- This topic has 1 reply, 2 voices, and was last updated 10 months ago by John Moffat.
- You must be logged in to reply to this topic.
After watching your lecture on JIT this is what I understood by that:
JIT is a theory which states to keep the inventory to an absolute minimum but that does not mean that the business doesn’t have any inventory at all otherwise they would be out of the business. That means business only have inventory which they think they can sell it to the customer. They don’t carry excessive inventory which could not be sold.
Therefore, it means that the business will only order new inventory from suppliers only in case of any demand otherwise it would be obsolete.
In the JIT approach; the number of orders will be more because we will order each time when we get any excess demand from the customers whereas holding cost will be less because we will not hold huge inventories.
What you have written is correct (except that it is not a theory, it is a practical policy that is very common).