What does the term "just-in-time" (JIT) inventory refer to?

The term "just-in-time" (JIT) inventory refers to an inventory management strategy that aligns raw-material orders closely with production schedules. This approach is designed to minimize inventory levels and reduce storage costs by ensuring that materials arrive just as they are needed in the production process. JIT aims to enhance efficiency by decreasing the amount of working capital tied up in inventory, ultimately improving cash flow and responsiveness to market demands.

By aligning orders with production needs, businesses can reduce waste and avoid the costs associated with overstocking or holding excess inventory. This strategy is particularly beneficial in industries where demand can fluctuate or where products have a limited shelf life, allowing companies to be more agile in their operations. The successful implementation of JIT requires careful planning and coordination throughout the supply chain, making it a critical aspect of effective operations management.