Just in Time Inventory Practices Term Paper

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JIT Management

Eli Whitney developed the interchangeable parts system when accepting a contract to manufacture muskets for the U.S. Army in 1799 (A Brief History of (Just-In) Time). Over the next 100 years, large scale processes held focus while manufacturers focused on individual technologies. The system of engineering drawing developed and modern tools were perfected during this time.

In the late 1890s, Fredrick W. Taylor created "Scientific Management" by observing workers and work methods, then implementing Time Study and standardized work. Frank Gilbreth added Motion Study and invented Process Charting, which focused on all work elements, including non-value added elements. Lilian Gilbreth added the study of motivations of workers and how attitudes affected the outcome of processes. These three originated the idea of eliminating waste.

Around 1910, Henry Ford and Charles E. Scrensen created the first comprehensive Manufacturing Strategy. Ford is considered to be the first practitioner of Just In Time and Lean Manufacturing strategies. In the 1930s, Alfred P. Slogan developed business and manufacturing strategies for managing large processes and dealing with variety.

Just-In-Time refers to manufacturing and conveyance of only what is needed, when it is needed, and the amount needed at a specific time (Toyota Production System Terms). It operates on three principles of the pull system, continuous flow processing, and takt time. The pull production system is the concept that each manufacturing component must be in line with another department to build the final product (Pull Production - Understanding Kanban: Extended Entry). It is controlled by management authorization to produce or not and uses visual aids to show progress and control the movement between work stations. The pull system starts with low levels of stock based on demand in needing the product, usually a number of days, and purchases are only made at a need to purchase level indicated by the management. The continuous flow processing is designed to improve environment performance, cut waste, and improve process control (Case Study 5: A Continuous-Flow System for Reusing Microetchant).

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Continuous flow processing identifies the processes involved to improve the processes for greater efficiency. It eliminates waste in materials and labor. The takt time is the time needed to produce one unit. It involves straight work time divided by the number of required units of production based on demand.

Economic Order-Quantity Decision Model, EOQ, determines how much of a product to order under a given set of assumptions (Horngren, 2006). EOQ assumes there are only ordering and carrying costs, the same quantity is ordered at each reorder point, demand, ordering costs, and carrying costs are known with certainty, purchasing cost per unit is unaffected by the quantity ordered, no stock outs occur, and costs of quality only to the extent that these costs affect ordering and carrying costs are considered. The reorder point triggers a new purchase and is computed by the number of units sold per unit of time times the purchase order lead time. Where EOQ assumes the demand and lead time are known with certainty, in cases of uncertainty, safety stock can be used as a buffer against unexpected increases in demand, uncertainty of lead time, and unavailability of stock from suppliers.

EOQ calculated order quantity can be different than the manager's choice of best performance due to the fact that EOQ ignores carrying costs. As a result of ignoring the carrying costs, managers would be inclined to order more. To achieve the optimal level between the two calculations, performance-evaluation models charge managers with carrying costs that require a certain level of return on investment.

Using EOQ parameters with JIT purchasing, companies establish long-term purchase agreements that define price and quality terms over an extended period. Individual orders are covered by the purchase….....

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