Healthy Times produces four types of frozen TV dinners that it sells to supermarkets and independent grocery stores. The company operates from two locations: a manufacturing plant and a refrigerated warehouse located a few blocks away. (Administrative offices are located in the manufacturing plant.)
The types of dinners to be produced each week are scheduled a week in advance, based on customer orders. The number of dinners produced, however, is always the same. The company runs its production facilities at full capacity—20,000 units per day—to minimize fixed manufacturing costs per unit.
Every Friday, local suppliers deliver to Healthy Times’s factory the fresh vegetables, chicken, fish, and other ingredients required for the following week’s production. (Materials are abundant in the region.) These ingredients then are cut into.meal-sized portions, “fresh frozen” using special equipment, and transported by truck to the refrigerated warehouse. The company maintains an inventory of frozen ingredients equal to approximately two weeks’ production.
Every day. ingredients for 20,000 dinners are brought by truck from the warehouse to the factory. All dinners produced in a given production run must be of the same type. However, production workers can make the machinery “set-up” changes necessary to produce a different type of frozen dinner in about 10 minutes.
Monday through Thursday, Healthy Times produces one type of dinner each day. On Friday, it manufactures whatever types of dinners are needed to balance its inventories. Completed frozen dinners are transported back to the refrigerated warehouse on a daily basis.
Frozen dinners are shipped daily from the warehouse to customers. All shipments are sent by independent carriers. Healthy Times usually maintains about a 10-day inventory of frozen dinners in the warehouse. Recently, however, daily sales have been averaging about 2,000 units less than the level of production, and the finished goods inventory has swelled to a 25-day supply.
Marsha Osaka, the controller of Healthy Times, recently read about the JIT inventory system used by Toyota in its Japanese production facilities. She is wondering whether a JIT system might benefit Healthy Times.
Instructions
With a group of students write a report to Marsha Osaka that covers the following issues:
a. In general terms, describe a JIT manufacturing system. Identify the basic goals of a JIT manufacturing system and any basic conditions that must exist for the system to operate efficiently.
b. Identify any non-value-added activities in Healthy Times’s operations that might be reduced or eliminated in a JIT system. Also identify specific types of costs that might be reduced or eliminated.
c. Assume that Healthy Times does adopt a JIT manufacturing system. Prepare a description of the company’s operations under such a system. (Your description should be consistent with the details provided above.)
d. Explain whether or not you think that a JIT system would work for Healthy Times. Identify any ethical concerns that Osaka should consider and provide specific reasons supporting your conclusion.
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