The of just in time, or JIT, inventory ordering process has been around since the 1970s, but much newer examples show how much more efficiently a business can run when it adopts the practice of ordering what is needed only when it is needed.
- Some retailers now use the JIT method to streamline the delivery process. For example, a company that markets office furniture but does not manufacture it may order the furniture from the manufacturer only when a customer makes a purchase. The manufacturer delivers it directly to the customer. The retailer has saved the cost of storing inventory.
- Burger King franchisers keep a substantial inventory of hamburger ingredients on hand all the time, but a hamburger is only cooked when it is ordered. This saves waste and gives the chain bragging rights for the freshness of its food.
- On-demand publishing is a prime example of the JIT inventory method, and it has become popular with independent publishers and self-publishing businesses. Master manuscripts of books are kept on hand, but texts are only printed and assembled as needed when a retail sale is made.
Where It Began
And, of course, the JIT inventory system can be found in automobile manufacturing, where it was first developed by Toyota Motor Company. The company realized that it was more cost-efficient to replenish parts or finished goods only when they are immediately needed, for production or for retail sales.
That meant a manufacturer didn't need a warehouse full of windshields and brakes. It could have those parts delivered hours before they were scheduled to be used on the assembly lines.
The JIT inventory system is popular with small businesses and major corporations because it provides a more efficient use of working capital and enhances cash flow. The JIT system can be especially helpful to small businesses that are just starting out since it can reduce the amount of capital required to get the business up and running and also help to avoid the business tying up money in unneeded inventory.
Obviously, using this sort of inventory method requires an efficient inventory management system and reliable suppliers.