...JIT is a production and inventory control system in which materials are purchased and units are produced only as needed to meet actual customer demand. In just in time manufacturing system inventories are reduced to the minimum and in some cases they are zero. JIT works in the three types of inventories: a) Raw materials: inventories provide insurance in case suppliers are late with deliveries. b) Work in process: inventories are maintained in case a work station is unable to operate due to a breakdown or other reason. c) Finished goods: inventories are maintained to accommodate unanticipated fluctuations in demand. The main BENEFITS of JIT are the following: 1. Funds that were tied up in inventories can be used elsewhere. 2. Areas previously used to store inventories can be used for other more productive uses. 3. Throughput time is reduced, resulting in greater potential output and quicker response to customers. 4. Defect rates are reduced, resulting in less waste and greater customer satisfaction. Most companies find, however, that simply reducing inventories is not enough. To remain competitive in an ever changing and ever competitive business environment, must strive for continuous improvement. DISADVANTAGES of JIT: Implementing thorough JIT procedures can involve a major overhaul of business systems -it may be difficult and expensive to introduce. JIT manufacturing also opens businesses to a number of risks, notably those associated with the supply chain. With...
Words: 260 - Pages: 2
...presentation is to introduce the concept of “JIT” and its efficiency in cost-effective operation in both product and service manufacturing. This strategy is widely used nowadays due to its ontime delivering of the right product/service at the time of its demand. This is a system that is highly used in many industries. In this essay we will see the example of the most common industry using JIT manufacturing, the automobile industries and explain why this method is so effective and widely accepted. Definition/ General Description Just-in-time method is based on the total elimination of waste, producing goods and services only when needed withought having to store inventory or have the customer waiting for the product/service. In other words, it is based on producing only the necessary parts in the necessary quantities at the right time by matching the production rates with the market demands at that time. Due to the fact that the materials arrive just in time for manufacturing, there is no need for storing inventory as mentioned previously. By these we can see that it operates at low cost and in reality generates profits. The “JIT” method has a positive effect on productivity and work performance and it’s overall cost-effective. The most common industry using JIT manufacturing is the automobile industries. I “JIT” and Toyota Production Systems History The idea of JIT manufacturing goes back to the Toyota motor company in Japan. Before using JIT manufacturing in Japan, Toyota had...
Words: 1203 - Pages: 5
...Advantages & Disadvantages of Lean Production by Scott Shpak, Demand Media Lean production originated in the auto industry to address waste and efficiency. Related Articles Advantages & Disadvantages of Licensing the Rights to the Company's Production Process What Emphasis if Any Should Be Placed on Lean Production? Advantages and Disadvantages of Opening a Production Facility in a Foreign Country Advantages and Disadvantages of Market and Product Development Strategies The Advantages & Disadvantages of the Beef Production Industry What Are the Advantages & Disadvantages for Every Company Becoming a Customer-Focused Business? Lean philosophy centers on the elimination of waste in all forms in the workplace. Specific lean methods include just-in-time inventory management, Kanban scheduling systems, 5S workplace organization, Scrum and other "agile" software development methodologies. Many of these concepts and systems were pioneered by automobile manufacturer Toyota dating back to the 1940s and were subsequently adopted as best practices in many industries beyond automotive production. Applying these principles to your production has the potential for both improved profitability and increased complexity. Sponsored Link Lean Manufacturing Implement Lean Manufacturing, Visual Management, 5S & CIwww.corporatepartners.com.au Types of Waste Lean principles aim to minimize all forms of waste, from sources as varied as material defects to worker ergonomics. Many sources...
Words: 768 - Pages: 4
...Advantages and Disadvantages of Just-in-Time (JIT) Manufacturing The main BENEFITS of JIT are the following: 1. Funds that were tied up in inventories can be used elsewhere. 2. Areas previously used to store inventories can be used for other more productive uses. 3. Throughput time is reduced, resulting in greater potential output and quicker response to customers. 4. Defect rates are reduced, resulting in less waste and greater customer satisfaction. A row of advantages goes within for a company if it introduces a jit/jis production, as the complete sequence of production goes hand in hand with the clients’ requests. By synchronizing and optimizing all processes and by dropping storage time the pass through time of the material can be extremely cut down on by which productivity is increased. Every single process gets more transparent and the amount of holding decreases and that in return leads to a decrease of the costs for capital commitment respectively to the circulating assets and in the end to the rising of the ROI (Return on Investment). This way the company experiences a decisive advantage regarding the costs compared to competitors, which do not produce in the jit/jis way. DISADVANTAGES of JIT: Implementing thorough JIT procedures can involve a major overhaul of business systems -it may be difficult and expensive to introduce. JIT manufacturing also opens businesses to a number of risks, notably those associated with the supply chain. With...
