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Unformatted text preview: e only work-in-process inventory. Because its
objective is to minimize inventory investment, a JIT system uses no (or very little)
safety stock. Extensive coordination among the firm’s employees, its suppliers,
and shipping companies must exist to ensure that material inputs arrive on time.
Failure of materials to arrive on time results in a shutdown of the production line
until the materials arrive. Likewise, a JIT system requires high-quality parts from
suppliers. When quality problems arise, production must be stopped until the
problems are resolved.
The goal of the JIT system is manufacturing efficiency. It uses inventory as a
tool for attaining efficiency by emphasizing quality of the materials used and
their timely delivery. When JIT is working properly, it forces process inefficiencies to surface. 610 PART 5 Short-Term Financial Decisions Materials Requirement Planning (MRP) System
planning (MRP) system
Inventory management technique
that applies EOQ concepts and a
computer to compare...
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