What Is Just‑in‑Time (JIT)?
Just‑in‑time (JIT) is an inventory-management and production strategy that aligns supplier deliveries of raw materials and parts to arrive exactly when they are needed for production. The goal is to minimize on‑hand inventory, reduce storage and carrying costs, increase operational efficiency and shorten production lead times. JIT requires accurate demand forecasting, reliable suppliers, stable production processes and high quality control (Investopedia).
Fast fact
– JIT reduces inventory carrying costs and can improve cash flow, but it increases vulnerability to supply‑chain disruptions (Investopedia; Toyota Production System).
How JIT Works (high level)
– Production schedules and customer demand drive procurement timing.
– Suppliers deliver small, frequent shipments matched to production needs.
– Work‑in‑process (WIP) and finished‑goods inventories are kept low.
– Visual scheduling tools like kanban signal when to reorder or produce more (kanban was developed at Toyota by Taiichi Ohno) (Investopedia; Toyota Production System).
Advantages of JIT
– Lower inventory carrying and storage costs.
– Reduced waste from obsolescence and excess materials.
– Greater production flexibility and shorter changeover times.
– Improved cash flow and lower working‑capital requirements.
– Faster response to changing customer demand and product redesigns (Investopedia).
Disadvantages and Risks of JIT
– High sensitivity to supply‑chain disruptions (single supplier failures, logistics delays, natural disasters, pandemics).
– Less buffer against sudden surges in demand.
– Requires near‑perfect quality and reliable machinery—defects can stop lines.
– Implementation can be complex and culturally demanding (continuous improvement mindset required) (Investopedia; MIT; Wall Street Journal).
Real‑world examples
– Toyota: Pioneer and best‑known practitioner of JIT/lean manufacturing. Toyota reduced inventories dramatically starting in the 1970s and developed kanban to support JIT operations (Toyota Production System; Investopedia).
– Aisin fire (1997): A single supplier’s plant fire disrupted production across Toyota’s supply chain, forcing temporary plant shutdowns and costing Toyota an estimated 160 billion yen in lost revenue—an iconic example of JIT’s vulnerability to single‑point supply failures (Wall Street Journal; Sloan Management Review; MIT).
– COVID‑19 pandemic (2020): Sudden global demand shifts and logistics breakdowns caused shortages of masks, sanitizers and medical supplies, illustrating how JIT systems can struggle with unexpected demand or cross‑border supply interruptions (Federal Reserve Bank of St. Louis; Investopedia).
Who uses JIT?
– Automotive manufacturers (large-scale use; Toyota is the archetype).
– Electronics and high‑tech manufacturers that benefit from short life cycles and high obsolescence risk.
– Retailers, restaurants and on‑demand printing where speed, freshness and cash flow matter.
– Any company with predictable demand, strong supplier relationships and the ability to manage small, frequent deliveries (Investopedia).
Who invented JIT?
– JIT is most closely associated with Toyota’s production system and the work of Toyota engineers such as Taiichi Ohno in the 1970s. Kanban, a key scheduling mechanism used in JIT, was developed at Toyota to improve manufacturing efficiency (Investopedia; Toyota Production System).
Special considerations
– Single‑sourcing vs. multiple suppliers: single suppliers can simplify coordination but create a single point of failure (seen in the Aisin example).
– Global supply chains: long lead times and cross‑border logistics increase risk for JIT.
– Quality control: defects have immediate production impact since little buffer inventory exists.
– Regulatory/critical sectors (medical, aerospace): safety stocks and redundant suppliers are often required despite JIT efficiencies.
Is JIT manufacturing risky?
Yes—JIT increases operational efficiency but reduces slack. If suppliers, logistics or production are disrupted, the ripple effects can halt manufacturing quickly. Successful JIT programs balance cost reductions with risk mitigation, contingency planning and supplier diversification (Investopedia; MIT).
Practical steps to implement JIT (step‑by‑step)
1. Assess readiness and strategic fit
– Evaluate demand variability, supplier landscape, production stability and the cost of inventory versus stockouts.
– Determine which product lines or components are suitable for JIT (stable demand, short lead times, low criticality).
2. Strengthen supplier relationships
– Move from arms‑length purchasing to partnerships with reliable suppliers.
