Question

How do you think activity based management would benefit from Just-in-time manufacturing? What type of analysis could you use to determine if there is a benefit? Do some research to support your conclusion. Do not forget APA format on your sources, in-text citations.

Answer 1

Advantages Just-In-Time Systems

Following are the advantages of Adopting Just-In-Time Manufacturing Systems

• Just-in-time manufacturing keeps stock holding costs to a bare minimum. The release of storage space results in better utilization of space and thereby bears a favorable impact on the rent paid and on any insurance premiums that would otherwise need to be made.
• Just-in-time manufacturing eliminates waste, as out-of-date or expired products; do not enter into this equation at all.
• As under this technique, only essential stocks are obtained, less working capital is required to finance procurement. Here, a minimum re-order level is set, and only once that mark is reached, fresh stocks are ordered making this a boon to inventory management too.
• Due to the aforementioned low level of stocks held, the organizations return on investment (referred to as ROI, in management parlance) would generally be high.
• As just-in-time production works on a demand-pull basis, all goods made would be sold, and thus it incorporates changes in demand with surprising ease. This makes it especially appealing today, where the market demand is volatile and somewhat unpredictable.
• Just-in-time manufacturing encourages the 'right first time' concept, so that inspection costs and cost of rework is minimized.
• High quality products and greater efficiency can be derived from following a just-in-time production system.
• Close relationships are fostered along the production chain under a just-in-time manufacturing system.
• Constant communication with the customer results in high customer satisfaction.
• Overproduction is eliminated when just-in-time manufacturing is adopted.

Disadvantages

Following are the disadvantages of Adopting Just-In-Time Manufacturing Systems

• Just-in-time manufacturing provides zero tolerance for mistakes, as it makes re-working very difficult in practice, as inventory is kept to a bare minimum.
• There is a high reliance on suppliers, whose performance is generally outside the purview of the manufacturer.
• Due to there being no buffers for delays, production downtime and line idling can occur which would bear a detrimental effect on finances and on the equilibrium of the production process.
• The organization would not be able to meet an unexpected increase in orders due to the fact that there are no excess finish goods.
• Transaction costs would be relatively high as frequent transactions would be made.
• Just-in-time manufacturing may have certain detrimental effects on the environment due to the frequent deliveries that would result in increased use of transportation, which in turn would consume more fossil fuels.

Precautions

Following are the things to Remember When Implementing a Just-In-Time Manufacturing System

• Management buy-in and support at all levels of the organization are required; if a just-in-time manufacturing system is to be successfully adopted.
• Adequate resources should be allocated, so as to obtain technologically advanced software that is generally required if a just-in-time system is to be a success.
• Building a close, trusting relationship with reputed and time-tested suppliers will minimize unexpected delays in the receipt of inventory.
• Just-in-time manufacturing cannot be adopted overnight. It requires commitment in terms of time and adjustments to corporate culture would be required, as it is starkly different to traditional production processes.
• The design flow process needs to be redesigned and layouts need to be re-formatted, so as to incorporate just-in-time manufacturing.
• Lot sizes need to be minimized.
• Workstation capacity should be balanced whenever possible.
• Preventive maintenance should be carried out, so as to minimize machine breakdowns