Question

What is a just-in-time (JIT) inventory system? Name some inventory costs that can be eliminated or reduced by its use.

Answer 1

Answer:

JIT — JIT stand for just-in-time. It is an inventory system that companies adopt in order to increase the efficiency and reduce inventory holding cost by decreasing waste by receiving goods only when they are required in the production process. To meet these objectives, JIT uses a process called kanban. Kanban is a scheduling system that determines what to produce, when to produce, and how much to produce. In short, JIT is an inventory system where inventory is made available to customers as and when the demand arises.

Some of the inventory costs that can be eliminated or reduced are given below:

i. Financing cost
ii. Warehousing cost
iii. Security and maintenance cost
iv. Inventory holding cost
v. There is less scope of theft, damage, and obsolescence
vi. Reduction in defect rate