Just In Time Purchasing
Pn. Norlia Binti Karim
| Ahmad Farhan Bin Yaakop
| Muhammad Zafri Bin Othman
| Muhammad Taqi’uddin Bin Mohd Hamzah Murghayah
| Managerial AccountingDMAN 3103
Diploma in Islamic Banking
Session 1 2013/2014
Table of Contents
Table of Contents
Introduction Just In Time (JIT) Management
Basic Features if JIT
Grouping and Empowerment of Employees
Total Quality Control
Traceability of Overhead Costs
Setup and Carrying Cost: The JIT Approach
Due Date Performance: The JIT Solution
Electronic Data Interchange (EDI)
Reducing Setup Times
Avoidance of Shutdown and Process Reliability: The JIT Approach
Total Preventive Maintenance
Total Quality Control
The Kanban System
Discount and Price Increases: JIT Purchasing versus Holding Inventories
1.0. Introduction Just In Time (JIT) Management
The manufacturing environment for many of these traditional, large-batch, high setup cost firms has changed dramatically in the past 10 to 20 years. For one thing, the competitive markets are no longer defined by national boundaries. Advances in transportation and communication have contributed significantly to the creation of global competition. Advances in technology have contributed to shorter life cycles for products, and product diversity has increased. Foreign firms offering higher-quality, low-cost products with specialized features have created tremendous pressures for our domestic large-batch, high setup cost firms to increase both quality and product diversity while simultaneously reducing total cost. These competitive pressures have led many firms to abandon Economic Order Quantity (EOQ) model in favor of a just-in-time approach to manufacturing and purchasing.
JIT manufacturing is a demand-pull system that requires goods to be pulled through the system by present demand rather than pushed through the system on a fixed schedule based on anticipated demand. Many fast-food restaurants, like McDonald’s, use a pull system to control their finished goods inventory. When a customer orders a hamburger, it is taken from the rack. When the number of hamburgers gets too low, the cooks make new hamburgers. Customer demand pulls the material through the system. This same principle is used in manufacturing settings. Each operation produces only what is necessary to satisfy the demand of the succeeding operation. The material or subassembly arrives just in time for production to occur so that demand can be met. Thus, complementary to and part of the total JIT system is the concept of JIT purchasing.
JIT purchasing requires suppliers to deliver parts and materials just in time for production. Supplier linkages are vital. Supply of parts must be linked to production, which is linked to demand. In survey among manufacturer in United States, 85 percent say that some or most materials, parts, and components are supplied to them on a JIT basis (John McClenahen and Jill Jusco, 2001). Thus, JIT inventory systems now appear to be extensively used.
JIT has two strategic objectives: to increase profits and to improve a firm’s competitive position. These two objectives are achieved by controlling costs (enabling better price competition and increased profits), improving delivery performance, and improving quality. JIT offers increased cost efficiency and simultaneously has the flexibility to respond to customer demands for better quality and more variety. JIT manufacturing and purchasing represent the continual pursuit of productivity through the elimination of waste....
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