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What is Just-in-time?

Just-in-time (JIT) is an inventory management method in which the goods are ordered/received only when they are needed. 

The main aim of just-in-time inventory management is to reduce inventory holding costs by minimizing waste and improving production efficiency. It is widely used to improve competitiveness and leads to increased turnover. 

Significance of Just-in-time in E-commerce Logistics

Just-in-time inventory management is used as a cost-cutting strategy by most companies. The main focus of just-in-time inventory is to correct and identify the barriers in the production process. Here are some important effects of this inventory management:

  • Reduces costs: Just-in-time inventory management reduces overall costs by reducing warehousing and purchase costs. This is because there is no need to store goods for a long time or buy raw materials in excess.
  • Eliminates excess waste: A just-in-time approach prevents overproduction, and hence, it eliminates the possibility of building up unnecessary inventory. Therefore, companies produce much less waste following this system.
  • Enhances efficiency: Since in JIT, the production duration is short, manufacturers get the chance to increase their efficiency levels. This results in better manufacturing management, with little to no defects.

Prerequisites for Just-In-Time and How It Works

Some prerequisites for just-in-time inventory management are as follows::

  • Good quality workmanship
  • Steady production
  • Reliable suppliers
  • Error-free manufacturing system

With these prerequisites fulfilled, companies must carry out a few steps to complete the JIT process. These steps are discussed here:

  1. The customer places an order, which is received by the manufacturer.
  2. Subsequently, the manufacturer places an order for raw materials from their supplier.
  3. The supplier then fulfills the order by delivering the materials to the manufacturer.
  4. Finally, the manufacturer assembles the final product from the raw materials received and sends it out for delivery

Use Case With Just-in-time

Consider, initially, a car manufacturer that also sells car parts. By establishing a just-in-time method, car parts were only ordered when customers needed them. This resulted in more warehouse space, less spending on products, and hence, an instant profit. 

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