Words: 419 - Pages: 2
...Inventory Systems QRB/501 July 15, 2012 Inventory Systems All businesses use an inventory system whether they realize it or not. In this technological age and global economy many types of inventory systems have emerged to help business run more efficiently. From the smallest “mom and pop shop” to the global giant Wal-Mart an inventory system is needed to keep track of products and turnover to ensure there is just enough in stock for the consumer. The larger a business the more complex the inventory system has to be to keep track of that inventory. Manual Inventory, Just in Time inventory, and RFID inventory are methods used today to keep track of materials and merchandise. There are advantages and disadvantages to each type of inventory. Manual Inventory The oldest and most common form of inventory is manual inventory. This basic form of inventory management is used all over the world for small businesses. A small business may start with this form of inventory using a spreadsheet to keep track of inventory turnover. This type of inventory costs little to start and requires almost no training (Hamlett, 2012). It may be sufficient for a business that sells very few high dollar items. An example would be a boat dealer who has a low volume in sales and can clearly see their inventory. Some businesses make what they sell and need to keep an inventory of ingredients used in the creation of their product. An example would be...
Words: 1643 - Pages: 7
...often accounts for a significant portion of all assets with a direct correlation to the balance sheet. Inventory includes assets intended for sale, assets in production, and assets that will be used for future production of goods. A company’s ending inventory can be calculated by adding the value of any beginning inventory with net purchases then subtracting the cost of goods sold. The equivalent mathematical representation is: Ending Inventory = Beginning Inventory + Net Purchases - Cost of Goods Sold (Inventory valuation, 2010). While there are numerous industry recognized standards for a valuation of inventory, three of the most common valuation systems include First-In, First-Out – FIFO, Last-In, First-Out – LIFO and Just-In-Time – JIT valuation systems. First-In, First-Out Goods processed or received by an organization are placed in holding as First-In, First-Out; this inventory system is used to track product for use and revenue gained. In the FIFO inventory valuation system, assets or inventory received first are the first ones to be used (Basu, 2013). FIFO regards the first unit arriveing in inventory as the first one sold. According to Wikipedia, inventory (n.d.) is commonly used to describe the goods and materials that a business holds for the ultimate purpose of resale. Additionally, the raw materials, work-in-process goods, and completely...
Words: 2902 - Pages: 12
...backwards when allocating costs between costs of goods sold and inventories, with no separate accounting for work in progress. According to ACCA article, in back flush accounting costs are not associated with units until they are completed or sold. Back flush accounting is also called delayed costing, as costs are not allocated to production until after events have occurred. From view by other author, back flush accounting is a costing system that omits recording some of all of the journal entries relating to the cycle from purchase of direct materials to the sales of finished goods (Robert, 2011). According to Grahame Steven, Financial Management 2006, an approach called back flush accounting has been developed to meet the requirement of JIT manufacturing which on it is not a sequential tracking system and does not account for individual transaction. Backflush accounting meshes well with Just-In-Time production system because, according to the Tax Shield Education, both Just-In-Time production and the process of backflush accounting work backward to account for cost incurred during the production process, but it does require accurate bills and records as well as controlled production yields, according to the Federal Accounting Standards Advisory Board (FASAB).Theoretically, the usual inventory accounts in backflush accounting are replaced with a simplified...
Words: 2438 - Pages: 10
...JIT The just-in-time (JIT) inventory method is an approach where materials, parts, and other goods are ordered only in quantities required to meet immediate production needs. These items are then carefully scheduled to be received at precisely the time they are needed. This increases efficiency, reduces waste, and ultimately minimizes inventory carrying costs. JIT was developed in Japan and is also known as the Toyota Production System. Disadvantages of JIT There is little room for mistakes as minimal stock is kept for re-working faulty product Production is very reliant on suppliers and if stock is not delivered on time, the whole production schedule can be delayed There is no spare finished product available to meet unexpected orders, because all product is made to meet actual orders – however, JIT is a very responsive method of production Advantage: Reduced setup time. Cutting setup time allows the company to reduce or eliminate inventory for "changeover" time. Small or individual piece lot sizes reduce lot delay inventories, which simplifies inventory flow and its management. Employees with multiple skills are used more efficiently. Having employees trained to work on different parts of the process allows companies to move workers where they are needed. Production scheduling and work hour consistency synchronized with demand. Increased emphasis on...
