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JIT inventory analysis compares stock, supplier reliability, service, and operating costs before a policy change. Build a matched comparison from existing exports, calculate the tradeoffs, and identify the conditions that need testing.
JIT analysis in inventory management compares the inventory reduction from smaller, more frequent replenishment with its effect on service and operating cost. Start with matched historical periods, then calculate stock, supplier reliability, fulfillment, and exception costs from the same SKU and location rows. A lower closing stock balance is only one part of the decision.
The US EPA's explanation of just-in-time methods describes production aligned with customer need, smoother production flow, and signals that trigger replenishment. A business review should test whether the necessary flow and supplier conditions exist before changing buffer levels.
Write down the proposed change: which SKUs and locations, what replenishment frequency, what buffer, and which service outcome must be maintained. Keep supplier, product mix, and demand conditions as comparable as possible. If several things changed together, report that limitation.
Use the broader inventory analysis framework to choose the business question. For a JIT review, the question is whether a particular policy balances stock, availability, and cost under the observed conditions.
Bring daily stock snapshots, customer demand and fulfillment rows, PO receipts, and separately recorded freight and receiving costs. Use SKU, stocking location, document line, and date to connect the records. Retain the original requested date; moving that date after a delay can make late service appear timely.
| File | Required fields | What it answers |
|---|---|---|
| Daily stock | Date, SKU, location, usable units, consistent unit cost | What inventory was held across the period? |
| Demand and shipment lines | Requested units, units filled by the required date, SKU, location | How much demand was served on time? |
| PO receipts | Release date, original due date, usable receipt date, quantity | Were replenishments timely and reliable? |
| Cost records | Period, SKU group, expedite freight, receiving labor or charges | What additional costs accompanied the policy? |
Inspect missing days and unavailable stock before averaging. Use inventory aging by site to separate old balances from the stock expected to support current demand. A change in the mix of unusable stock should not be credited as a replenishment improvement.
Segment the review when demand behavior differs. ABC-XYZ analysis addresses value and variability, which can help avoid drawing one conclusion across unlike items.
A Pennsylvania distributor reviews one SKU before and after a replenishment change. Each row below covers 14 days. In this simplified example, every daily stock close within a row equals the stated average; the unit cost is $20 throughout.
| Period | Average stock (units) | Requested units | Units filled by required date |
|---|---|---|---|
| Before A | 1,000 | 1,000 | 990 |
| Before B | 1,000 | 1,000 | 990 |
| After A | 600 | 1,000 | 970 |
| After B | 600 | 1,000 | 970 |
With these columns in A:D and rows 2:5, calculate inventory value in E2 and fill rate in F2, then fill down:
=B2*20
=D2/C2
For the before and after fill rates, divide the respective totals. In Excel, SUM adds the values in a specified range, so these formulas preserve the unit counts behind each rate:
=SUM(D2:D3)/SUM(C2:C3)
=SUM(D4:D5)/SUM(C4:C5)
| Measure | Before | After | Calculation |
|---|---|---|---|
| Average inventory value (USD) | 20,000 | 12,000 | Average units × 20 |
| Requested units | 2,000 | 2,000 | Sum of each period's demand |
| Units filled by required date | 1,980 | 1,940 | Sum of each period's fulfillment |
| Demand fill rate | 99.0% | 97.0% | Filled / requested |
| Units not filled by required date | 20 | 60 | Requested − filled |
Average inventory value fell by $8,000, or 40.0% of the original $20,000. Fill rate fell by 2.0 percentage points, with 40 additional units missing the required date. The 60 units still belong in demand even if they ship later.
The check is simple: 1,980 + 20 = 2,000 before, and 1,940 + 60 = 2,000 after. Reconcile the filled and unfilled groups to the complete demand export before interpreting a service improvement or decline.
The matching receipt and cost records show the following. Summed lead days add the operating-day lead time of each receipt once; on-time receipts meet the original due date.
| Period | Receipts | On-time receipts | Summed lead days | Expedite freight (USD) | Receiving cost (USD) |
|---|---|---|---|---|---|
| Before A | 10 | 10 | 20 | 100 | 50 |
| Before B | 10 | 10 | 20 | 100 | 50 |
| After A | 20 | 18 | 60 | 350 | 100 |
| After B | 20 | 18 | 60 | 350 | 100 |
Place this table on a separate sheet in A:F, again using rows 2:5. The after-period receipt reliability and average lead time are:
=SUM(C4:C5)/SUM(B4:B5)
=SUM(D4:D5)/SUM(B4:B5)
Before reliability is 20 / 20 = 100.0%, and average lead time is 40 / 20 = 2.0 operating days. After reliability is 36 / 40 = 90.0%, and average lead time is 120 / 40 = 3.0 operating days. Inspect the individual late receipts next: an average does not reveal the length or concentration of the delays.
Receiving cost rises from $100 to $200 across the matched windows, while expedite freight rises from $200 to $700. These changes total $600 of additional recorded operating cost.
Finance supplies the following carrying-cost assumption for the comparison. It excludes the receiving and expedite costs already shown, and applies only to costs expected to vary with inventory.
| Input | Value |
|---|---|
| Reduction in average inventory value (USD) | 8,000 |
| Annual carrying-cost rate | 24.0% |
| Days in each comparison window | 28 |
| Annual day basis | 365 |
Estimated carrying-cost reduction is 8,000 × 24.0% × 28 / 365 = $147.29. Additional recorded cost is $600, leaving $452.71 more cost after the estimated carrying benefit. Dollar estimates are rounded to cents; rates above are rounded to one decimal place.
The $8,000 reduction in inventory investment is separate from that period-cost comparison. Do not add the full stock release to recurring savings. Nor does the calculation value every possible consequence: missed-demand costs and stoppages are absent unless supported by additional records.
The NIST Manufacturing Extension Partnership's discussion of lean supply emphasizes defined inventory buffers, supplier relationships, and explicit risk choices. In this example, the service decline and higher exception costs warrant reviewing delivery reliability and buffer assumptions before extending the policy.
Covirage is not affiliated with Microsoft.
Bring matching stock, demand, receipt, and cost exports with the proposed policy assumptions. Covirage maps the columns, and its tools compute and check the historical comparisons; the external AI model explains the tradeoffs with every figure traced to its rows. Create a free Covirage account and bring a sample of your own data.
See Covirage for supply chain teams for related business reviews.
No. A business can retain defined buffers while pursuing smoother flow and replenishment tied to need. The useful question is whether the chosen stock level supports service given supplier reliability, process variation, and the consequences of running short.
Use average daily inventory, demand fill rate, delivery reliability, replenishment lead time, expedite costs, and receiving effort. Keep the time windows and SKU group consistent. Add production stoppages or lost demand when they are recorded reliably and relevant to the decision.
Historical comparisons can reveal tradeoffs and weak assumptions, but they do not prove future performance. Demand mix, supplier capacity, seasonality, and other changes may explain the result. Use the findings to scope a controlled pilot with explicit service limits.
No. A lower inventory balance can release working capital once, while avoided carrying cost is a period expense estimate. Compare that estimate with additional freight, handling, and disruption costs over the same interval, and avoid counting the same cost twice.