Just in time (JIT)
Just in time (JIT) inventory control systems occur when a business holds no stock and instead relies upon deliveries of raw materials and components to arrive exactly when they are needed.
Instead of occasional large deliveries to a warehouse, components arrive just when they are needed and are taken straight to the factory floor.
For just in time inventory control to be effective the business must have a good relationship with their suppliers.
The benefits of reduced warehouse costs must be balanced against the cost of more frequent deliveries and lost purchasing The cost advantages of operating on a larger scale, eg buying more cheaply in bulk and reducing unit costs. from bulk buying discounts.
| Benefits of just-in-time inventory | Costs of just-in-time inventory |
| No money is tied up in inventory meaning it can be used elsewhere in the business | Delay in receiving orders from suppliers will lead to production having to stop |
| Less storage space/warehousing is required which will reduce costs | Lose out on economies of scale as fewer bulk orders will be required |
| Reduced wastage as less risk of stock going out of date or out of fashion | Stock being delivered frequently increases administration and delivery costs |
| Lower inventory levels are easier to monitor leading to less risk of theft | Difficulty coping with unexpected changes to demand leading to a loss of sales |
| Frequent delivery of stock increases carbon footprint damaging the image of the business |
| Benefits of just-in-time inventory | No money is tied up in inventory meaning it can be used elsewhere in the business |
|---|---|
| Costs of just-in-time inventory | Delay in receiving orders from suppliers will lead to production having to stop |
| Benefits of just-in-time inventory | Less storage space/warehousing is required which will reduce costs |
|---|---|
| Costs of just-in-time inventory | Lose out on economies of scale as fewer bulk orders will be required |
| Benefits of just-in-time inventory | Reduced wastage as less risk of stock going out of date or out of fashion |
|---|---|
| Costs of just-in-time inventory | Stock being delivered frequently increases administration and delivery costs |
| Benefits of just-in-time inventory | Lower inventory levels are easier to monitor leading to less risk of theft |
|---|---|
| Costs of just-in-time inventory | Difficulty coping with unexpected changes to demand leading to a loss of sales |
| Benefits of just-in-time inventory | |
|---|---|
| Costs of just-in-time inventory | Frequent delivery of stock increases carbon footprint damaging the image of the business |
Edwin, a pest control product supplier for John Lewis, talks about the benefits both he and John Lewis have from the 'just-in-time' delivery service he offers.