Discuss the just-in-time inventory system.
What will be an ideal response?
The practice of acquiring inventory only in response to a completed sale is called a pull-through system. The ultimate extension of pull-through processing is just-in-time inventory management. A just-in-time (JIT) inventory system attempts to reduce inventory levels to the absolute minimum by (1) accepting inventory only as it is sold, (2) assembling product in the absolute minimum time possible, and (3) shipping product to the customer immediately upon completion. In this way, the three primary inventories of manufacturing, (1) raw materials, (2) work in process, and (3) finished goods, are all kept at the minimum levels possible.
The purchase of inventory only after a sale is made; very typical with Internet firms is called micro inventory. The development and growth of the eBay online auction service has provided many small businesses with the ability to practice just-in-time inventory management. Buyers on eBay know that there will be a period of a few days between winning a bid and receiving the product. Numerous eBay sellers use this time to obtain the product. Often, it is shipped directly from the wholesaler to the buyer. This practice is the ultimate just-in-time process: The eBay seller never owns or handles the products being sold.
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