Discuss the use of a just-in-time (JIT) system for inventory management. - Scottish Highers Business Management - Question 2 (a) - 2022
Question 2 (a)
Discuss the use of a just-in-time (JIT) system for inventory management.
Worked Solution & Example Answer:Discuss the use of a just-in-time (JIT) system for inventory management. - Scottish Highers Business Management - Question 2 (a) - 2022
Step 1
Organisations hold small amounts of inventory
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Answer
A JIT system allows organizations to minimize the amount of inventory they hold. This leads to lower storage costs, as less warehouse space is required.
Step 2
Relies on suppliers to deliver inventory when it is required
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Answer
The JIT approach emphasizes a strong relationship with suppliers. This means that timely delivery is critical to ensure that production runs smoothly without delays.
Step 3
Money is not tied up in inventory
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With JIT, organizations can free up capital that would otherwise be tied in inventory. This allows for investment in other areas of the business and improves cash flow.
Step 4
Wasteage is reduced
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JIT systems aim to reduce waste by aligning the production schedule closely with demand. This minimizes excess inventory and reduces the risk of obsolescence.
Step 5
Delivery/admin costs may increase
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Answer
While JIT can reduce overall storage costs, it may lead to increased delivery and administrative costs due to the higher frequency of orders and reliance on supplier schedules.
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