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Just in Time Inventory: Definition, Advantages & Examples

Just in Time Inventory: Definition, Advantages & Examples
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  • 0:01 Just in Time Inventory
  • 0:31 JIT Inventory Example
  • 1:10 Why Use JIT Inventory
  • 2:17 JIT Risk
  • 2:45 Lesson Summary
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Lesson Transcript
Instructor: Paul Mckinney

Paul has been in higher education for 17 years. He has a master's degree and is earning his PhD in Community College Leadership.

Just In Time (JIT) is a production and inventory control system in which materials are purchased and units are produced only as needed to meet actual customer demand.

Just in Time Inventory Definition

Just in time (JIT) inventory is a strategy to increase efficiency and decrease waste by receiving goods only as they are needed in the production process, thereby reducing inventory costs. In other words, JIT inventory refers to an inventory management system with objectives of having inventory readily available to meet demand, but not to a point of excess where you must stockpile extra products.

JIT Inventory Example

General Motors operates using a JIT inventory, relying on its supply chain to deliver the parts it needs to build cars. The parts needed to manufacture the cars do not arrive before or after they are needed; rather, they arrive just as they are needed.

The Bailey Seat Company supplies GM with all the seats it needs for the production of its full-size trucks. The Bailey Seat Company and GM work closely together so that the seats arrive at the assembly plant as they are needed for each truck being built. The seats are never stored at GM's assembly plant, waiting to be installed onto the trucks. The seats are delivered to the plant and are immediately installed into the new trucks.

Why Use JIT Inventory?

The JIT inventory method requires that producers be able to forecast demand accurately. JIT inventory supply system represents a shift away from the older 'just in case' strategy where producers carried large inventories in case higher demand had to be met. A few of the advantages of using JIT inventory include:

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