What is Just-in-Time?

Just-in-time is a manufacturing flow assumption that is designed to only require inventory at the point of production. By doing so, the total inventory investment needed by a business is greatly reduced. The concept involves a number of changes to the traditional manufacturing system, including the following:

Producing in small batches, so that work-in-process and finished goods do not pile up
Producing only to order, so that goods are not produced in anticipation of orders
Buying supplies locally, so that safety stock levels can be reduced
Having suppliers deliver frequently and in small quantities, so that the total amount of raw materials on hand is minimized
Shortening equipment change-overs, so that short production runs are more economical

Advantages of Just-in-Time

There are several major advantages to just-in-time systems. First, they increase efficiency, because work is only conducted on jobs for which there is an immediate need. If there is no customer order, then no goods are being produced. Second, scrap levels are reduced, because scrap is detected earlier in the production process and immediately addressed. Third, less working capital is required, since there is less inventory to fund in the production process. Fourth, a business can operate with less square footage, because there is less inventory storage on-site. And finally, quality levels are higher, because the lack of inventory makes it easier to identify production issues during the manufacturing process.