– Negotiate frequent deliveries, smaller lot sizes and clear service‑level agreements.
– Where possible, avoid sole sourcing for critical components or build contingency suppliers.
3. Improve demand forecasting and production planning
– Use point‑of‑sale and order data to generate accurate short‑term forecasts.
– Implement sales & operations planning (S&OP) to align demand, production and procurement.
4. Adopt pull systems and visual controls (e.g., kanban)
– Replace push (forecast‑driven) scheduling with pull signals driven by consumption on the line.
– Use kanban cards, electronic kanban or barcode/ERP triggers to initiate replenishment.
5. Optimize logistics and lead times
– Shorten lead times through local suppliers or improved transport.
– Consolidate deliveries strategically to reduce costs while keeping frequency high.
6. Build quality into the process
– Implement total quality management (TQM), poka‑yoke (error‑proofing) and preventative maintenance so production isn’t stopped by defects or equipment breakdowns.
7. Maintain minimal, strategic buffers
– Establish safety stock levels for the most critical parts; use buffer inventories selectively rather than across the board.
– Consider strategic inventory at multiple supply‑chain nodes (e.g., regional distribution centers).
8. Implement technology and data systems
– Use ERP, supply‑chain visibility tools and real‑time inventory tracking to coordinate orders and production.
– Automate replenishment triggers based on consumption or production milestones.
9. Create contingency plans and scenario testing
– Run supply‑chain risk assessments and create playbooks for supplier failures, logistics disruptions and demand spikes.
– Test alternative suppliers and logistics routes periodically.
10. Measure, learn and continuously improve
– Track KPIs: inventory turns, stockout frequency, lead time variability, on‑time delivery, production downtime and total cost of inventory.
– Use continuous improvement (kaizen) to iterate processes and resolve bottlenecks.
KPIs to monitor
– Inventory turns and days of inventory on hand (DOH)
– Stockout rate and service level
– Lead time and lead‑time variability
– On‑time delivery from suppliers
– Production downtime attributable to parts shortages
– Total landed cost of inventory
Mitigations for major JIT risks
– Diversify suppliers and keep at least one alternative for critical parts.
– Maintain emergency safety stock for high‑criticality items.
– Use nearshoring or dual sourcing to reduce lead‑time risk.
– Invest in visibility tools to detect upstream issues early.
– Contractually require contingency capacity from key suppliers.
Example: Automotive assembly with JIT (concise)
– A carmaker receives customer orders and schedules assembly. Instead of holding large parts inventories, it places frequent small orders for engines, airbags and components timed to arrive as vehicles reach the relevant assembly station. Kanban signals or electronic triggers tell suppliers when to ship. If a supplier can’t deliver, production stalls rapidly—so the carmaker must ensure supplier reliability, backup sources or limited safety stock for critical parts (Investopedia; Toyota Production System).
The Bottom Line
JIT is a powerful approach to cut inventory costs, reduce waste and increase responsiveness. It works best where demand is predictable, suppliers are reliable, quality and equipment uptime are high, and information flows are fast. However, JIT raises supply‑chain risk: firms must balance efficiency with resiliency by using selective buffers, diversifying suppliers, improving visibility and preparing contingency plans. The Toyota and COVID‑19 examples show both the efficiency gains and the vulnerabilities inherent in JIT systems (Investopedia; Toyota Production System; Federal Reserve Bank of St. Louis).
Sources
– Investopedia, “Just‑in‑Time (JIT)” (Daniel Fishel), https://www.investopedia.com/terms/j/jit.asp
– Toyota, “Toyota Production System” (overview)
– The Wall Street Journal, “Toyota Motor Shows Its Mettle After Fire Destroys Part Plant”
– Nishiguchi, Toshihiro, and Alexandre Beaudet, “The Toyota Group and the Aisin Fire,” Sloan Management Review, Fall 1998
– Massachusetts Institute of Technology (MIT), “Self‑Organization and Clustered Control in the Toyota Group: Lessons From the Aisin Fire”
– Federal Reserve Bank of St. Louis, “Understanding Supply and Demand Shocks Amid Coronavirus”
If you’d like, I can:
– Create a one‑page JIT readiness checklist tailored to your industry.
– Draft sample KPI dashboards or kanban card templates.
– Outline a contingency plan template for critical suppliers. Which would help most?