Just-in-time Purchasing

Just-in-time Purchasing

Just-in-time purchasing (JIT purchasing) is a cost accounting purchasing strategy. It is a systems approach for developing and operating the purchasing function. You purchase goods so that they’re delivered just as they’re needed to meet customer demand. It has tremendous effects on the operations of production, distribution, and accounting. With JIT, when you get customer orders, you plan purchases. You purchase the minimum number of items to meet customer demand. JIT purchasing typically results in smaller orders and frequent deliveries.

Just In Time (JIT) – this aims to reduce costs by cutting stock to a minimum. Items are delivered when they are needed and used immediately. The characteristics of JIT systems are consistently high quality, small lot sizes, frequent delivery, short lead time, and close supplier ties. Companies are using JIT production to gain and maintain a competitive advantage.

The goal of JIT purchasing is to reduce the carrying cost of inventory. Less inventory on hand means you pay less in storage and insurance costs. JIT also requires less cash in the short term.

It is an approach to inventory management in which products are bought in little quantities to decrease stockpile inventory carrying costs and attain delivery just in time for use. JIT purchasing methods are successful in Japan and many other countries like, South Korea, Taiwan, USA, UK, Germany, France, Hong Kong, etc.