Holding small amounts of inventory with a Just-In-Time (JIT) inventory system can improve cash flow and create operating efficiencies.
JIT involves ordering inventory for production and customer sales only when it’s needed to produce goods, not before. When you no longer have to hold huge stockpiles of inventory, you free cash for other uses. And you’ll reduce storage costs.
Because you’re not making products in advance, there’s no risk that you’ll have a supply of finished goods that outweighs demand or have raw materials left unused.
When you’re making products only when needed, it’s easier to halt one product’s production and switch to a different one to fill orders. With shorter production times, mistakes can be spotted quickly and corrected, resulting in fewer defects and waste.
JIT systems are sensitive to disruptions in the supply chain. A single supplier with a machine breakdown or inability to secure raw materials can stall or shut down your manufacturing process.