Description of a Just-in-Time (JIT) System
A Just-in-Time system is a cost management system where cost savings are realized by providing raw materials and supplies to a manufacturing process just-in-time for them to be utilized in the creation of the finished products. Some companies, especially smaller companies with a low amount of capital can benefit by implementing a Just-in-Time (JIT) system because it creates a reduction in Inventory-on-Hand, avoiding the cost of inventory stockpiles and the cost of the rental of inventory floor space. With JIT, the floor space is freed up creating more efficiency since the extra workspace can be used for additional machinery or personnel. Improved efficiency can result in additional sales and increase asset turnover (sales/total assets) (Jessica & Sorooshian, 2013, p.89). More sales result in higher profits. Increased revenue from more sales and decreased expenses from the cost savings of implementing JIT result in higher net income.
Jessica, Y., & Sorooshian, S. (2013). To study the impact of just-in-time system. Journal of Management & Science, 3(4), 88-90.