JIT (Just In Time) Management of Inventory (Cambridge (CIE) AS Accounting): Revision Note

JIT management of inventory

What is just-in-time management of inventory? 

• Just-in-time (JIT) management is where goods are only purchased or supplies are only received when they are needed in the production process to meet customer demand 

What are the advantages of just-in-time management?

• It minimises storage cost and waste

• It improves cash flow as less money is tied up in inventory 

• Less chance of damaged goods or out-of-date items

What are the disadvantages of just-in-time management?

• Delays in delivery can mean that customer demand is not met in time 

• Disruptions cannot be covered for as there is no buffer stock 

• High administrative effort to monitor orders and deliveries constantly

• Over-reliance on supplier

• Possible loss of trade discounts due to small orders

• Increased delivery cost due to more frequent deliveries