Just In Time Inventory

Just In Time Inventory - Just In Time Inventory: A...

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Just In Time Inventory: A Financial Perspective Just-In-Time (JIT) inventory systems are important to financial managers because inventory is a necessary current asset that represents a significant investment. We will briefly describe JIT inventory and production: often the two are interrelated. The relationship of inventory and accounts receivable is accelerated in a JIT system. Therefore, the strategy of inventory management is critical in a financial viewpoint to the firms overall financial strength. JIT systems require that the financial manager have excellent business intelligence, real time data and be aware of cost drivers that can wreak havoc upon JIT systems. We will look at Corporations that have used JIT inventory systems and the pro’s and con’s of a JIT inventory system. What is Just-In-Time Inventory? JIT, Just-In-Time is a term usually thought of as describing inventory arriving or being produced just in time for the shipment or next process. JIT is a process for optimizing manufacturing processes by eliminating all process waste including wasted steps, wasted material, and excess inventory. The term also describes lean manufacturing that is dependent upon JIT inventory systems (Term= JIT ). The term is commonly referred to the concepts of Taiichi Ohno from the Toyota Motor Company in Japan regarding production. Just-In-Time inventory systems depend upon logistics that include: transportation,
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warehousing and several strategies for handling the potential supply chain uncertainties (Martha A18). Just-in-time is easy to grasp conceptually, everything happens just-in-time. Conceptually there is no problem about this; however achieving it in practice is likely to be difficult! History of Just-In-Time Systems Taiichi Ohno’s JIT system was derived from his observances of an American supermarket of the 1956 era (TPS). Toyota Production System (TPS) is largely credited to Taiichi Ohno, a Toyota executive vice president who traveled to the U.S. in 1956 to visit automobile plants. Interestingly, his most important discovery during his journey was the American supermarket. Ohno was impressed with how shoppers selected what and how much they wanted. The supermarket gave Ohno the idea to set up a pull system, in which each production line became a supermarket for the succeeding line. Each line would replace only the items that the next line selected. Ohno also created the kanban ("signboard" in Japanese) system for replenishment of components or subassemblies. Just In Time: A Tool to Improve Efficiency in Inventory Investment Gitman describes the JIT system as a tool to minimize inventory investment (Gitman 578). The ideology is that the materials arrive at the time they are needed for production and the company minimizes inventory investment by having only work-in-process (WIP) inventory. Inventory turnover can be
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increased which will result in a higher profit margin. This eliminates the need for safety stocks, and reduces inventory on hand. However there must be extensive
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This note was uploaded on 04/29/2009 for the course CBS 456765 taught by Professor Paul during the Three '09 term at Curtin.

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Just In Time Inventory - Just In Time Inventory: A...

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