JIT: A Strategic Tool of Inventory Management

Investment in inventory absorbs a large portion of the working capital of a company and often it represents a large portion of the total assets of a business. By improving return on investment by increasing the rate of inventory turnover, management often wants to ensure economic efficiency. Effective inventory management enables a firm to provide lower costs, rapid response and flexibility for its customers. Just-in-time (JIT) philosophy is most widely adopted and practices in the recent years worldwide. It aims at reducing total production costs by producing only what is immediately needed and eliminates wastes. It is based on a radically different concept, deviating substantially from the existing manufacturing practices in many respects. It is a very effective tool to reduce the wastage of inventory and manage it effectively. It has the potential to bring substantial changes in the existing setup of a company; can give it a new face, broaden its acceptability and ensure a longer life. It can strategically change the atmosphere needed for longer survival. JIT is radically different from MRP and goes beyond materials management. The new outlook acquired by the company can meet global expectations of the customers. JIT happens to provide global markets. The present paper examines the strategic role of JIT in inventory management. Information technology helps JIT in managing inventory effectively, as it helps in integrating the components of supply chain network. Quality aspect of inventory management has also been discussed.