Just In Time - JIT

AAA

DEFINITION of 'Just In Time - JIT'

An inventory strategy companies employ to increase efficiency and decrease waste by receiving goods only as they are needed in the production process, thereby reducing inventory costs.

This method requires that producers are able to accurately forecast demand.

INVESTOPEDIA EXPLAINS 'Just In Time - JIT'

A good example would be a car manufacturer that operates with very low inventory levels, relying on their supply chain to deliver the parts they need to build cars. The parts needed to manufacture the cars do not arrive before nor after they are needed, rather they arrive just as they are needed.

This 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.

VIDEO

Loading the player...
RELATED TERMS
  1. Pull-Through Production

    A method used in just-in-time manufacturing processes to order ...
  2. Work Cell

    The logical and strategic arrangement of resources in a business ...
  3. Reverse Fulfillment

    The portion of the supply chain that moves returned products ...
  4. Make To Order - MTO

    A business production strategy that typically allows consumers ...
  5. Inventory

    The raw materials, work-in-process goods and completely finished ...
  6. Supply Chain Management - SCM

    Supply chain management is the streamlining of a business' supply-side ...
RELATED FAQS
  1. What is the difference between JIT (just in time) and CMI (customer managed inventory)?

    Just-in-time (JIT) inventory management focuses solely on the need to replenish inventory only when it is required, reducing ... Read Full Answer >>
  2. What are some tactics businesses can use to increase unlevered free cash flow?

    Unlevered free cash flow is defined as earnings before interest taxes, depreciation and amortization (EBITDA) less capital ... Read Full Answer >>
  3. How can a company control its holding costs?

    A company can control its holding costs through efficient management of its inventory and the efficiency of its overall logistics ... Read Full Answer >>
  4. How is investing in a corporate bond different from buying shares of the company's ...

    Examples of just in time, or JIT, inventory processes are found in automobile manufacturing, drop shipping retailers, fast ... Read Full Answer >>
  5. What are the main benefits of a JIT (just in time) production strategy?

    The chief benefit of the just-in-time production (JIT) strategy is that it allows businesses to ensure that there is always ... Read Full Answer >>
  6. What are the main problems with a JIT (just in time) production strategy?

    The benefits of the just-in-time (JIT) production strategy are well-documented, but it can also have some serious disadvantages. ... Read Full Answer >>
Related Articles
  1. Investing

    Just In Time

    Just in time (JIT) is a system of supplying goods as close as possible to when they are actually needed. For a company that resells, that means goods arrive just before hitting the shelves for ...
  2. Insurance

    Working Capital Works

    A company's efficiency, financial strength and cash-flow health show in its management of working capital.
  3. Fundamental Analysis

    Measuring Company Efficiency

    Three useful indicators for measuring a retail company's efficiency are its inventory turnaround times, its receivables and its collection period.
  4. Fundamental Analysis

    Inventory Valuation For Investors: FIFO And LIFO

    We go over these methods of calculating this component of the balance sheet, and how the choice affects the bottom line.
  5. Fundamental Analysis

    Explaining the Common Size Income Statement

    A common size income statement expresses each account as a percentage of net sales.
  6. Professionals

    What Does an Auditor Do?

    An auditor ensures that organizations maintain accurate and honest financial records.
  7. Fundamental Analysis

    Calculating the Net Debt to EBITDA Ratio

    Financial analysts typically use the net debt to EBITDA ratio to determine a company’s ability to pay its debt.
  8. Economics

    How Does an Operating Lease Work?

    Operating lease is a term used mostly in accounting to denote a lease that gives the lessee rights to use and operate an asset without ownership.
  9. Economics

    Understanding Historical Cost

    Historical cost equals the original purchase price of an asset recorded on a company’s balance sheet.
  10. Economics

    What's Recorded in a Cash Book?

    A cash book is an accounting book that records all cash receipts and cash payments before they’re recorded in a business’s general ledger.

You May Also Like

Hot Definitions
  1. OsMA

    An abbreviation for Oscillator - Moving Average. OsMA is used in technical analysis to represent the variance between an ...
  2. Investopedia

    One of the best-known sources of financial information on the internet. Investopedia is a resource for investors, consumers ...
  3. Unfair Claims Practice

    The improper avoidance of a claim by an insurer or an attempt to reduce the size of the claim. By engaging in unfair claims ...
  4. Killer Bees

    An individual or firm that helps a company fend off a takeover attempt. A killer bee uses defensive strategies to keep an ...
  5. Sin Tax

    A state-sponsored tax that is added to products or services that are seen as vices, such as alcohol, tobacco and gambling. ...
  6. Grandfathered Activities

    Nonbank activities, some of which would normally not be permissible for bank holding companies and foreign banks in the United ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!