Traditional accounting principles treated things like materials and products on the shelves as assets to the company. However, newer guidelines look at them as dead money, which also draws costs in addition to just manufacturing. This different perspective forced companies to improve their efficiency and having your parts and products ready when you need them, and only at that time, is the basis for JIT processes. The crisis in supply channels caused by the pandemic only reinforced the importance of this strategy.
- JIT avoids wastes that come from overproduction and waiting for materials and holding too much inventory that can’t be used.
- Just in time leads to an efficient supply chain, lower costs for both the company and customer which makes products more afforable.
- An example of a JIT is fast food restaurants as they serve their customers each day and don’t assemble the food until a customer orders it.
“The just-in-time inventory model lets manufacturers reduce their overhead expenses while always ensuring that parts are available to manufacture their products. This allows a company’s customers to be better served, while, at the same time, lowering the cost of doing business.”