Essay, Research Paper: Jit Inventory

Since the dawn of human existence evolution in all sectors of society has occurred due to Economic factors. This has mainly happened due to the fact that all technological achievements have occurred in favor of money. Specifically we can admit that Economy is the main reason for growth and development. By these means it is in our interest to establish strong economies either as societies (macroeconomics) or as individuals (microeconomics). For these reasons several techniques and methods have been initiated in order help modern individuals to develop. Such techniques are usually Accounting or Managerial in their nature. However one of the most important technique is both an Accounting and a Managerial technique and is called "The just in time method".
Just in time manufacturing "was an inventory control approach that was developed by Taiichi Ohno at Toyota Motor Company of Japan. Specifically it requires that "the exact quantity of defect-free raw materials, parts and subassemblies are produced just in time for the next stage of the manufacturing stage" (Ivancevich-Lorenzi-Skinner, p 427). That actually means an inventory is never large and by this way cost is being reduced due to the fact that there are no losses of materials due to bad demand or spoilt. This method is totally a demand - driven process since inventory value represents the exact value of raw materials, parts or subassemblies that must be spent to satisfy orders that have already taken place. By these means the company is never overstocked and that has as an affect that the company will never have a liquidity problem since assets as stock of goods are smaller and cash is bigger. Another reason for this to happen is the fact that Just in time manufacturing "is a philosophy of eliminating non value added activities and increasing product quality throughout the manufacturing process" (Meigs, Bettner, p. 804).
But how can we control if our Just in time manufacturing system is efficient? The answer to that is given by Meigs and Bettner : "A widely used measure of efficiency in a Just in time system is the Manufacturing Efficiency ratio" (p. 805). This ratio is given by the Value Added Activities time over the Cycle time. The cycle time is the time of processing, storing, moving and inspecting that is spent on the material before their usage. If the ratio is equal to one then we have the perfect Manufacturing efficiency ratio. This means that the smaller the number the less efficient is our Just in Time manufacturing method and the larger are the Value added activities.
Finally we can conclude that if we perform the Just in Time manufacturing the right way we diminish cost and that is the ideal case for every company of producing nature. Toyota once again initiated a revolutionary technique on the field of Management that was widely copied by many companies around the world.



Bibliography


· Lorenzi, Peter , Skinner, Steven J. , Ivancevich, John M. :
"Management Quality And Competitiveness". Irwin McGraw-Hill (1997).
· Williams, Meigs , Bettner, Haka : "Accounting The Basis For Business Decisions". Irwin McGraw-Hill (1999).
· Garrison, Noreen : "Managerial Accounting: Concepts For Planning, Control And Decision Making". Irwin McGraw-Hill (1997).


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