Examples of just in time, or JIT, inventory processes are found in automobile manufacturing, drop shipping retailers, fast food restaurant production and on-demand publishing. The JIT inventory system was popularized by Toyota Motor Company in the 1970s. It is an alternative to the more traditional “just in case” inventory system where manufacturers or retailers carry large amounts of inventory to ensure always having a sufficient amount of inventory on hand to meet any reasonable increase in demand or weather any reasonably anticipated supply shortages. In contrast, with the JIT inventory system, materials or finished goods are procured or scheduled to be replenished only at the point in time they are actually required, either for production or for retail sales.
The JIT inventory system is popular with small businesses and major corporations because it provides a more efficient use of working capital and enhances cash flow. The JIT system can be especially helpful to small businesses that are just starting out, since it can reduce the amount of capital required to get the business up and running and also help to avoid the business tying up money in unneeded inventory.
The JIT inventory system, as popularized by Toyota and since adopted by other auto manufacturers, is implemented by scheduling ordering and deliveries so parts are only delivered as needed in the production process. For example, if a car’s doors are put in place on Tuesday and windshields on Wednesday, then those respective parts are not delivered by the company’s supplier until just before those respective days.
Obviously, using this sort of inventory method with a large manufacturing company requires an inventory management system that involves careful planning, efficient ordering and reliable suppliers.
Some retail companies implement the JIT inventory method by using arrangements with drop shipping companies. An example of this is a company that markets office furniture but does not manufacture the furniture itself or keep inventory of it on hand. Rather, as it receives orders for furniture from customers, it purchases the needed furniture from a manufacturer and has the manufacturer deliver it directly to the customer.
Nearly all fast food chains have moved to using a JIT inventory system. An example of this is Burger King, where all the necessary ingredients for preparing hamburgers, such as meat, buns and condiments, are kept on hand, but the actual hamburgers are only prepared when a customer places an order. This contrasts with an inventory system that has premade sandwiches already prepared.
On-demand publishing is an example of the JIT inventory method that has become popular with independent and self-publishing operations. Master manuscripts of books are kept on hand, but texts are only printed and assembled as needed when an actual retail sale is made when a customer orders a book.