Final answer:
Electronic Data Interchange (EDI) in Just-in-Time (JIT) systems reduces inventory levels by eliminating the need for paper transactions and allowing companies to receive parts and materials only when they are needed.
Step-by-step explanation:
Electronic Data Interchange (EDI) in Just-in-Time (JIT) systems helps reduce inventory levels. By eliminating the need for paper transactions, companies can streamline their supply chain and reduce the amount of inventory they need to keep on hand. JIT systems allow companies to receive parts and materials only when they are needed, reducing the risk of overstocking.
For example, in the automotive industry, just-in-time delivery ensures that car manufacturers receive the necessary parts right before they are assembled into cars. This eliminates the need for large warehouses to store excess inventory, reducing inventory holding costs.
By reducing inventory levels, companies can free up capital and space, reduce the risk of obsolescence, and improve overall efficiency in their supply chain.