Cost Accounting

What is Just-in-Time Inventory System

Just-in-Time Inventory System

JIT inventory system is a method of stock control that involves a systematic approach to keeping accurate records of all the stock and inventory.

A just-in-time (JIT) inventory system ensures that raw materials arrive at the business precisely when needed for manufacturing.

It also helps in keeping track of every product in the inventory so as to ensure accurate delivery at the right time. JIT systems allow businesses to track everything, from the products bought to the delivery location.

JIT entails lowering the number of suppliers, simplifying the procurement process, reorganising the factory layout, and exercising adequate control over overproduction.

The suppliers should be few and well-chosen. The relationship with them should be close and well-regulated so that they supply defect-free, high-quality inputs. This ensures the manufacture of high-quality products as well as a reduction in pre-storage inspection costs.

Conditions for Effectiveness of Just-in-Time Inventory System

  • As already stated, JIT ensures tuning of the consumption of raw material with its delivery time. If this is the case, maintaining safety stocks can be avoided both at the suppliers and the buyer’s end.
  • For JIT to be effective, the supplier must be taught how to work together. They must, of course, be nearby to guarantee that the stuff is delivered on time. In many instances, the supplier keeps a warehouse on the buyer’s property.
  • Procedures must be developed to decrease the amount of time spent moving, to minimise the amount of inventory built up along the moving line. The layout of the plant should be planned so that the distance over which the materials must be transported is kept to a minimum.
  • The material delivery process should also be improved. However, the most important feature is the need to revamp the entire organisational structure to pursue the common goal of making JIT a success.
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