In the past manufacturers would produce stock and store it in warehouses to have enough stock to absorb maximum market demand i.e. it was called a just-in-case strategy.
This would mean costs were incurred for warehousing, security, staff and lighting.
The just-in-time strategy means that stock is only produced when orders are received. Raw materials are ordered in and the stock is manufactured. This system minimises the need for storing production supplies or finished stock.
A by-product of the JIT system is cost savings but at the same time nothing is fool-proof. It is necessary to be ahead of the game, to eliminate problems that will halt production. Problems like forecasting incorrectly, suppliers not carrying enough raw materials and hiccups with the transport of raw materials.
However, this does not take away the fact that a JIT system helps improve the inventory and manufacturing process, and in doing so improves supply chain efficiency.
