JIT is an inventory strategy that aims to have goods needed or required for a company at the right time, therefore reducing inventory costs and wastes without impacting the customer supply. JIT inventory strategy uses signals, or Kanban, which automatically produces the renewal of inventory or goods, cut down on inventory or goods ordering in anticipation of decrease in requirements, and improve financial outputs of the company. The basic components of the JIT strategy include design flow, total quality management, waste elimination, vendor management, and product and process design.
There are a lot of benefits in incorporating Just-in-time in a company. Just-in-time makes production operations more efficient, cost effective, increased importance on supplier relationship, flow from warehouse to shelves improve, which lead to customer responsive. Just In Time appeals to many companies because it helps prevent manufacturers from being stuck with inventory that could become obsolete. Just-in-time was originally developed and justified based on cost reduction and quality improvement dimensions. Now, more and more companies view Just-in-time as providing an approach to achieving excellence in the elimination of waste which does not add value to the product, as well as making the company more alert or responsive to short-term customer demands. With this being said, Just-in-time results in a lower costs because of capital tied up in materials or goods. This allows companies to optimize their operations and perhaps invest capital for new opportunities. However, Just-in-time is also open to a number of risks such as an increase in ordering and administration costs. Production may be stopped if supplies are delayed; this could be due to weather conditions, an accident, or even worse a strike. Sales may be lost if the company is not meeting customer demands, and depending on the productivity of the supplier. Thus, the company is not guaranteed success or to achieve the benefits of Jus-in-time, and must be careful to ensure that this is the appropriate condition for the transition prior to beginning or adopting Just-in-time.
Just-In-Time inventory has come a long way throughout the years improving the efficiency of acquiring goods in many companies. Competition in the business world