Reduced Costs
Among the major benefits of JIT system is the elimination of raw material, inventory and product storage costs.
The traditional notion is to consider raw materials or inventory of finished goods as an asset. The JIT method turns this concept upside down and considers stock as waste or dead investment incurring opportunity costs.
The JIT system sources raw materials close to the manufacturing time, and ships out the product to the customer immediately without storage, leading to substantial savings resultant from not storing raw materials or stocking up finished goods. Deploying funds tied up in raw materials and inventories to generate additional revenue do wonders to the finances of the organization.
JIT’s thrust on elimination of waste from the production process and improving product quality reduces damaged goods and saves on Human Resources costs considerably.
All these cost savings translate to a lower manufacturing price for the product.