What is the concept of Just-In-Time (JIT) inventory?

The concept of Just-In-Time (JIT) inventory centers on the principle of aligning production schedules closely with customer demand. This means that materials and products are produced or received only as they are needed in the production process, which minimizes the amount of inventory held at any given time. This approach allows companies to reduce costs associated with storage, handling, and waste of unsold goods, thereby increasing efficiency.

By synchronizing orders directly with production schedules, JIT encourages manufacturers to invest in solid relationships with suppliers, ensuring that raw materials and components are delivered exactly when needed. This can help improve cash flow and reduce the risks associated with holding large inventories, such as deterioration, obsolescence, and excess costs.

This strategic alignment enables a smoother production process that is more responsive to changes in customer demand, ultimately enhancing the overall agility of the organization in the supply chain.