The document discusses the concept of Just in Time (JIT) inventory management. It defines JIT as an inventory strategy where companies receive goods and materials only as needed for production to minimize costs. This reduces waste by avoiding overproduction and excess inventory storage. The document traces the origins of JIT to Toyota Motor Corporation in the 1970s and describes how JIT alignment of supply with demand can increase efficiency if implemented properly. However, it also notes that disruptions in the supply chain pose risks to JIT systems.

1. Concept of Just in Time (JIT) & its
Importance in Inventory Management
Furqan Javeed Syed
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2. What is Just in Time (JIT)
• The just-in-time (JIT) inventory system is a management strategy that
aligns raw-material orders from suppliers directly with production
schedules.
• Companies employ this inventory strategy to increase efficiency and
decrease waste by receiving goods only as they need them for the
production process, which reduces inventory costs. This method
requires producers to forecast demand accurately.
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3. What
Exactly
Do You
Mean by
Just-in-
Time?
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A just-in-time (JIT) inventory
system is a management strategy
that has a company receive goods
as close as possible to when they
are needed.
So, if a car assembly plant needs
to install airbags, it does not keep
a stock of airbags on its shelves
but receives them as those cars
come onto the assembly line.

4. Who
Invented JIT
Inventory
Management
?
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JIT is attributed to the Japanese automaker
Toyota Motor Corporation.
Executives at Toyota in the 1970s reasoned
that the company could adapt more
quickly and efficiently to changes in trends
or demands for model changes if it did not
keep any more inventory in-store than was
immediately needed.

5. How Does
Just-in-Time
Inventory
Work?
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The just-in-time (JIT) inventory system minimizes
inventory and increases efficiency.
JIT production systems cut inventory costs because
manufacturers receive materials and parts as needed for
production and do not have to pay storage costs.
Manufacturers are also not left with unwanted inventory
if an order is canceled or not fulfilled.
Example: A car manufacturer that operates with low inventory
levels but heavily relies on its supply chain to deliver the parts it
requires to build cars on an as-needed basis. Consequently, the
manufacturer orders the parts required to assemble the vehicles
only after an order is received.

6. Advantages of JIT
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Production runs are short, which means that manufacturers can
quickly move from one product to another.
This method reduces costs by minimizing warehouse needs.
Companies also spend less money on raw materials because they buy
just enough resources to make the ordered products and no more.

7. Disadvantages of JIT
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The potential disruptions in the supply chain.
If a raw-materials supplier has a breakdown and cannot deliver the
goods promptly, this could conceivably stall the entire production line.
A sudden unexpected order for goods may delay the delivery of
finished products to end clients.

8. KANBAN
SYSTEM
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Kanban is a Japanese scheduling system
that's often used in conjunction with lean
manufacturing and JIT. Taiichi Ohno, an
industrial engineer at Toyota, developed
Kanban to improve manufacturing
efficiency.
The Kanban system highlights problem
areas by measuring lead and cycle times
across the production process, which
helps identify upper limits for work-in-
process inventory to avoid overcapacity.

9. Wastes
• Anything that exceeds the minimum
resources needed for the appropriate value.
• Toyota’s seven deadly wastes:
• Overproduction (excessive
production resources)
• Inventory
• Waiting
• Transportation
• Processing
• Motion
• Defective parts
•
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10. Why is Inventory Reduction Important?
Inventory costs money -
carrying costs,
obsolescence costs, and
opportunity costs.
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Inventory covers up
problems and
bottlenecks.
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Inventory reduction
forces organization and
employees to eliminate
sources of problems and
work as a team.
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11. What Types
of
Companies
Use JIT?
The JIT inventory system is popular
with small businesses and major
corporations alike because it enhances
cash flow and reduces the capital needed
to run the business.
Retailers, restaurants, on-demand
publishing, tech manufacturing, and
automobile manufacturing are examples of
industries that have benefited from just-in-
time inventory.
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12. Is Just-in-
Time
Manufacturin
g Risky?
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A chief benefit of a JIT system is that it minimizes
the need for a company to store large quantities
of inventory, which improves efficiency and
provides substantial cost savings. However, if
there is a supply or demand shock, it can bring
everything to a halt.
For instance, at the beginning of the 2020's
economic crisis, everything from ventilators to
surgical masks experienced disruption as inputs
from overseas could not reach their destinations
in time to meet a surge in demand.

13. Example
of JIT
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Famous for its JIT inventory system, Toyota Motor Corporation orders
parts only when it receives new car orders. Although the company
installed this method in the 1970s, it took 20 years to perfect it.
Sadly, Toyota's JIT inventory system nearly caused the company to
come to a halt in February 1997, after a fire at Japanese-owned
automotive parts supplier Aisin decimated its capacity to produce P-
valves for Toyota's vehicles. Because Aisin is the sole supplier of this
part, its weeks-long shutdown caused Toyota to halt production for
several days.
This caused a ripple effect, where other Toyota parts suppliers likewise
had to temporarily shut down because the automaker had no need for
their parts during that time period. Consequently, this fire cost Toyota
160 billion yen in revenue.

14. THANK YOU
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