Blog General retail Just in time inventory (JIT): Definition + benefits in 2024
08 March, 2024

Just in time inventory (JIT): Definition + benefits in 2024

Just in time inventory, or JIT, is an inventory management strategy where goods are produced or acquired only as they’re needed for production or to fulfill customer orders. This method minimizes inventory holding costs and waste.

Storage facilities and large stocks of inventory can be a huge drain on a business. The physical area has to be taken care of, rent has to be paid, and personnel have to spend time overseeing and maintaining all the stock. 

That’s where just in time inventory comes in. This method of inventory management allows a company to function without needing a large store of goods. Businesses that use just in time inventory operate by getting the raw goods and items they use as –– and when –– they’re needed.

Just in time (JIT) is a lean approach to inventory management that helps keep costs low while meeting manufacturing and order demands to keep customers satisfied.

Keep reading for a full guide on how JIT works, its pros and cons, real-life examples, and who may benefit from it the most.

Definition of Just In Time Inventory

What is JIT?

Just in time inventory management is a lean production approach to optimize efficiency and minimize waste throughout the supply chain. At its core, JIT revolves around the principle of acquiring or producing goods exactly when they’re needed, in the quantities required, and in the right location. 

This strategy synchronizes production schedules and customer demand, in turn reducing excess inventory levels and associated carrying costs.

Key takeaways: 

  • JIT is demand-driven production, meaning it aligns production with actual customer demand and ensures goods are manufactured or acquired only as needed to fulfill orders.
  • Lean inventory practices are used to eliminate excess inventory, including raw materials, work in progress inventory, and finished goods. This minimizes storage costs and inventory obsolescence, contributing to a more streamlined and cost-effective supply chain.
  • JIT requires a culture of continuous improvement, like identifying and eliminating inefficiencies, bottlenecks, and non-value-added activities to drive ongoing enhancements in operational effectiveness.
  • Success hinges on strong supplier partnerships that deliver materials promptly and consistently.
  • Placing a high priority on product quality and reliability helps minimize defects or inconsistencies, resulting in a higher level of quality control.
  • JIT allows businesses to be flexible and agile with market demand, supply chain disruptions, or production requirements. 

Graphic of the JIT process

How does just in time inventory work?

The just in time inventory management technique is dependent on two things: accurate forecasting and reliable suppliers that are nearby.

  • Accurate forecasting: When you’re working with stripped-down inventory levels, you have to have a good idea of your needs ahead of time. These projections could be based on seasonal demands, known trends, or an upcoming event. Either way, automated inventory management systems are highly efficient at basing their predictions on historical data to provide accurate forecasts.
  • Reliable suppliers: Since just in time inventory management hinges on receiving inventory at the last minute or only having the minimal amount you need on hand, you have to be able to depend on your suppliers to deliver. 

When it comes to retailers, the just in time approach may mean the manufacturer passing the products directly to the wholesaler or a third-party logistics company (3PL) for order fulfillment. This way, the retailer can streamline operations by avoiding physically handling the items at all.

Here’s generally how the process will look at each step.

1. Design the process

The JIT process should be designed based on inventory forecasting results. With trends, averages, and other considerations in mind, the process should involve a very clear understanding of your business’s needs and customer habits. 

Because just in time inventory is demand-focused, a clearly defined process ensures the business is prepared to meet demand — with policies and procedures in place, suppliers ready, and everyone understanding their role.

2. Review with management

Management reviews the JIT process using total quality management (TQM), which ensures everything runs smoothly from end to end. TQM also ensures continual evaluations to reassess and improve processes as needed.

3. Establish vendor relationships

Vendor relationships are critical to the success of just in time inventory. Finding vendors that provide quality products and services will ensure you’re able to meet customer needs. Set clear expectations of your vendors and encourage open communication. It’s also important to continually evaluate vendors to ensure they’re meeting set standards.

4. Retailer receives the order and places the order with the supplier

With systems in place, the customer can now place their order. The retailer receives the order, who will then order from the supplier. This is where good vendor relationships are critical, as a customer is now waiting on a product. The product is pulled, or production starts to fulfill the order.

5. The supplier ships the order

The order then ships. Depending on the specific process, orders ship directly to the customer, such as with a 3PL provider, which handles order fulfillment entirely. 

Alternatively, the order ships to the retailer, who will then ship the order to the customer. This is all dependent on the specific type of products and the number of suppliers.

Advantages of JIT

Just in time inventory offers numerous benefits, ultimately leading to higher profitability and a more competitive edge in the marketplace. Here’s how:

  • Reduces carrying costs: Carrying costs arise from storing raw materials or finished goods, increasing the longer they stay in storage. With JIT, there’s an immediate turnaround that reduces inventory costs.
  • Reduces inventory loss or damage: Inventory stored for extended periods risks degradation, with potential issues like spoilage from improper temperature, products breaking, damage from dust and dirt, or expiration. With JIT, inventory is used as soon as it’s received, eliminating the need for lengthy storage times and the consequent loss of profit.
  • Promotes local carriers: Utilizing local suppliers offers advantages like reduced transportation costs, environmental benefits, and easier maintenance of strong supplier relationships due to proximity.
  • Less money tied up: In addition to the cost of warehousing, the inventory held there has had to be paid for, which is also a large investment. When you need minimum stock, you don’t have money tied up and can invest it in other areas of your business.
  • Increases productivity: With materials arriving precisely when needed, there’s less time and resources wasted on inventory management, allowing for more efficient use of resources and improved workflow. 
  • Improves product quality: Minimized risk of product deterioration or obsolescence means a higher-quality end product. Streamlined JIT inventory also allows for better quality control.
  • Increases flexibility: With materials acquired on demand, companies can easily adjust production levels and product offerings to match fluctuating demand patterns without the burden of excess inventory.