Words: 613 - Pages: 3
...Just in time production (JIT) Just in time is a ‘pull’ system of production, so actual orders provide a signal for when a product should be manufactured. Demand-pull enables a firm to produce only what is required, in the correct quantity and at the correct time. This means that stock levels of raw materials, components, work in progress and finished goods can be kept to a minimum. This requires a carefully planned scheduling and flow of resources through the production process. Modern manufacturing firms use sophisticated production scheduling software to plan production for each period of time, which includes ordering the correct stock. Information is exchanged with suppliers and customers through EDI (Electronic Data Interchange) to help ensure that every detail is correct. Supplies are delivered right to the production line only when they are needed. For example, a car manufacturing plant might receive exactly the right number and type of tyres for one day’s production, and the supplier would be expected to deliver them to the correct loading bay on the production line within a very narrow time slot. Advantages of JIT Lower stock holding means a reduction in storage space which saves rent and insurance costs As stock is only obtained when it is needed, less working capital is tied up in stock There is less likelihood of stock perishing, becoming obsolete or out of date Avoids the build-up of unsold finished product that can occur with sudden...
Words: 338 - Pages: 2
...Chapter 12 Q1-18 not 2.6.12 pg496 1. Raw Material inventory, work in process inventory, maintenance/repair/operating supply (MRO) inventory, and finished goods inventory 3. Better forecasting, physical control, supplier reliability can result from appropriate inventory management policies abc guides development of those policies, idea is to establish policies that focuses resources on few critical inventory parts and not the many trivial ones222 4. Holding costs, ordering costs, setup costs. Setup time 5. Demand for item is known; lead-time is consistent and known, receipt of inventory is instantaneous and complete, quantity discounts are not possible, only variable costs are setup or ordering cost and holding or carrying cost, and stock outs or shortages can be completely avoided 7. Because in EOQ it assumes that there are no other variable costs and the product price is constant. Because for a quality discount it takes into consideration the price of the product because it is giving a discount of buying large volumes so it can still cover the cost of buying the product, as discount quantity goes up, the product cost goes down. 8. It eliminates the shutdown and interruption of production necessary for annual physical inventories, eliminates annual inventory adjustments, trained personnel audit the accuracy of inventory, allows the cause of the errors to be identified and remedial action to be taken, maintains accurate inventory records 9.A reduction in setup cost will...
Words: 736 - Pages: 3
...WORKING CAPITAL MANAGEMENT Objective of Working Capital Management: Working capital management is concerned with the problems that arise in attempting to manage the Current Assets and the Current Liabilities. The goal of working capital management is to manage the firm's current assets and current libilities in such a way that a satisfactory level of working capital is maintained. Otherwise, it is likely to become inslolvent and may even be forced into bankruptcy. Current asset should be large enough to cover its Current Liabilities and it must be managed efficiently in order to maintain liquidity of the firm. But too much money blocked with current asset also not advisable. Therefore, maintaining a balance between Current Asset and Current Liabilities is the main theme of the theory of working Capital management. WORKING CAPITAL OR OPERATION CYCLE (O) The objective of the financial decision-making is to maximise the shareholders' wealth. To achieve this, it is necessary to generate sufficient profits, it depends on the amount of sales. But sales do not convert into cash immediately, there is a time lag between the sale of goods and the receipt of cash. First the cash is converted into Material stock, then Material purchased transferred to production and converted into Work-in-progress stock, then finished goods stock. The finished goods is to be sold in the market and converted into Receivables (debtors), the debtor when paying it will be converted as Cash. Working Capital...
