How does JIT benefit a company? Does the type of company or amount of inventory used impact the benefits?
JIT aims at keeping the stock holding to bare minimum leading to much lower inventory cost and much lower storage and warehouse cost. Minimum inventory at all stages of supply chain means lesser expiry and lesser wastage for the organization. Lower inventory means lower investment for the same level of production.
In inventory management, the Just-In-Time or JIT system reduces wastage, improves efficiency and productivity, and contributes to smoother production flows. A shorter production cycle can decrease financial costs, inventory costs and labour costs. Below, we summarize the key features of the JIT approach.
Smooth production flow
One of the key features of the JIT system is a uniform production process. From the arrival of materials from suppliers to the delivery of goods to customers, the JIT system aims to prevent fluctuating production rates, which can result in delays and excess work-in- process inventories.
Pull-method
The pull-method contributes to this smooth production process, and it is a key feature of the JIT system. Under the pull-method, goods are produced in each stage only as they are needed at the next stage. This system eliminates work-in-process inventory between production steps, thereby reducing waiting times and associated non-value-added costs.The pull-method also prevents wastage due to the production of defective products, since the output at every stage of production is inspected before passing on to the next stage.
Reduction in storage and waiting time
Under the JIT system, materials are purchased and goods produced only as required, rather than to build up stocks for future use. This alleviates the need to make space for holding products and materials, and results in less time wasted waiting for large amounts of materials and products. Relatedly, the JIT system encourages faster setups of production machinery. Producing small lots of product only as required demands a faster set up of machinery, resulting in more efficiency and reduced costs. The result is higher quality raw materials and finished products.
Maintenance of equipment
The JIT system requires strict adherence to routine maintenance schedules. Effective, preventive maintenance of equipment will allow the company to avoid costly down time from machine breakdowns.
Employee satisfaction and stronger relationships
The JIT system also encourages multi-skilled workers, flexible facilities and an atmosphere of teamwork. These things improve the production system to help the company maintain a competitive edge by seeking ways to improve its products, achieve more efficient operations, and eliminate non-value-added costs. The JIT system also encourages stronger relationships between suppliers and producers. Under the JIT system, communication and information flow between the supplier and producer are open, supporting strong supply coordination. These relationships are enhanced by long-term contracts.
Automated purchasing
Under the JIT system, if materials are required, the supplier will receive an electronic message to deliver them. This improves efficiency and reduces time wastage. Automated purchasing also means that existing inventory levels and production levels are calculated automatically, making things easier and more efficient.
Reliable vendors
Under the JIT approach, suppliers are limited. This reduces the amount of time spent on vendor relations, and ensures that the firm is working with only reliable suppliers who can deliver high quality goods on time.
Long-term benefits of a JIT system
A long-term concentration on production growth and supply requirements, and synchronizing changes in raw materials specifications with suppliers, provide many long-term benefits to the business. The JIT system can produce long-term benefits like cost savings, lower production costs and better customer satisfaction.
How does JIT benefit a company? Does the type of company or amount of inventory used...
29. What is a sinking fund, how is it used and who does it benefit? Be sure to state how that party benefits.
Activity-Based Customer-Driven Costs Suppose that Stillwater Designs has two classes of distributors: JIT distributors and non-JIT distributors. The JIT distributor places small, frequent orders, and the non-JIT distributor tends to place larger, less frequent orders. Both types of distributors are buying the same product. Stillwater Designs provides the following information about customer-related activities and costs for the most recent quarter: JIT Distributors Non-JIT Distributors Sales orders 700 70 Sales calls 70 70 Service calls 350 175 Average order size 750...
Many companies now employ just-in-time (JIT) techniques to reduce inventory and costs to streamline their business processes. A company that uses JIT will need to modify its budget process to accommodate the changes in operations. Briefly describe the budgeting process that might be employed by a company that uses JIT
Just in time (JIT) is an inventory management method whereby materials, goods, and labor are scheduled to arrive or be replenished exactly when needed in the production process? Using this concept of JIT and Lean Thinking you should answer the following questions by taking any Saudi Manufacturing company. Question: 1. Why Companies adopted JIT model? 2. Assess the reasons for using lean thinking. What are the benefits from Suppliers to end users? Using examples and Reasons why Company more focus...
Write one process step of the automobile manufacturing company which follows JIT practice, and explain in detail how JIT can reduce variability in its inventory levels.
JIT is definitely a good system implemented to oversee the whole production process. How does this process help improve quality issues?
Trago Company manufactures a single product and has a JIT policy that ending inventory must equal 5% of the next month's sales. It estimates that May's ending inventory will consist of 14,000 units. June and July sales are estimated to be 280,000 and 290,000 units, respectively. Compute the number of units to be produced in June.
1 ant cst an rs cas in taiile t To facilitate a move toward JIT production, AB Company is considering a change in its play layout. The plant controller, Anita Bentley, has been asked to evaluate the costs and benefits of the change in plant layout. After meeting with production and marketing managers, Anita has compiled the following estimates: Machine moving and reinstallation will cost $100,000 Total sales will increase by 20% to $1,200,000 because of a decrease in production...
Resourceful Corporation is considering the implementation of a JIT inventory system. The company recently analyzed its cycle time to determine the average number of days spent in each activity of its production process. A summary of the analysis is shown below: Production Activity Receiving materials Inspecting materials Storing materials Moving materials into production Setting-up production equipment Cutting materials Assembling materials Painting finished products Packaging finished products Number of Davs 4 4 Resourceful's value-adding production activiti es include b Resourceful's total...
Glaston Company manufactures a single product using a JIT inventory system. The production budget indicates that the number of units expected to be produced are 201,000 in October, 209,500 in November, and 206,000 in December. Glaston assigns variable overhead at a rate of $0.70 per unit of production. Fixed overhead equals $158,000 per month. Compute the total budgeted overhead for October.