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Just in time is a production system that aims at releasing an exact number of products to the market when the clients need it (Cochran, 1998). This production system requires a detailed production plan with the specific quantity of raw materials and factors of production such as machines and labor. Prior information on the supply must be clear to ensure that the company produces an exact amount to meet the demand.
In such a system, there are rare or no cases of excess or surplus production. This system is advantageous as it reduces wastage of resources and unnecessary expenditure. Another objective is to increase the return on investment through the reduction of manufacturing inventory. This essay is a detailed definition and history of the organization of JIT (just in time) and how Toyota Company has incorporated the philosophy into its production.
Toyota implements a unique production system namely the Kanban system. The idea behind this system arises from the structure and logic of a supermarket that is; a mass merchandise store that uses a product card on which the product's information are defined. At Toyota, this system sends a special signal that retrieves the parts to be used in a particular process as per the details in the product card. The idea was first initiated by former vice president of Toyota, Taiichi Ohno. Through this process, Toyota Company can optimize its production by eliminating unnecessary waste in human and corporate resources (Cochran, 1998).
Looking back at the history of Toyota Company, it is evident that the company's management comprises of intelligent and aggressive leaders who were ready to take the risk in order to improve the production system of the company. Taiichi Ohno took the job of increasing the productivity of Toyota after the Second World War (Liker, 2004). His major achievement was to combine the concepts of just in time and the Jidoka (automation with a human touch). During this time, Ohno toured the United States to study ford's production system (Liker, 2004). Nonetheless, the idea of a supermarket was more inspirational than any other system. After his trip to the Ford Company, he used the idea of a supermarket and came up with the Kanban concept. As a result, Ohno implemented just in time and managed to increase the efficiency of Toyota's production significantly.
Over the years, this process has undergone immense changes as a result of new leadership and transformation of vehicle production. Even so the process, whether in its original form or the newly computerized system, is still applicable to different businesses running in the 21st century.
Apart from efficiency in production, the company has gained significantly from the implementation of a Kanban system. There is a significant improvement in the quality of products from Toyota Company. In addition the company is more reliable as the Kanban system records information on the items on stock enabling the management to check the stock and top up when necessary (Liker, 2004).
The Just in Time (JIT) has also been applied in Spirit Aerosystems
In conclusion, just in time is a production approach that ensures optimum utilization of resources during production. Toyota is one of the companies that have used this strategy for a long time. Through the concepts of the Kanban system, the company has achieved efficiency, reliability as well as production of quality products.
Cochran S. D. (1998).Balanced production;Production System Design Lab, Michigan Institute of Technology.
Liker K.J.(2004).The Toyota way: 14 Management principles from the world's greatest manufacturer.McGraw-Hill.
An inventory refers to a warehouse or storage place where a business keeps and maintains the levels of their stocks of the products (Fuchs, 23). This is in order to ensure that there is swift delivery of these predicts on the order and to ensure that they are always in stock in case of any delivery which is required (Axsäter, 26). With the demand for products being increasing at each dawning day, more and more practices of management have continued to evolve in pursuit for procurement of the products by the customer. Delivery systems of high quality and which are highly reliable have continued being developed in order to ensure that there is efficient delivery systems as well as supply chains are maintained .This is so as to ensure that there is a consistent efficient delivery system of the products to their customers (Salcic, 26). Currently, all businesses have focused on increasing customer satsfaction and services in order to stand out for their customers (Fuchs, 23). This is in addition to ensuring that the level of competition is checked and the need for an effective inventory management has largely been viewed as a necessity rather than just a mere trend. Project management involves a branch of management that is concerned with effective management in different types of management projects. It is very important for one to first understand the different inventory management techniques and understand why this practice is especially important.
Just in Time (JIT)
One of the most common methods of controlling inventory in the manufacturing environment is just in time, or the JIT, inventory control. This method seeks to deliver the inventory to production floor just in the right time for use (Salcic, 34). JIT inventory control method is highly dependent on the ability of the company to feed the demand that has been created. In most companies that utilize JIT delivery, the supplier owns a warehouse which is located close to the manufacturing facility.
This refers to an additional amount of stock which is carried over the normal stocking level requirements as a cushion against uncertainty (Joseph, 23). Some of the reason behind using the safety stock control method is inclusive of supplier performance problems, long lead times as well as the uncertainty of materials. The calculation of safety stock quantities involves another sophisticated formula, but many of the large companies have software's which are used to automatically calculate the values of safety stocks (Axsäter, 24). For the small businesses which mainly operate on very tight budgets, having additional inventory in form of stock may have more harm as compared to the financial benefits that would be earned from carrying the inventory.
