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562 unit 4 revised

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Just-in-time (JIT) inventory control is a technique for reducing inventories to a minimum by arranging for the components of the production process to be delivered “just-in-time.” The distributors or manufacturers using this strategy wait for an order to be made before any purchases are made. The plan involves having zero stock on hold while speculating for future demand; ordering and receiving inventory only when needed, not earlier. This approach is used to avoid excess stock when the demand for certain products is low, which leads to losses. Therefore, the inventory held by manufacturers in such cases is forecasted to be sufficient to run through the production process, and in tandem with the supplier demand-not in excess. Additionally, they can be classified into JIT production and JIT purchasing. For production, it only begins when the customer places an order meaning the firm holds raw material awaiting production once there is demand. On the other hand, JIT purchasing is when absolutely no inventory is held or purchased before an actual order is received.
Furthermore, this strategy is structured with the elimination of waste and seamless processes in mind. This idea sees the reduction of problems within the systems to have a more simplified, quality and product-oriented structure. When it is successfully implemented, JIT reduces unnecessary labour used to handle and move inventory together with material expenses, and frees up money that is tied up in inventory.

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Having little or no inventory in stock means that less space is needed to store the materials hence no storage costs are incurred. In some cases, the spaces that would have been used for storage can be converted to serve other purposes within the organization. Additionally, less labour is used or needed in JIT, both for handling and security of the materials. Moreover, when using JIT system, there are very slim chances of incurring costs from stock that have perished or deteriorated due to factors in the storage system. It eliminates waste in waiting for time, overproduction, product defects, etc.
JIT is appropriate in situations where proper scheduling of production is done, and close and long-term supplier-consumer relationships. Strong supplier relationships see that the suppliers are integrated into your production processes. Hence they become aware of the needs as they come up. This way, they can supply products frequently even when the products may be cheaper elsewhere. In most cases, these companies enter into a contractual agreement that sees both of them benefiting in the long term; lower prices for one party and sure, continuous sales for the other. Also, most firms that are in such relationships prefer firms with warehouses that are close to their manufacturing/production firms to reduce lead product times for urgent products.
However efficient JIT seems there are some disadvantages tied to this strategy. First, the strategy is quite complex to formulate and implement. It requires strategizing and restructuring processes to see that the system production matches the JIT strategy. Additionally, there is the need to source and contract with long-term suppliers, who are reliable and supply quality products at the lowest price. Sourcing for such may be hard especially with the strategy in mind; such suppliers will also have to re-strategize and integrate their processes with the companies. Also, some suppliers may not agree to meet some minimum supply requirements or needs as they come up due to the costs that come with frequent supplies.

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