A logistics strategy where inventory is received only when needed for production or sale is a key component of modern supply chain management. This approach aims to reduce warehousing costs and increase efficiency by aligning raw material orders from suppliers directly with production schedules. For instance, an automobile manufacturer receives components from its suppliers precisely when those parts are required for assembly on the production line.
The adoption of this methodology offers several advantages, including decreased storage expenses, minimized waste from obsolete inventory, and improved cash flow. Historically, its implementation has been facilitated by advances in information technology, enabling real-time communication and coordination between suppliers, manufacturers, and distributors. It promotes closer relationships with vendors and emphasizes process optimization throughout the entire supply chain.
