Business – 4.2 Inventory management – Just in Time (JIT) | e-Consult
4.2 Inventory management – Just in Time (JIT) (1 questions)
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The adoption of JIT influences inventory management and cash flow in the following ways:
- Reduced inventory holding costs: By ordering materials only when needed, a firm minimises the capital tied up in stock, lowering warehousing and insurance expenses.
- Improved cash flow: Fewer funds are locked in raw‑material inventories, freeing cash for other operational needs or investment opportunities.
- Greater reliance on supplier reliability: With lower safety stocks, any delay in supplier deliveries can quickly translate into production stoppages, making cash flow more sensitive to supply‑chain disruptions.