Just-in-time (JIT) inventory management focuses solely on the need to replenish inventory only when it is required, reducing costs associated with inventory on hand. Customer-managed inventory (CMI) management uses the same principles as JIT inventory, but it allows customers to order their own inventories directly from vendors or suppliers.
JIT inventory was pioneered by Toyota. The inventory management system is used to produce or acquire material or products used in inventory only when demand requires it. A company's inventory system becomes much more efficient due to the fact that it avoids scenarios in which inventory supply exceeds demand.
If inventory on hand is greater than demand, it increases a company's costs to maintain and warehouse its inventory, and it also reduces the liquidity of a company.
When a company uses the JIT inventory management system, it relies on software to alert the company when new product or material are needed. When a piece of inventory is used, it creates a hole in the company's inventory management system, which triggers an order to fill the hole, making inventory management more efficient.
CMI, on the other hand, is similar to JIT inventory in that it uses the same principles of efficient inventory management. Inventory supply is matched as closely to demand as possible, but with CMI, customers of manufacturers can personally order inventory.
CMI makes the manufacturer and the customer more efficient. If a retailer sells widgets and has a replenishment level of 5, for example, once its inventory is reduced to five widgets, the retailer can automatically order more widgets from a manufacturer that's waiting to fill orders.