Princess Nourah Bint Abdulrahman University Ministry of education College of Business Administration Department of Accounting
Why companies are using just-in-time(JIT)purchasing and the features and benefits of a just-in-time production system.
Names: Atheer Alshehri 435001392 (1) Alanoud al ashaikh 435002580 (15) Shahad Aleid 435008312 (32) Wejdan Jmaan 435005540 (48) Badriah Almatrood 435002475 (18)
Section: 6A1
1
Key words : 1/ JIT system. 2/Inventers. 3/Continuous improvements. 4/purchasing. Objective: 1/ acquaint the reader with the overall JIT concept and the factors necessary for its implementation. 2/the concepts and the disadvantages presented here represent the ideal principles and methods of implementation and development
Introduction : In this research we will discuss the definition of the JIT system and the strategy required to implement it also the most unique characteristics, the advantages and disadvantages, and finally the objectives achieved by this system. To facilitate the idea and clarify its meaning we have a simple example of one of the companies that apply this system and it's a good example would be a car manufacturer that operates with very low inventory levels, relying on its supply chain to deliver the parts it needs to build cars. The parts needed to manufacture the cars do not arrive before or after they are needed; instead, they arrive just as they are needed.
2
What does (Just In Time – JIT) mean? Just-in-time (JIT) is an inventory strategy companies employ to increase efficiency and decrease waste by receiving goods only as they are needed in the production process, thereby reducing inventory costs. This accurately.method requires producers to forecast demand . This inventory supply system represents a shift away from the older justin-case strategy, in which producers carried large inventories in case higher demand had to be met, A just-in-time manufacturing system requires making goods or service only when the customer, internal or external, requires it, JIT requires better coordination with suppliers so that materials arrive immediately prior to their use, It reduces or eliminates inventory and the costs associated with carrying the inventory, It emphasizes that workers immediately correct the system making defective units because they have no inventory. With no inventory to draw from for delivery to customers, just-in-time relies on high quality materials and production. It is required that the companies that use just-in-time manufacturing must eliminate all the sources of failure in the system. Production people must be better trained so that they can carry out their works without errors. Suppliers must be able to produce and deliver defect free materials or components just when they are required, and equipment must be maintained so that machine failures are eliminated.
3
Any system must have characteristics that distinguish it from other systems. These are the most important characteristics: 1/ Long term perspective: Due to that JIT system counting on long term concentration, which in need to improve and enhance the production line, illustrate it for a presentation purposes. Therefore, there are process that should be taking under consideration which is the following: Create format the changes on the products, row materials, and levels of production that is assigned to suppliers Second of all: Provide employees, and transportation’s Requirements so we can eventually gain the Client’s total satisfaction.
2/ Automated purchasing : In general, Any transaction process for all levels, wither it belongs to a production ,or storage ,or specific time it is conducted automatically within the electronic system, also if there is a demand to know more details, or need particular supplies, it will be Only through email messages.
3/strong relationships : JIT system built upon strong bonds between the suppliers and companies which is always based on Long run agreement and contracts.
4/ Efficiency : among all characteristics Efficiency is essential within the supply process, it could be transferred in some of production process or operation due 4
to the gap that might be existed could lead to some issues, so efficiency could have great impact through training the employees to discover problems and follow the right standards for raw materials, and products. Also testing products to assure good production line .
5/ Continuous improvements : Continuous improvements help to eliminate production, and quality problems. These improvements could be in the form of developing some of the design steps, setting up systems or eliminating steps that do not add value to the product.
We also stated that any system that has characteristics certainly followed the pros and cons, so through what will be stated we will know what are the negatives or unacceptable repercussions when applying this system, in return we get the pros. Just in times system can provide us several advantages: 1- less space-room needed Which means that Space is not mandatory*l to store items, which will result to reduce cost, in regards of renting or buying warehouse.
2-Smaller investment: Limited budget companies can purchase only When it needed certain amount of stock where it leads to increase in cash flow within the company. 5
3-In order to prevent the risk of running out of products, there are certain procedures that have to be followed through a specific agreement with the provider hence giving the priority to the company i owe, and have the products arrived on time based on the agreement between both sides .
4- Just in time system is characterized that the process of the production line is limited ( production line). Therefore, it will be much easier to stop the production of one product, and totally switch to produce another item based on clients’ desire.
Disadvantage : Time is a major key on the system. Which means that the manufacturer has to stick to the time frame that is given, and deliver the products on time, otherwise any delay will cause the danger. More planning required: Most companies have seasonal sales periods, meaning a number of products will need a higher stock level at certain times of the year due to higher demand. And ensuring suppliers are able to meet different volume requirements at different times.
6
The objectives of this system are to realize the following:
•JIT manufacturing views inventory as a waste that needs to be eliminated. According to JIT, by eliminating inventory we can clearly identify problems and work to eliminate them. •JIT manufacturing is an efficiently coordinated production system that makes it possible to deliver the right quantities of products to the place they are needed just in time. •JIT drastically reduce WIP (work in progress) inventories throughout the production system. Products flow from suppliers to production to customers with little or no delays or interruptions beyond the amount of time they spend being produced at work centers in manufacturing. JIT manufacturing is to reduce manufacturing lead times, and this is primarily achieved by drastic reduction in WIP.
7
conclusion Just-in-time (JIT) purchasing is a systems approach for developing and operating the purchasing function. JIT purchasing along with the total quality management in many industries has been successful in reducing inventory and increasing the overall effectiveness of purchasing function and hence the productivity of manufacturing. JIT purchasing methods are successful not only in Japan, but also in many countries like, South Korea, Taiwan, USA, UK, Germany, France, Hong Kong, etc. JIT purchasing has tremendous effects on the operations of production, distribution, and accounting. An attempt has been made in this paper to review the literature available on JIT purchasing with an objective to establish a framework for improving the effectiveness of purchasing function. In addition, some future research directions on JIT purchasing are indicated.
Limitations and perspectives:
One of the obstacles we faced in the research: 1/ Work on research in English for the first time. 2/ The difficulty of identifying scientifically reliable subjects. 3/ we could not find the specific information related to the subject of the research 8
Reference: 1/ Boyd,K. 2013, " Cost Accounting For Dummies" http://www.dummies.com/business/accounting/cost-accounting-just-intime-purchasing-risks-and-benefits/ 2/ 1999, " International Journal of Production Economics" https://www.sciencedirect.com/science/article/pii/S0925527398000255 #aep-abstract-id5 " 3/ (agarwal, 2012) ."Just-In-Time (JIT) Method: Definition and Objectives" http://www.yourarticlelibrary.com/accounting/managementaccounting/just-in-time-jit-method-definition-and-objectives/53120
4/ Acevedo,L, 2017.''what are some characteristics of JIT inventory system'', https://bizfluent.com/info-8286907-characteristics-justintimeinventory-system.html . 5/ Bragg,S,2017.''the advantages and disadvantages of JIT inventory '', https://www.accountingtools.com/articles/the-advantages-anddisadvantages-of-just-in-time-inventory.html .
Barlow ,P,2015. '' advantages and disadvantages'', https://babington.co.uk/blog/accounting/just-in-time-advantages-anddisadvantages/
9