Why might a business decide to implement a Just-In-Time (JIT) inventory system?

A business might decide to implement a Just-In-Time (JIT) inventory system primarily to reduce waste and lower inventory holding costs. JIT focuses on producing or acquiring goods only as they are needed in the production process, which minimizes excess stock. By reducing the amount of inventory on hand, businesses can avoid the costs associated with storing unsold goods, such as warehousing expenses and depreciation.

Additionally, JIT fosters a more efficient production process that aligns closely with demand, which reduces the risk of inventory obsolescence. Since JIT also emphasizes continuous improvement and quality, companies that adopt this system often experience enhanced operational efficiencies, leading to further cost reductions and increased competitiveness in the market.

In contrast, increasing overall inventory levels or building larger warehouses would contradict the fundamental principles of JIT, which advocates for keeping inventory levels as low as possible to reduce waste. Improving customer service often requires changes beyond just implementing JIT; it may involve refining production workflows, enhancing communication, and adopting better forecasting methods alongside JIT implementation.