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How important is the role of JIT in Inventory Optimization?

Just in Time (JIT) is a strategy of maintaining the optimum inventory level in which raw materials and components are received by manufacturer just before they are actually required. JIT works on pull management system and in this strategy, on demand material has to be delivered to manufacturer just when needed, neither sooner nor later.

It helps in improving the efficiency of workers and reducing capital cost while reducing wastes (like the pallets used to hold the inventory for long term, floor occupied by excess inventory, etc.). It maintains the inventory in such a way that manufacturer should not face problems of Excess inventory or Less Inventory.

Excess inventory results in Excess capital involvement, High risk of damage, obsolescence, or loss of material, inefficient use of floor space and Excess maintenance cost, while less inventory results in late shipment, unsatisfied customer and Stressed employees.

JIT is the key tool which is used to reduce the cost burden of high inventory. It helps to evaluate the actual stock level in supply chain and determine the optimum stock level. Major benefits of using JIT are:

  • Low Inventory holding cost and warehouse cost
  • Better supply chain management
  • Better customer service level
  • Less wastage

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