Just-in-Time (JIT) Inventory
Definition
An approach that keeps inventory to a minimum by receiving goods only as they are needed for production or sale. It cuts carrying cost but relies on reliable suppliers and demand.
Related Terms in Purchasing & Inventory
Net Realisable Value (NRV)
The estimated selling price of inventory less the costs to complete and sell it. Inventory is generally carried at the lower of cost and NRV, so a fall in NRV triggers a write-down.
Lower of Cost or Market
An inventory valuation rule requiring stock to be reported at the lower of its historical cost or its current market value, so that likely losses are recognised promptly.
Standard Costing
A method that assigns predetermined standard costs to products and then analyses the variances between standard and actual costs. It is widely used in manufacturing for control and pricing.
Bill of Materials (BOM)
A structured list of the raw materials, components and quantities needed to make a finished product. It drives manufacturing cost, inventory planning and procurement.
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