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  • Resources /
  • Understanding The Just In Time Inventory Management System

Understanding The Just In Time Inventory Management System

December 19, 2019
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Tags: Supply Chain

Inventory management, or the supervision of the flow of goods from manufacturers to warehouses to points of sale, is imperative to ensure a business can meet customer demand. Without an adequate inventory management system, companies can lose money. One example of an inventory management system is the Just in Time (JIT) methodology. Let's get into what JIT is and talk about key considerations and recent developments. 

The Basics of Just in Time Inventory Management

The (JIT) methodology is a version of lean manufacturing. Lean manufacturing is based on the practice of ordering and receiving materials only as they're needed within the production process. JIT inventory management uses the lean approach with regards not just to materials for production, but also manufactured goods.

This methodology originated in Japan, supposedly coming from Toyota's practices. However, many shipyards in Japan had already put the system into use to combat the lack of cash and space for big factories and warehouses. That said, it's still known colloquially as the Toyota Production System.

Key Considerations for Just in Time Inventory Management

The key goal of the JIT approach is to maximize efficiency while minimizing waste. When businesses implement lean manufacturing or the JIT inventory method, they must keep some key considerations in mind:

Supply Chain Reliability: Lean manufacturing is largely dependent on a timely supply of materials or goods. Therefore, businesses must know their suppliers well. The approach works best when they have a strong relationship with their suppliers. However, consultants often recommend having more than one supplier available to mitigate risks.

Transparency with Customers: Especially for businesses that are transitioning to a JIT system, transparency is crucial. Customers may not be able to receive their products instantly anymore. However, if a business is producing a high-quality product, customers will usually wait. They don't, however, like to be taken by surprise with wait times.

Understanding Customer Behavior: Because companies aren't keeping stock on hand, they have to understand their customers' buying patterns. They should keep factors such as seasonal demand and location-based demand in mind when developing their JIT plan. Otherwise, they may lose sales based on being out of stock.

Integration of Technology: Modern JIT systems often rely on advanced software solutions for inventory management. Tools like ERP (Enterprise Resource Planning) systems, AI (Artificial Intelligence), and machine learning can predict demand more accurately and manage the supply chain more efficiently.

Considerations for Just in Time Inventory Management

Stockouts: Being out of stock of key products is one of the biggest pitfalls of lean manufacturing. Combating this pitfall requires not only an accurate analysis of customer behavior, but also help in managing the supply chain. Advanced software can help with real-time tracking and forecasting.

Supply Chain Disruptions: Any interruption in the supply chain can disrupt production. For example, Toyota suffered lost revenue due to a fire that broke out in one of its suppliers' plants. Potential disruption is the reason to have backup suppliers on hand. The COVID-19 pandemic highlighted the importance of supply chain resilience and diversification.

Advantages of Just in Time Inventory Management

Even with these considerations, the JIT inventory management system is advantageous:

Reduced Inventory Costs: Companies don't have to run a large warehouse to store their materials or inventory, saving space and money.
Lower Risk of Obsolete Stock: Companies avoid loss of revenue in dead stock, which is stock that's expired, out of season, or otherwise unable to be sold.
Flexible Production: JIT inventory management affords companies the ability to keep production runs short. If they need to switch to a new product, they can do so easily without worrying about large stocks of unused materials.

Recent Developments in 2024

Automation and Robotics: Automated guided vehicles (AGVs) and robotics have further enhanced the efficiency of JIT systems by reducing human error and speeding up material handling processes.
Blockchain Technology: Blockchain can provide enhanced transparency and security in the supply chain, ensuring timely delivery and reducing the risk of fraud.
IoT (Internet of Things): IoT devices can provide real-time data on inventory levels, production rates, and supply chain logistics, enabling more precise JIT operations.


Inventory management, whether the JIT approach or another methodology, is essential for your business's efficiency. Don't suffer revenue loss with an inaccurate or outdated inventory management system. Instead, contact Group O to streamline your inventory management. To learn more call our supply chain team at 866-476-8761.

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