Words: 2961 - Pages: 12
...I.INTRODUCTION Experiencing low cost traditional surgical procedures, Advanced Medical Technology Corporation (AMT) wants to broadcast this tagline by manufacturing well designed medical instrument based on a massive researching. Taking into account the efforts and allowances spilled by AMT on its research and development aspect, and in invading new markets, it is not unexpected that it had gained an extraordinary growth and rapid expansion of its sales force for just a few years of being established. Like any other companies who were in their infancy/growth stage, it is a normal thing to put the best shoe forward in order to gain an A+ mark. But the aggressiveness nature of the decisions made by Peter Haskins, president of the AMT, had, to the conclusion of some lenders, contributed to several tribulations that impede the continuous growth of the company. Though AMT had gained extraordinary growth through their well done researches, it tends to risk its financial aspect by exhausting too much fund just to develop and produce its product. Its mismanagement of its assets had made potential creditors to deny its loan requests. These facts had led to the perfection of this study. It aimed to analyze the problems faced by the company, the cause of these problems and how the company will trounce these problems. II. EXECUTIVE SUMMARY Advance Medical Technology Corporation (AMT) developed, manufactured and sold scientific medical instruments, needles, and catheters that allowed...
Words: 2630 - Pages: 11
...JIT Inventory Helping manufactures | Smiley II, Reginald Keith Jerome Bus 255 | JIT Inventory Helping manufactures | Smiley II, Reginald Keith Jerome Bus 255 | Reginald Smiley II Professor Thomasson Bus 255 November 24, 2014 JIT Inventory Helping Manufactures The globalization is forcing firms to be more careful about customer satisfaction and profit maximization. Logistics is one of the key tools that builds cost and service advantages to the firms. On the other hand, Just-in-Time (JIT) management approach, which is effective in the manufacturing sector in particular might be applied to the firms as a chance to achieve cost and service advantages through logistics. When the firms focus on the JIT for business processes but not products, the management principles of the JIT can be applied to logistics. JIT is an inventory management system based on placing smaller, more frequent, inventory orders. JIT can quickly reveal areas that need improvement, improve efficiency and productivity, free up additional workspace and free up more working capital. JIT inventory has helped manufactures be able to preserve parts flow so that inventories do not build up at any phase of the manufacturing process, allowing expeditious development and requiring active management of the production procedure. Just-in-time (JIT) inventory refers to an inventory management system with objectives of having inventory readily available to meet demand, but not to a point of excess where you...
Words: 2599 - Pages: 11
...An investigation into JIT of Menlo Research Paper Word account: 4982 Lecturer: Dr. Shawn Wong Student name: Chen Li Student ID: 11300205 Content 1. Introduction………………………………..3-9 1.1 overview of Menlo and logistics industry………..3-7 1.2 Research Topic, question, objective…………..7-8 1.3 Research Rational/Contribution…………..8-9 2 Research Methodologies………………………..10 2.1 How to conduct paper search……………10 2.2 Research Limitation……………10 3. Presentation and discussion of research find……..11-22 3.1 What is the JIT system in the Menlo? ……………11-13 3.2 How to Menlo use JIT system in the operation? ……………13-17 3.3 What are the key challenges Menlo facing when use the JIT system? ……………17-20 3.4What are the advantages of using the JIT system? ……………20-22 4 Conclusion: ……………23-24 4.1 Summary……………23 4.2 Implication: ……………23-24 4.3 Further research opportunities: ……………24 5.Reference List…………………………….25 1. Introduction: 1.1Overview of the company: Menlo logistics was originally formed in the late 1980s. Its initial plan was to create an organization which offers customer warehouse, inventory and transportation management. On October 26, 1990, Menlo was officially formed and started as third-party logistics (3PL) services provider. The company achieved profitable growth after 1990.( http://www.con-way.com/en/logistics) Menlo...
Words: 5672 - Pages: 23
... In the wake of the decline of Western Manufacturing and the relevance crisis of management accounting to modern business as outlined by Kaplan and Johnson in ‘Relevance Lost’, the traditional cost accounting approach has been largely replaced by alternative methodologies (Kee, Schmidt 2000). The role of the management accounting in the modern firm is not only to report the score, but to seek to influence the score by using techniques and theoretical approaches to improve the business processes. As such it is important for managers to understand the use and usefulness of a variety of alternatives to traditional accounting approaches, especially traditional cost accounting and look to introduce other techniques which may have practical advantages for the firm (DUGDALE, JONES 1998). There is no one size fits all approach which will work in any case and the application of cost accounting can and will always provide key information about how the business is doing in terms of its goals. Indeed many of the newer techniques focus on particular applications within industry and each of them has something to offer the firm in terms of improving the business processes (Plenert 1993). This report considers three approaches in the context of...
Words: 3699 - Pages: 15