Disadvantages of JIT

Perhaps unsurprisingly, all those benefits come at a cost. Here are some drawbacks of JIT to keep in mind:

  • Supplier dependency: Local suppliers may not have much competition, which could make it more difficult to negotiate rates. Also, if that supplier runs out of the items you need, you have to scramble to find another quickly.
  • Forecasting difficulties: The JIT method is based on accurate forecasting. But if those forecasts are flawed, the pre-planning necessary for the system to work will be wrong, and the company could fail.
  • Little room for error: Sporadic orders may affect workflow, and if a run of orders stops, a company might have to shut down. Any change in an original order or cancellation may also cause issues for the company.
  • Risk of communication breakdowns: The JIT method relies on seamless communication with suppliers. Communication breakdowns can disrupt the entire supply chain and lead to significant losses.
  • Potentially higher inventory costs: Unexpected disruptions or emergencies can incur higher costs. Maintaining a lean inventory requires precise coordination and reliability among suppliers, which may entail additional expenses for backup plans or alternative sourcing.
  • Need for a high degree of accuracy: Any inaccuracies in forecasting, order management, or data interchange can lead to disruptions, impact production schedules, and hurt customer satisfaction. 

graphic featuring pros and cons of just in time management

Challenges like forecasting difficulties, the need for accuracy, and the risk of communication breakdowns can make or break the JIT method.

A robust inventory management system like the Cin7 Omni can help prevent some of the challenges associated with JIT. With a clear view of the market and a robust ecosystem of integration partners, Cin7 Omni can give you more accurate forecasts you can rely on. It also gives a real-time look at inventory levels so everyone is working from the same data set, helping avoid miscommunications.

Who uses JIT inventory?

JIT inventory management is particularly advantageous for industries or small businesses characterized by fast-changing consumer demands, short product life cycles, and a need for cost efficiency. 

Industries like automotive manufacturing, electronics, retail, and food service are prime examples where JIT principles can significantly improve operational efficiency, minimize holding costs, and improve overall competitiveness.

Just in time examples

Just in time inventory management is the perfect system for contractors working on tight budgets because they don’t have to lay out money for raw materials until there are orders to fill. It’s why contract manufacturers who work with large companies like Apple, Toyota, and Zara operate on this system.

Here are a few examples of companies that use JIT inventory practices.

  • Apple: The tech giant contracts its manufacturing out to many different factories in China, but these contractors will only start production when Apple authorizes them to. This approach lets Apple launch new products efficiently and maintain high customer satisfaction.
  • Toyota: Known for pioneering the concept of just in time manufacturing, Toyota ensures that only the necessary quantity of new stock is delivered as parts are used. This approach avoids interruptions to the production process and keeps stock minimal. 
  • Zara: The fashion retailer produces small batches of clothing and replenishes its stores frequently based on real-time sales data and customer feedback. This approach allows them to quickly adapt to changing fashion trends and reduce markdowns.

Small businesses can implement JIT as well. Local bakeries or cafes, custom furniture makers, food trucks, and craft breweries are just a few examples of small businesses with either limited storage or where fresh or on-demand products may be beneficial.

Is just in time inventory management software right for you?

To judge if the just in time inventory management method is right for you, ask yourself the following questions:

  • Are your customers OK with the time gap between you receiving an order and being able to deliver the completed goods?
  • Can you rely on your supplier to deliver the items you need quickly?
  • Can you start the manufacturing process as soon as you have an order?
  • Can you be sure your customers won’t change their orders?
  • Is your supply chain efficient enough to support a system like this?
  • Do your products go out of trend, making it redundant to store them?

If you answered yes to several of the above, the just in time inventory management system is probably a good bet for you.

Discover how Cin7 can support your inventory management — no matter which method you use. Learn more about our products. 


What is just in time inventory control designed to do?

Just in time inventory control is designed to minimize inventory holding costs and waste by ensuring goods are produced or acquired on an as-needed basis. It aims to synchronize production with customer demand.

What is a downfall to just in time manufacturing and inventory management?

One downfall to just in time manufacturing and inventory management is its vulnerability to disruptions in the supply chain. Relying on precise coordination and minimal buffer stocks means any supplier delays or shortages can lead to production bottlenecks and customer dissatisfaction.

Just in time inventory management would most help which business?

Just in time inventory management would most help businesses with fast-changing consumer demands and short product life cycles, like those in the fashion industry or electronics sector. Additionally, businesses with limited storage space or those seeking to minimize inventory holding costs will likely benefit from JIT.

What is a just in time inventory system?

A just in time inventory system is a supply chain management approach where goods are acquired or produced only as needed to fulfill customer orders. It requires strong communication between suppliers and precise order forecasting.

Does JIT mean zero inventory?

No, JIT doesn’t necessarily mean zero inventory. JIT focuses on minimizing inventory levels to reduce waste and holding costs, but it does allow for some level of inventory maintenance. The goal is to maintain optimal inventory levels that align closely with customer demand rather than completely eliminating inventory.

Stop managing your inventory.
Start connecting it.