Just-in-time manufacturing definition
/What is Just-in-Time Manufacturing?
Just-in-time manufacturing requires the creation of goods when customer orders are received. The intent behind this system is to avoid the waste that would otherwise arise from the excessive storage of inventory and the overproduction of goods. The result is a streamlined system that minimizes the investment in working capital, while also minimizing inventory obsolescence and production scrap. Orders to suppliers are usually in small unit quantities, and are only sufficient to meet immediate production needs.
Impact of Just-in-Time Manufacturing on Inventory
Under the just-in-time system, inventory levels can be extremely low. This is because inventory is only received into the factory when it is about to be used on the production line. Deliveries may even bypass the receiving area and go straight to the production lines. In addition, work-in-process is minimized within the production area. The result can be an orders of magnitude decline in inventory.