Question

The adoption of JIT, supply chain management, vendor management will drastically reduce the level of:
(A) Raw material stock
(B) Work in progress stock
(C) Finished goods stock
All of the above​

Answer 1

Answer:

The main focus of JIT is to identify and correct the obstacles in the production process. It shows the hidden problems of inventory. Just In Time method prevents a company from using excessive inventory and smoothens production operations if a specific task takes longer than expected or a defective part is discovered in the system. This is also one of the main reason why the companies (which are opted for JIT) invest in preventive maintenance; when a part/equipment breaks down, the entire production process stops. The prime objective of JIT is to increase the inventory turnover and reduce the holding and all connected cost. This concept was made applicable again by the Japanese firms, placing an order for the material, the same day for the production of the product. Thus, the Just In Time approach eliminates the requirement to carry voluminous inventories and incur heavy carrying other related costs to the manufacturer. In order to avail the benefits of JIT system, there should be an optimum synchronization between the manufacturing cycle and delivery of material. Just In Times requires a good understanding of the supplier and the manufacturer in terms of the quantity and delivery of the material. In the event of any misunderstanding between the manufacturer and supplier of the material, the entire production process may come to a halt. One example of JIT system is a car manufacturer, a manufacturer of the cars operates with bare minimum inventory levels, as there is a strong reliance on the supply chain to deliver the parts required to manufacture cars. The parts required in the manufacturing of cars do not arrive before or after they are needed; rather, they arrive only when they are needed. Successful JIT implementation wholly depends on how the manufacturer manages its suppliers. A lot of pressure is exerted on them, as the supplier of the materials have to be ready with an ample quality material, as the need arises.