![]() ![]() For example, a sudden shortage of raw materials or bad weather that slows shipments may have a dramatic effect on production. One of the most significant downsides to just-in-time systems is that unexpected supply chain interruptions in any area can derail the entire process. This inventory strategy works best when a company works with reliable suppliers that provide consistent quality, doesn't experience shipping disruptions and pens long-term contracts that minimize price fluctuations. It's an effective method for attaining high production levels with minimal inventory holding and supply costs. The goal of a JIT inventory strategy is to balance production volume with inventory levels and ensure the company keeps only the stock that's necessary for near-term work on hand. ![]() These are important distinctions because production can't go forward without inventory, but the business can incur storage costs if the inventory arrives too soon. Materials should not arrive before production is expected to begin.Materials must arrive when production is expected to begin.Just-in-time inventory management consists of two core principles: A pull system means supplies are replaced as goods are consumed rather than proactively. Another way of referring to JIT inventory management is as a "pull" system. In inventory management, "just-in-time" means having inventory arrive precisely when needed, no sooner. JIC companies are often more agile and able to respond to sudden demand increases.įor both JIT and JIC, the term " inventory" refers to raw materials and supplies used in production, unfinished items in various stages of the manufacturing process and final products.Įxamples of unfinished, or work in progress, items include motherboards with CPUs installed that are ready to have memory modules attached in the next stage of building a laptop. JIC is suitable for cases where having adequate inventory is nonnegotiable. Purchases are made to maintain a healthy stockpile and avoid running out of raw materials or work in progress items and slowing or stopping production.Ī JIT model is something to aspire to because it aims for a sustainable process, with reliable suppliers and stable demand. In contrast, those that prefer a just-in-case inventory approach are proactive. It’s a reactive strategy, where inventory purchasing decisions are based on current conditions. Choosing Between Two Inventory Management StrategiesĬompanies committed to just-in-time inventory focus on making the supply chain as lean as possible. There are several points about JIT and JIC inventory management that companies should understand to successfully carry out either just-in-case or just-in-time inventory learning objectives or a combination of both. No matter the industry, making the most of inventory requires planning and a solid grasp of current and future customer demand. ![]() ![]() Both are commonly employed in manufacturing and distribution, but any business providing tangible products, such as retail or food and beverage, falls somewhere on the JIT versus JIC curve. Just-in-time (JIT) and just-in-case (JIC) are on opposite ends of the inventory philosophy spectrum: One aims for lean operations, the other makes stockpiling a priority. East, Nordics and Other Regions (opens in new tab) ![]()
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