just-in-time
An inventory management strategy receiving goods only as they are needed for production or sale, minimizing inventory holding costs and waste.
Example
“Toyota's just-in-time system reduced inventory from weeks to hours, cutting storage costs and revealing quality problems immediately.”
Memory Tip
JUST-IN-TIME = inventory arrives exactly when needed. No warehouse, no waste. Requires reliable suppliers.
Why It Matters
Just-in-time inventory management directly impacts how much cash a business ties up in stored goods. For personal finance, understanding this concept helps you recognize why certain products cost less at some retailers than others, and why supply chain disruptions can suddenly affect product availability and prices in your everyday shopping.
Common Misconception
Many people assume just-in-time means a company never keeps extra stock and therefore always has products available. In reality, this strategy increases the risk of stockouts and delays when suppliers fail to deliver on time, which is why supply chain disruptions often lead to empty shelves rather than steady inventory levels.
In Practice
A car manufacturer using just-in-time ordering might receive seat components only twice per week instead of storing 10,000 seats in a warehouse. This reduces their inventory holding costs from 5,000 dollars per week to perhaps 500 dollars, but if a supplier delivers late by even one day, production lines must shut down, costing far more in lost output.
Etymology
JUST-IN-TIME (arriving exactly when needed). Inventory arriving JUST IN TIME for use — not before.
Common Misspellings
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Related Terms
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See Also
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