MGT 6170 CMU Operations Management Paper
Learning Engagement # 7
TOPIC:
If inventory is so difficult to manage, why don’t firms have their suppliers manage the inventory and accept deliveries only on a Just-in-Time basis? Or, is this obsolete in 2022?
PROFESSOR'S GUIDANCE FOR THIS WEEK'S LE:
You may want to look at costs associated with inventory. Make sure you understand the minimum formed by two conflicting cost dynamics associated with ordering /purchasing inventory in batches and by storing it. Cost consideration will give a clue at what is involved and how the inventory decision has to be made. Back up your ideas with a current event.
REPLY TO
by Maysaa Al Mashaykhi
Manufacturers use an inventory strategy to increase Just-in-time (JIT) inventory management, also known as lean manufacturing. They are sometimes referred to as the Toyota production system (TPS). The process involves ordering and receiving inventory for production and customer sales only as it is needed to produce goods and not before (Carlson,2021). This type of inventory management delivers many advantages but is not without its downsides and depends heavily on elements such as a strong, fast, and efficient network of suppliers. Just-in-time inventory management is a positive cost-cutting inventory management strategy, although it can also lead to stockouts. The goal of JIT is to improve a company's return on investment by reducing non-essential costs(Teeboom. 2019). The JIT inventory system describes a shift away from the older "just-in-case" system, in which producers carried much more comprehensive inventories of stock and raw goods in case they needed to produce more units because of higher demand.
Since customers sometimes place unexpected purchases, and some excess inventory is required to meet these needs, just-in-time inventory is not always suitable. The reason that just-in-tome is not reasonable is the possibility of an error. Just-in-time inventory makes it difficult to fix the mistakes and work on a defective product. Any logistical problem might cause a delay in the delivery of products, which can cause the entire manufacturing operation to delay. That will result in significant financial loss and cause harm to a company's reputation in the market.
For example, it is easy for manufacturers or assemblers in an industry like car suppliers to manage inventory and supply it on time. That is because most car manufacturers are just assemblers because of the nature of the product. But for an industry such as fabric manufacturing suppliers managing the inventory is impossible. The reason is that once raw material, it runs via a sequence of processing before eventually coming out as a product.
R. Carlson. (March 12, 2021).Just-In-Time (JIT) Inventory Management
https://www.thebalancesmb.com/just-in-time-jit-inv...
L.Teeboom.( January 31, 2019).Pros & Cons of the JIT Inventory System.
https://smallbusiness.chron.com/pros-cons-jit-inve...
by Priyanka Bangari
Inventory management has become increasingly tough owing to its unpredictable nature. The function of stock levels and the dynamic nature of client demand are two factors that may impact the inventory of any organization. As a result, managers have issues in maintaining sufficient supplies to fulfill customs expectations while minimizing inventory management costs. For example, if a food item company has more raw material than is necessary, inventory carrying costs will rise. Furthermore, if the manufacturer fails to order the needed quantity of raw material, production may be suspended, resulting in a deterioration of relationships with wholesalers and distributors (Opoku et al 2020).
To address this problem, a Japanese company developed the just-in-time (JIT) manufacturing approach. Companies who used this method were able to reap the rewards. It does, however, come with its own set of disadvantages. And the prime disadvantage in this condition is that the supply chain's seamless operation is largely dependent on perfect coordination between all of the key players engaged in the supply, production, and transportation of raw materials and finished goods (Briscoe, & Schaub, 2020).
Furthermore, price shocks, supply shocks, demand shocks, and big orders may all have a significant influence on inventory management and, as a result, reduce ROI. The fundamental reason for all of these drawbacks is that JIT is mostly based on current demand. And since the price of raw materials and other vital goods is always fluctuating, handling such circumstances may be very inefficient. Furthermore, the exceptional spike in orders presents a considerable danger, particularly to firms that are reasonably large and serve a large number of clients (Usman, Karaye & Abubakar, 2020). As a result, companies are typically hesitant to use the JIT technique.
References
Briscoe, N., & Schaub, M. (2020) CONJIT: A FEASIBLE SOLUTION FOR JUST-IN-TIME INVENTORY MANAGEMENT.
Opoku, R. K., Fiati, H. M., Kaku, G., Ankomah, J., & Opoku-Agyemang, F. (2020). Inventory Management Practices and Operational Performance of Manufacturing Firms in Ghana. Advances in Research, 1-18.
Usman, R. D., Karaye, Y. I., & Abubakar, A. (2020). impact of inventory management on profitability of listed pharmaceutical firms in nigeria. impact of inventory management on profitability of listed pharmaceutical firms in nigeria, 44(1), 16-16.