JUST-IN-TIME

Definition

Just-in-time (JIT) is an industrial and logistics management system that involves producing and delivering goods only when they are needed, in the exact quantities required. Developed at Toyota in the 1950s, this principle aims to minimize intermediate inventory, work-in-progress, and waste. For retail pricing, just-in-time has direct implications: less excess inventory to mark down, but a greater reliance on the accuracy of demand forecasting.

Why it's important

• Significantly reduce costs —including storage and inventory financing costs —which frees up cash flow and improves profitability.
• Minimize markdowns —which result from excess inventory—by putting only the quantities corresponding to projected demand into circulation.
• Improve the freshness of the product selection (by stocking shelves with recent products rather than older inventory), which enhances the perception of quality.

A concrete example

A fresh-food retailer is switching part of its supply chain (yogurts, prepared meals) to a just-in-time model with its main suppliers. Before the switch, each store received weekly deliveries in large quantities, with a food-safety write-off rate (expired products) of 3.8%. After the switch, deliveries are now made twice a week, adjusted to meet the demand forecast by AI models. The write-off rate has dropped to 1.9%, representing an annual savings of €1.2 million for the category in question.

How to measure/use it

Implementing just-in-time in retail requires three conditions: reliable demand forecasting at the point of sale (AI models are essential to achieve the necessary level of detail), responsive upstream logistics (suppliers capable of delivering on short cycles with high service levels), and precise management of contingencies (stockouts, unexpected spikes in demand). Pricing can be used to smooth out demand when inventory is tight (a slight price increase to slow sales, a slight decrease to speed them up).

Common Mistakes

• Switching to JIT without validation: supplier reliability—a supplier-side shortage immediately becomes a customer-side shortage.
• Applying JIT to unsuitable products: slow-moving items or those with long lead times are not eligible.
• Ignoring operational risk: a strike, a health crisis, or a logistics disruption immediately becomes apparent to customers.

Learn more

• Research & Data: Price analysis to assess the impact of JIT on profitability by category.
• Solutions: AI-powered sales forecasting that provides the forecasting precision required for JIT.
• Tip: Operational Pricing Consulting to align pricing decisions with JIT constraints.
• Resources: Check out our pricing FAQ to understand the relationship between JIT and the bullwhip effect.

Mini FAQ

Is the JIT suitable for all categories?

No. It works well for fast-moving items with short lead times (fresh produce, certain standard manufactured goods). It is risky for seasonal items with long lead times (seasonal apparel, Christmas toys).

What impact will this have on suppliers?

An upstream transfer of inventory. Suppliers must build up their own inventory to deliver on a just-in-time basis, which can hurt their profitability if the terms of the arrangement are not negotiated (volume commitment, forecast sharing).

JIT and E-commerce: Are They Compatible?

Yes, and it's becoming more and more common. Dropshipping and pre-order models are extreme forms of JIT, where the distributor doesn't even stock the product until a customer places an order.