Advantages Of Just-In-Time Inventory System

Main benefits or advantages of just-in-time inventory system can be expressed as follows:

1. Reduce Liquidity Problem

Just-in-time inventory system helps to reduce inventory costs of the company. It minimizes the money tied up in inventory of raw materials, work-in-progress and finished goods. So, it helps to reduce the liquidity problem of the firm.

2. Less Storage Space

Just-in-time inventory system does not need large storage space and warehouse because of faster turnaround of inventory. 

3. Suitability

Just in time inventory system is suitable for all types of business organization. All business organizations (producers, suppliers, distributors, assemblers, wholesalers etc.) can apply this system of inventory. It is applicable for both big and small scale business houses.

4. Wastage Minimization

Just in time inventory system gives emphasis on zero waste. It prevents investment in unnecessary inventory of materials and finished goods. It helps to minimize wastage by maintaining minimum stock level.

5. Investment Opportunity

Just in time inventory helps to minimize inventory costs such as materials handling cost, storage cost and staff cost. Company can invest this saving in other profitable opportunities.

6. Minimize Unfavorable Variances

Just in time inventory system helps to eliminate material price variances and unfavorable overhead spending variances.

7. Quality Control

As just in time system gives emphasis on perfect quality of work, It is easy to spot production mistakes and quality problems very quickly. So, appropriate corrective actions can be taken on time.

       Also Read: Advantages Of Perpetual Inventory

8. Constant Production

Just-in-time system avoids over and under production by supplying only needed amount of materials and components consistently to meet the actual market requirement. It ensures constant production.