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 time. 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 production. 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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