JIT (Just-In-Time)

Question 1

what is JIT (Just-In-Time)

Answer 1

the process of ordering supplies only when they are either required for production or when an order is placed by a customer.

Question 2

advantages of JIT

Answer 2

-allows production to be lean (ie. there is no wastage as all inventory is used up)
-No money is tied up in inventory improving cash flow and working capital
-No warehouse is required, saving costs
-The business is more responsive to changing external factors

Question 3

disadvantages of JIT

Answer 3

-Relies on a good infrastructure between the business and suppliers (eg. roads)
-if deliveries are late then the business will face the negative consequences of understocking
-no room for error in production
-Require excellent relationships with suppliers to work effectively which can take time to develop