Discuss the use of just in time (JIT) production. - Scottish Highers Business Management - Question 2 (a) - 2018
Question 2 (a)
Discuss the use of just in time (JIT) production.
Worked Solution & Example Answer:Discuss the use of just in time (JIT) production. - Scottish Highers Business Management - Question 2 (a) - 2018
Step 1
Less storage may lower rent/premises costs.
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Answer
JIT production minimizes the amount of inventory on hand, which can significantly reduce storage costs. Companies do not need to allocate large spaces for inventory, leading to savings on rent and operational facilities.
Step 2
Finance is not tied up in inventory.
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By reducing the level of raw materials and finished goods, companies can utilize financial resources more effectively. This capital can be reallocated for other operational needs, enhancing overall efficiency.
Step 3
Reduced waste as less inventory is stored.
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Having minimal stock reduces the likelihood of waste due to items becoming obsolete or spoiled. This approach encourages lean manufacturing practices, ultimately leading to better resource management.
Step 4
Redacted risk from problems going "out of date".
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With JIT production, businesses can mitigate the risk of inventory becoming outdated or irrelevant. This is particularly critical in industries with rapidly evolving consumer preferences and technology.
Step 5
Redacted that inventory is easier to monitor.
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A smaller inventory facilitates better tracking and management. With less to monitor, it becomes easier for businesses to maintain accurate records and respond swiftly to any changes in demand.
Step 6
Depend on reliable suppliers.
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Implementing a JIT system necessitates strong relationships with suppliers to ensure timely delivery of materials. A disruption in the supply chain can halt production, making dependable suppliers a crucial factor.
Step 7
Increased number of deliveries may incur increased administration costs.
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While JIT can minimize inventory costs, it can lead to a higher frequency of deliveries. This increase may result in elevated administrative overheads and logistics expenses, which must be carefully managed.
Step 8
May lose out on economies of scale/buying in bulk.
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JIT may reduce opportunities for bulk buying discounts, as reduced inventory levels necessitate more frequent purchases. This can lead to higher per-unit costs compared to bulk purchasing strategies.
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