Managing the control of goods in terms of batches requires that one has the right number of components which are used to cover the needs until the next batch arrives (Joseph, 34). If one happens to have predictable needs, one may order a fixed quantity of stock each and every moment that one places an order at a value that is of fixed interval (Imenkovi, 24). In that effect, it means that one is placing a standing order in such a manner that the prices and the quantities are always kept under review and therefore ensuring that the right amount of quantities is maintained (Axsäter, 12)
The following are some of the major issue which is important in project management;
Inventories which are not managed well could easily lead to unnecessary increase in the amount of working capital. The funds which would have been directed into other developmental projects such as growth initiatives as well as research could end up being used to finance stock which may not necessarily be needed (Joseph, 24).
Effective inventory management is also likely to lead to low storage costs that would in turn lead to an increase in the profits of the company (Salcic, 32). The storage space is very expensive especially when one is able to comfortably manage the amount of inventory which they have as well as are able to reduce the amount of goods which one needs to store, thus one just require less space, which would result in low warehouse costs of renting.
An inventory record would help the customers by providing them with the products which they need in a very swift manner (Joseph, 54). Poor inventory management can easily lead to lower availability of goods as well as increased level of delivery time. In order for one to be able to gain the service satsfaction stars, they would need to ensure a high level of inventory records.
Inventories which are spread in many places need to be managed using a proper system on the basis of demand and supply (Joseph, 43). For proper inventory management, correct techniques would go a long way in managing multiple inventories.
Objectives of Inventory Management
The primary objectives of inventory management are:
I. Minimizing the possibility of disruption in the production schedule of the firm for the need of raw materials, stock as well as spares.
II. To keep down capital investment in inventories.
So it is very essential to have the required inventories. The excessive inventory just happens to e an idle resource of concern (Joseph, 45). The concern must allow aim at avoiding this situation. The investment in the inventories should be very sufficient in the optimum level. The main concern of excessive inventories is:
I. The unnecessary tie up of the firm's funds as well as loss of profit.
II. Excessive carrying costs
III. The risk of liquidity.
The excessive level of inventories consumes most of the business funds, which cannot be utilized for any other purpose and therefore involves an opportunity cost. The carrying costs, which include the cost of shortage, handling insurance, recording as well as inspection, are as well increased proportionally to the volume of inventories. This cost is likely to impair the concern profitability to some more extent.
On the other hand, a low level of the inventories is likely to result i frequent interruptions in the production schedule and therefore resulting in the under-utilization of capacity as well as reduced sales (Joseph, 52). The objective of the inventory management should therefore be to ensure that excessive inventory as well as inadequate inventory at the same time maintaining adequate inventory for the smooth running of the business operations (Salcic, 27). Efforts need to be made in order to have them placed in the right quantity and at the right price as well as quantity. An effective management system is able to
I. Maintain the correct amount of stock of raw materials in the period of the short supply while anticipating for price changes (Fuchs, 23).
II. Ensure continuous supply of materials to the department of production which would facilitate uninterrupted production.
III. Minimizing the costs involved in the costs as well as the time.
IV. Maintaining a sufficient stock of finished gods for smooth sales operations.
V. Ensure that the materials are available for use especially in production as well as production of services at the time that they are required.
VI. Ensure that the finished goods are made available for delivery to the customers in order for them to fulfill orders, smooth the operations of sales as well as for efficient customer service.
VII. Minimize investments in inventories as well as carrying cost as well as time.
VIII. Controlling the investments in inventories and keeping them at optimum levels.
Problems faced by the management
The management ids faced by various problems. One of them is the maintenance of inventories for efficient and smooth production as well as sales operations.
Maintaining just the minimum possible inventory since inventory holding costs as well as opportunity costs of funds are invested in inventory.
Controlling investments in inventories and ensuring that they are kept at the most optimum level.
In summary form, the inventory management team is tasked with ensuring that a balance between too much inventory and too little of the same inventory is achieved. Efficient management as well as efficient control of the inventories is important in reducing investment in the working capital.
Many businesses have utilized the basic inventory management technique or the inventory control methods in order to keep the costs in check. Inventory management has therefore become part of management of the supply chain. There are many methods available to an organization for the management of inventory records.
