Advantages And Disadvantages Of An MRP System

a. After analyzing Pro-Forma Income Statement for all four quarter the utilization of Just-in-time strategy in Quarter 2-3 would have made Lean in Enterprises for more profitable. Since the premise of Just-in-time is to reduce waste and make sure that the supply chain is working efficiently to meet the customer demand. Just-in-time inventory is the minimum inventory necessary to keep a perfect system running. In Operation Management Heizer and Render define JIT inventory as the exact amount of the good arrives at the moment it is needed. (p. 2010) The ability to implement this strategy in Quarter 2 and Quarter 3 would have been very beneficial to the company expenses. The Just-In-Time strategy would have help the company avoid the $8,163 holding cost an excess capacity cost of $491,524. Just-in-time strategy would have prevented additional production after the product had low customer demand. Just-in-time would have also prevented the same waste

The Just in Time system however is a process that produces necessary products as required. This system is highly beneficial as it reduces the amount of inventory waste, as the goods are made to order. It also reduces warehousing costs as the goods are made and shipped directly to the customer rather than being held for extended periods at the warehouse.

Under an ABC system, the allocation of costs to products is achieved through at least four analytical steps. Firstly, costs are grouped into activity levels. Secondly, cost drivers are

4) Exploring the possibility of implementing JIT (Just in Time) system that can reduce the finished goods inventory at

Activity-based costing (ABC) methodology is an instrument designed to provide accountants and managers with valuable costing information that will allow them to make sound strategic decisions. It is used as a secondary methodology rather than a replacement for the company’s primarily costing system. The ABC methodology identifies activities in an organization and for each activity it assigns a cost. The cost reflects the actual resource consumption by each activity that has been identified.

MacDonald’s follow “Just in Time” JIT system for managing inventory. They have the system of supplying products to customers as soon as order is taken, with no delay between placing the order and getting it in hand. (Diwan P.,

ABC is a method utilized by organizations to establish costs for each product or service that the business provides. The ABC method utilizes cost drivers to determine indirect cost, as well as direct costs and volumes to ascertain costs that pertain to the product or service that the business delivers (Nowicki,

Burbidge, Production flow analysis for planning group technology, Journal of Operations Management, Volume 10, Issue 1, January 1991, pp 5-27.

This presents Raytheon with even more reason to use an ABC-oriented approach which identify and track the costs of activities, so the company can use it to see if activity costs are in line with industry standards. In fact, “in an ABC system, the costs of the organization’s significant activities are accumulated and then assigned to goods or services in accordance with how the activities are used in the production of

Consequently, this more efficient system all but ensures an organization will drastically increase its bottom line, as well as save a significant amount of money by not reordering unnecessary goods. Furthermore, an enterprise will be in a better position to services customers quickly, and as navigate any unexpected changes in business (i.e. a supplier suddenly running out of certain equipment items or going out of business) (Henderson, 2017). As a result, this new EFYJ system will provide the benefits of time savings, accuracy, and consistency within its inventory controls.

With this system each customer’s order cost the same amount to complete causing orders with high profit limits to subsidized orders with low profit limits making it difficult for Super Bakery to know the true cost for an order. The company changed to the activity-based costing (ABC) system allowing the managers the ability to recognize the cost and profit margins for each sale. The ABC system associates the costs with the activities allowing managers the opportunity to access a system that allocates overhead costs that uses multiple bases. Costs can be traced back to each individual’s account regardless of the product provider letting managers know which products are profitable and which ones are not. The traditional costing system allocates cost to departments or jobs instead of overhead cost pools. The traditional costing system makes it difficult to know which activity or product is making a profit.

JIT is a customer-oriented management philosophy used in contemporary supply chain management. Originally, it was used to refer to the process of producing standard products at the right time to meets the demands of the consumers. However, in modern manufacturing plants, the term is used to describe the approach of producing goods at the most minimum waste level possible. It enables the manufacturing companies to avoid costs associated with the overproduction of goods (Hirano 12).

A common way of decreasing the amount of inventory a business holds on a daily basis is implementing a just-in-time inventory process. A Just-In-Time inventory system means that the business gets the materials for a product, as they are demanded. “The electronic data

The just-in-time (JIT) inventory management is the process of ordering and receiving inventory for production and customer sales only as it is needed and not before. This means that the company does not hold safety stock and operates with low inventory levels. This strategy helps companies lower their inventory carrying costs by increasing efficiency and decreasing waste. Waste is anything that does not add value.

ABC refers to cost attribution to cost units on the basis of benefit received from indirect activities e.g. material ordering, material handling, machine setups, quality assuring, customer support services etc. For each such activity, it is necessary to identify a cost driver that causes incurrence of cost relating to that activity. For example, hours spent on testing for a quality assurance activity may be used as application base of cost driver for this activity.