Inventory systems for week two.docx _13K_ - Student of Fortune by yaofenji


									       The method that I have chosen for an Inventory Control System is the Just-In-Time (JIT)

System. This system is defined as a production and inventory control system in which materials

are purchased and units are produced only as needed to meet actual customer demand. This

approach enables companies to reduce their inventories to a minimum quantity or even

sometimes zero. It has been stated that this system has had the most direct effects on the

following inventories: Raw materials, Work in process, finished goods. Companies used to hold

large quantities of these resources in order to avoid any production problems. With this system

though, enough materials are purchased in order to cover the needs on a daily basis.

   This system is based off customer request. As the customer has placed an order, the

materials are ordered to process this request. After producing all orders at the end of the day the

finished product is immediately shipped out and the inventory left should be little or none. The

process is which this system is predicated on is that raw materials are received just in time to go

into production, manufacturing parts are completed just in time to be assembled into products,

and products are completed just in time to be shipped to customers.

   The Pull Approach helps this method. The Pull Approach helps to control the flow of

materials that are needed to complete an order. There are signals sent back and forth that request

the exact amount of materials that are needed to complete the project and when they are to be

delivered. These exact materials will be delivered as needed and in a timely fashion, which helps

to control waste and time management. Nothing will be produced without this approach

dictating the materials needed and when they are to be delivered. This also helps to guard

against inventory buildup.

   The main benefits of the Just-In-Time System are the following:
        • No funds will be tied up holding unnecessary inventory

        • There will be no storage space tied up with unnecessary inventory

        • There will greater customer satisfaction due to reduced defect rates and be less waste.

 • There is a greater potential for output and customers will be happy due to a faster throughput


   The benefits to this system could be very beneficial. If you do not have to tie up funds with

purchasing inventory that you do not potentially need for the near future, you could use those

funds on other areas of your business. If you do not need to order, the unnecessary inventory

then you could utilize the storage space that you would need to hold this inventory for other

reasons. Perhaps with this money and space you could develop a new division to your business

that could add to the services you currently render.

   As an example, Dell Computer Corporation has fine-tuned its Just-In-Time inventory control

system to effectively manage its process. It has enabled them to have a customized computer

that is order by a customer by 9am on a truck to be delivered at 9pm. It has been said that Dell

has been able to price their products from 10-15% lower than their competitors which gives them

a huge edge. It also allows them to possibly put lower priced computer parts into their systems if

the inventory prices would be lower as opposed to having the parts sit on their shelves for

months. With Dell’s market share it is no wonder why they are a success by implementing a

winning/strategic system like this.

   If there is less material to be worked with this should create a lower waste and smaller defect

numbers in production. With this being said customers will be happier due to lower costs and a

quicker production process.

   The main disadvantages of the Just-In-Time System are the following:
     • Revamping your entire system could be difficult, time consuming and expensive.

 • With no little or no inventory to work with, if there are any supply issues this could cease


   Introducing a new process on this scale could be extremely problematic. If you are trying to

implement an entirely new inventory system this will take time. This time will be utilized

training personnel, which costs money, updating new systems and software. In addition, if you

have no inventory and you have companies that you order your resources from that go out of

business then this could hinder your own production. Any stoppage in receiving the necessary

supplies could be disastrous. It would cause a major problem with your customers and could

cause you to lose current and future accounts. You will always be vulnerable to disruptions in

supply but with this system that is the chance you have to take. This will force you to make

quick decisions due to not having the supplies to produce what is necessary. You have a window

of one day’s production supplies to work with and after that you would be forced to shut down

production due to lack of materials. This will definitely cost you money; every day that you are

out of business is another day that you cannot possibly make money.

   The current companies that effectively use these systems are the following:

     • Dell Computer Corporation

     • Harley Davidson

     • Toyota Motor Company

     • General Motors

     • Manufacturing Magic

     • Hawthorne Management Consulting

     • Strategy Manufacturing Inc.
   As you can see these are high profile companies that work on a huge production scale. If

they can effectively use and maintain these systems to run their business then it could be utilized

as your main inventory system.

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