What does 'Just-In-Time' (JIT) inventory mean?

'Just-In-Time' (JIT) inventory refers to an inventory management strategy that aligns raw-material orders with production schedules. This approach ensures that materials are received just as they are needed in the production process, thereby reducing the holding costs associated with excess inventory. JIT aims to optimize efficiency by minimizing waste and lowering inventory levels, enabling businesses to produce only what is necessary at any given time.

By coordinating the timing of inventory deliveries with production demands, JIT helps businesses respond more quickly to market changes and consumer needs, fostering a more agile supply chain. This also reduces the risks associated with excess inventory, such as obsolescence or storage costs. Therefore, the essence of JIT revolves around the synchronization of inventory management and production processes, which is why this option captures the fundamental concept of JIT accurately.