Just-In-Time

Question 1

What is Just-In-Time (JIT)?

Answer 1

Just-in-time is an alternative approach to inventory management. JIT is a process of ordering suppliers only when they are either required for production or when an order is placed by a customer.

Question 2

What are the advantages of just-in-time?

Answer 2

• Allows production to be lean, e.g. there is no wastage as all inventory is used for production.
• 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

What are the disadvantages of just-in-time?

Answer 3

• If deliveries are late then the business will face the negative consequences of understocking.
• Requires excellent relationships with suppliers to work effectively, which can take time to develop.
• Relies on good infrastructure between the business and supplies, e.g. roads.
• No room for error in production.