As the name implies, just-in-time (JIT) inventory management refers to having the right level of inventory available at the right time. This system was developed in Japan in the 1970s when Toyota sought to reduce inventory levels to the absolute minimum by receiving items from suppliers just as the last of those items were being pulled from Toyota’s warehouse shelves.
This system can make the manufacturing process more efficient by allowing a business to quickly scale production up or down depending on customer demand. By keeping inventory levels low, a company can reduce its working capital needs and enhance its cash flow. Low inventory also allows a business to avoid product waste due to damage or expiration.
However, just-in-time inventory management does come with some risk. It can leave a business vulnerable to supply chain disruptions that could unexpectedly halt production.