at their disposal. Just in Time, as a concept and process, was arguably created by Toyota in Japan during the 1970s. The History of JIT Inventory and Production ![]() The idea is that the entire production chain runs efficiently enough that only the exact quantity of materials to complete the current orders is moving through the inventory system at one time. It’s a strategy to deliver materials and inventory when, and only when, they’re needed/ordered, without holding excess. This method of management was developed for companies looking to reduce inventory-related expenses and wasteful practices. Just in Time (JIT) inventory management was conceptualized in an effort to create a leaner, more efficient, and less expensive chain of production.
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