Operations - inventory management

Question 1

JIT features

Answer 1

• ordering supplies only when required for production or order is placed by customer
• originated in Japan
• 1930 ‘The toyota way’

Question 2

JIT advantages

Answer 2

• allows production to be lean, no wastage as all inentory is used for production
• no money tied up inventory, improving cash flow and working capital
• no warehouse required, saving costs
• more responsive to changing external factors
• reduced pilferage, stock levels more easily monitored

Question 3

JIT disadvantages

Answer 3

• delivery costs
• if deliveries late then business faces consequences of understocking
• requires good supplier relations which take time to develop
• relies on good infrastructure between business and suppliers - roads

Question 4

Consequences of understocking

Answer 4

• run out of inventory and have idle staff/machinery

- customers go to competition instead