The full form of JIT is: JUST IN TIME
What does JIT mean in the finance sector?
Just in time is a method of inventory of management where the production of raw material is done in accordance to the schedule of production. In simpler terms no huge inventory is stored beforehand and the raw materials are only procured when needed.
This management technique helps in reduction of wastage of raw materials and hence leads to reduction in cost. JIT allows you to produce/manufacture top quality goods while cutting down on cost and saving up on storage space.
How is JIT beneficial for the finance sector?
Following are the benefits of just in time management strategy:
BENEFICIAL FOR SMALLER INDUSTRIES
The smaller industries who can’t afford to take huge risks such as deterioration of raw material can take advantage of JIT strategy. It also helps in maintaining a constant cash flow.
LESS STORAGE SPACE
Since the raw materials are ordered only when needed, huge storage spaces are not needed to store the raw material.
EQUIPMENT MAINTENANCE AND INCREASE IN EFFICIENCY
Just in time forces the business to adhere to a strict maintenance routine reducing the chance of failure during production.
This also helps in keeping a check on raw material deterioration which when replaced timely allows the smooth flow of production.
STRONG RELATIONSHIPS AMONG THE STAKE HOLDERS
JIT helps the company to easily reinvent themselves and employ latest techniques to their production easily. This helps in keeping the employee satisfied as they face new challenges periodically.
Under JIT the communication with vendors is more open and is built on mutual trust. It’s easier to maintain a long term contract under JIT system.