Is It A Cost Saving For Mechanism?

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

Lean operations emphasizes the understanding of the customer by producing units only as they are needed. As individual units are manufactured this reduces inventory drastically. This also would reduce any waste of products created and not sold. Both of these processes would have been a benefit to my company as there were several units of certain brands that were not desirable or meeting customer needs. This caused a loss of revenue by having units that were produced but not sold. The lean operations and Just In Time methods would eliminate this problem from the manufacturing side of my company.

Businesses benefit from having a good relationship with their suppliers of raw materials and components. In manufacturing, companies are adopting “Just-in-time” manufacturing. This means that businesses only produce when they have an order, and they only get materials delivered when they are needed. Businesses require reliable and efficient suppliers to be able to order their stock last-minute.

Employing new merchandising tools aid the company in realizing lean production measures with its supply chain. Forecasting capabilities substantiated through “The combined efforts of our supply chain, merchandising, operations and finance teams, we reduced inventory by almost half a billion dollars in 2009, while at the same time improving our in-stock position” (Datamonitor 360, 2010).

Just In Time (JIT): A just in time approach maintains only required inventory in demand; it uses previous year’s statistics to dictate the amount of inventory to be kept on hand (Business.com). The benefits of a just in time approach are that it reduces inventory, shipping fees, depreciation, and doesn’t waste product.

The Just in Time tools will be very handy to reduce inventory at our health care organization. Inventory is an important and noticeable asset in health care delivery system. Cost reductions can be attained by applying advanced inventory management systems that would cause in fewer inventories on hand although still fulfilling demand for

For Riordan to implement this type of plan, an entire new strategy will need to be developed for handling inventory. Currently, each Riordan plant handles inventory independently. Now Riordan must centralize inventory and ordering systems. The two systems need to be centralized because lean production is based on the theory that goods are produced when needed, thus eliminating waste (Chase, Jacobs, & Aquiliano, 2006).

It is an advanced level of accounting that is targeted to reduce expenses and thus improve the overall look of the business at hand. However, in doing that, some processes that seem to be irrelevant in the manufacturing process on the financial statements are actually relevant in the process to correctly produce and manufacture certain items (Kennedy & Widener, 2008). Therefore, when a business takes in the lean accounting approaches advice, it may seem to work perfectly in the short-term but could have some big issues in the long-term. Conversely, the effects of the lean accounting approach really depend on the size of the business at hand and how much inventory is in question when it is implemented. The more inventory that is present in the business the more effective the lean accounting approach is because it exposes possible weaknesses within the manufacturing system and the bigger the inventory the more creditable the lean accounting is (Shah, 2003). So, it is not a perfect system but the bigger the amount of inventory that is present the more accurate the accounting method

Just-in-Time is an inventory management philosophy that aims to reduce inventories by implementing systems and processes to supply a product or service exactly when it is needed, and how it is needed in the production process. The concept of JIT is widely accepted today by many American manufacturing companies, and it is a means of controlling costs through striving to maintain lean inventories—in fact, the concept of JIT was introduced in the early 1980’s to the U.S. as a concept know as “zero inventories”. This inventory control concept involves close relationships with vendors or suppliers, who are able to provide components of the product direct to the work-in-process area, in a “pull” type fashion, whereby the components are

Dell and Toyota are two model companies of just in time. They effectively get the right products to their customers when they need it. Both companies have achieved a competitive advantage within their industries due to utilizing the just in time process and allowing visibility between them and other members of the value chain.

Broyles, D., Beims, J., Franko, J., & Bergman, M. (2005, April). Academic Mind. Retrieved January 19, 2008, from http://www.academicmind.com/unpublishedpapers/business/operationsmanagement/2005-04-000aaf-just-in-time-inventory-management.html

The company also reduces inventory management cost by maintaining low inventory or just-in-time inventory which is a good technique to gain competitive advantage.

Then ford and GM used mass production and economies of scale while Toyota’s market was very small but focused on variety of vehicles on the same assembly line to satisfy customers. To make the operations flexible TPS was invented. It has few of its ideas from the United States. The core idea of JUST IN TIME system came from the concept of pull system used in American supermarkets. In pull system stores use to replenish each item which went low on the shelf. At Toyota every step of the manufacturing process uses Kanban cards to signal to the previous step when its parts need to be replenished. Apart from broadly defining customers to include internal and external clients, Toyota was also encouraged for systematic approach in problem solving, which became most important for continuous improvement known as KAIZEN. This way Toyota became the world’s best

Push method of material flow forecast the inventory needs in the production unit according to the customer demands. Companies predict what the customers will be needed in the nearby future and the quality of that stock. Thus the company will produce enough to meet that forecasted demand and with carry the related inputs. Disadvantage of this system is that the forecasting can be proved wrong due to certain factors that will result in overstocking in the warehouses and storage. Consequently it will result in the holding or carrying cost of inventories. Unlike this system, JIT uses pull method of material flow which provide goods and services only when the certain demand or need arise. It begins with the customers’ order and the production department will make only to fulfill customer’s order. In this way, JIT characterizes to reduce inventory level and their related holding costs.

According to [5], Just-in-Time (JIT) inventory management enables an organization to gain competitive advantage by not having a large or excessive amount of inventory in warehouse. The organization only needs to order the parts when they are actually needed and new materials are produced only when old materials have finished. One advantage of adopting this strategy is that there will be no excess of inventory that needs to be stored and hence the inventory levels will be reduced as well as the cost of carrying and storing goods. One major disadvantage of this is that the organization will expose it in the risk of ordering problems for example a supplier is not able to provide parts on time. The result of this is that the organization cannot fulfill the order and contributes to customer dissatisfaction.