Setting up of various stocks levels:
The management has to always keep the right and accurate level of stock in order to avoid over-stocking as well as under-stocking. The management does this by deciding on the maximum level, the minimum level, the level of re-order, level of danger as well as the average level of materials which should be kept in the store. The terms of this kind of technique are organized below.
(a) Level of re-ordering
It is very important to understand the level of ordering limit. This refers to the level at which supply of materials has to be made (Salcic, 21). This level exists somewhere between the maximum level and the minimum level in such a manner that quantity of materials which are represented by the difference which occurs between re-ordering level as well as the minimum level are sufficient to meet the production demands until a time when the goods can be replenished is achieved (Fuchs, 23). The level of re-order depends mainly on the maximum rate of consumption as well as order lead time (Chand, 26). When that level is attained, the keeper of the store initiates the purchase requisition.
(b) Maximum Level:
The maximum level refers to the level that the stock should and must never reach. It is also called the maximum limit (Chand, 22). The main function of the maximum level is to ensure that unnecessary blocking of the capital in the inventories, losses on different accounts of deterioration as well as obsolescence of the materials, extra overheads and the temptations to the cases of theft as well as other subsequent activities.
The minimum Level
This represents the lowest amount of material below which stock is not allowed to fall. The level has to be maintained at each and every time so that the production is not held up due to the shortages of ant materials (Chand, 27). This is the level of stock at which a fresh order has to be made in order to replenish the stock.
The Average stock level
This is achieved by getting the average of both the minimum as well as the maximum level of stock.
This is that level below which the stock should under any circumstances be allowed to fall (Chand, 32). The danger level is somewhere below the minimum level and therefore the purchases that the managers should make very special efforts in acquiring the necessary materials as well as stores.
(f) The Economic Quantity
One of the major decisions which the purchasing department is faced with is the determination of the level of what should be determined at any given time. Purchasing in wholesale means purchasing in bulk and has the advantage of lesser costs of purchasing. However, the cost of carrying them tends to be much higher (Chand, 34). Similarly, if we have purchases being made in very small quantities, holding costs tend to be higher as compared to the purchasing costs which are higher in that case. Therefore, the most economic quantity of buying or the most optimal quantity should be determined through the purchasing department by ensuring that factors such as cost ordering, holding as well as carrying.
Preparations of Inventory Budgets:
Organizations that experience huge requirements of materials normally prepare their purchase budgets. This should be done well in advance. The production budget for production as well as consumable materials and capital as well as the maintenance should be put separately. The sales budget basically provides the basis for the production of plans of productions. Therefore, the first step that is required in the preparation of a purchase budget is to establish the sales budget. According to the plans of production, the schedule of materials is prepared upon the amount as well as the return that was contained in the plan. In determining the net quantities that are to be procured, necessary adjustments have to be made for the stock that is already held.
The valuation has to be made in a standard rate of the current market. On this manner, the procurement of materials can be prepared. The budget which is communicated all the departments which are concerned so as to have the actual purchase commitments regulated according to the budget. The actual figures are compared to the budgeted figures from time to time so as to provide a suitable basis for keeping the purchase materials under control.
Maintaining Perpetual Inventory System:
This is another method which is required to help in controlling the inventory. It is also called the automatic inventory system. The main ides of this particular system is to make available details concerning the quantity as well as the value of the stock of each and every item all the times. Therefore, the system provides a rigid control over the stock of materials as the physical stock can be regulated regularly with the stock records kept in the stores as well as cost office.
Axsäter, Sven. Inventory Control. New York: Springer, 2006. Internet resource.
Imenkovi, Tea. Inventory Control System in the Hospitality Industry: Possibilities of Establishing a Flawless Inventory Control System in the Hospitality Industry. Saarbrucken: LAP Lambart Academic Publishing, 2010. Print.
Fuchs, Jerome H. Computerized Inventory Control Systems. Englewood Cliffs, N.J: Prentice-Hall, 1978. Print.
Salcic, Zoran, and Asim Smailagic. Digital Systems Design and Prototyping: Using Field Programmable Logic and Hardware Description Languages. Boston: Kluwer Academic, 2000. Print.
Chand, S. (2014). 6 Most Important Techniques of Inventory Control System. YourArticle Library .
Joseph, L. (2014). Inventory Management Techniques and Their Importance. udemy blog .
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