Just in Time Inventory

Toyota developed it in Japan in the 1970s under Taiichi Ohno, and the University of Cambridge's Institute for Manufacturing treats it as a management philosophy rather than a single technique.

Its tool set includes kanban (a signal, often a card, that triggers replenishment only after material is used), levelled production schedules and shorter setup times.

Indian vehicle makers held between 14 and 54 days of inventory across the period below, and the component makers supplying them mostly held more. Inventory days is the number of days of stock a company holds. Screener is an Indian listed-company data site; its inventory days ratio is computed from each company's annual accounts (see its ratio definitions for the basis), so the figures below are computed ratios for March 2015 to March 2026, not audited stock counts.

The component makers' ranges sit higher than the vehicle makers'. The inference is that part of the vehicle makers' leanness is stock carried upstream by suppliers. With eight companies and different product mixes, treat that as a pattern to check, not a proven rule.

Lean stock lowers costs in normal times and deepens losses when supply breaks. In a calibrated economic model (Ortiz, Federal Reserve, April 2022), an economy using just in time gained 1.3% in firm value, but an unanticipated shock caused a roughly 15% deeper output contraction.

A real case: on 28 February 2022 Toyota announced that it would suspend all 28 lines at 14 Japanese plants from 1 March after a suspected cyberattack on its supplier Kojima Industries. Parts arriving straight to the line meant no buffer.

The remedy is not to abandon the method. Choi and co-authors (Production and Operations Management, July 2023) argue for using just in time on segments chosen fittingly, item by item.

An item can run lean when the cover you plan to hold at reorder is at least its 90th-percentile lead time in days of use. Cover is the days of use your stock will last: stock on hand divided by daily use. The 90th percentile is the lead time that nine in ten deliveries beat. Run the test with your own goods receipt notes:

Planned cover versus 90th-percentile lead time

1. List the last 12 receipts for one item, with order date and receipt date.
2. Write each lead time in days, and sort them.
3. Take the 11th value of 12 (the 18th of 20) as the 90th percentile.
4. Multiply by daily use to get the cover needed at reorder.
5. Pass if your planned cover is at least that. Fail if it is lower; more than one delivery in ten is likely to arrive after your stock runs out, and the gap between planned and required cover shows how much worse.

With 12 receipts the percentile is rough, so rerun it each quarter. The test only works if recorded stock matches the shelf, which a perpetual inventory system is meant to ensure. Where demand swings, a conventional buffer is set by safety stock.

Five terms sit close to it and are often mixed up with it:

• Just in case: the opposite approach, holding extra stock against disruption. Most firms mix both.
• Safety stock: the buffer that protects against late delivery or demand swings, which lean plans still need.
• Reorder point: the stock level that triggers an order, set from lead time and use.
• Inventory lead time: the days from ordering to receipt, the number the test above is built on.
• Vendor managed inventory: the supplier manages your stock levels. Just in time is about delivery timing, not who manages the stock.

Our inventory visibility shows stock across all warehouses, inventory on order and expected lead times, so you can compare planned cover with what is on hand and inbound. You still compute the 90th-percentile lead time from your own goods receipts. Our inventory alerts warn you when items approach or fall below minimum levels and when back-ordered items arrive. Set those minimums from the cover your test produces. Our forecasting and purchase automation lets you plan purchases and schedule purchase requisitions or purchase orders against stock levels and forecasts.

As of October 2026, the Basic plan costs $199 a month, billed yearly, and includes inventory alerts, multiple warehouses and purchase orders and transfers (see pricing). A 15-day free trial gives full access with no credit card.