In international business, logistics manages the global supply chain. The two main objectives of logistics are
- to manage a firm’s global supply chain at the lowest possible cost
- to serve the customers’ needs to the best
The JIT(Just in time) inventory systems, pioneered by Japanese firms during the country’s remarkable economic transformation during the 1960s and 1970s, was mainly built to enable achievement of the above objectives.
JIT economizes inventory holding costs by having the materials arrive at a manufacturign plant just in time to enter the production process and not before. Thereby, the major cost savings come from speeding up inventory turnover. This reduces warehousing and storage costs.
This also reduces the amount of working capital it needs to finance inventory, which fress the capital for other uses.
Also, JIT can help to improve product quality. Under JIT, parts enter the manufacturing process immediately. This allows defective inputs to be spotted at the same time.
However, JIT leaves a firm without a buffer stock of inventory. Yet, there are ways of reducing the risks associated with JIT.
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