jit vs min or max

8/7/2019 JIT vs Min or Max

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` Inventory management Lowering the holding

costs of inventory.

` Holding costs are estimated to cost approximately

15-35% of the material's actual value per year.` The primary factors that drive this up include

additional rent needed, great insurance premiums

to protect inventory, and the cost of capital to

finance inventory.


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` Cost cutting approaches.

` Areas to be managed to lower the inventory cost

are :

1. How Fast Should a Company Liquidate DeadStock?

2. How Important is it to Have an Accurate Sales

Forecast?

3. What Role Does Freight Play in Inventory Costs?


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` Best companies Set plans to sell their obsolete

inventory.

` Reason Everyday it doesnt sell is just adding

holding cost.

` Sale at reduced price, sale as distressed product,

salvage, or charitable donation.

`

Best way to reduce this cost is selling atdiscount.


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` As per the sales forecast, companys inventory

management purchases the appropriate volume of

parts and materials.

` Forecast is not accurate then company will buymore than it can sell, and will be left with an

overstocked situation.


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` Cost of Inventory = Price of the product + Freight

charges in bringing that product to the warehouse

and to the final destination.

` To lower the inventory cost per unit freight costshould be addressed.

` Buying too small a volume means a higher price,

and a higher per unit freight rate and vice versa.


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` It is based on a minimum and maximum level of

inventory.

` Money is tied up in inventory that is not selling,

and not being invoiced.` Endangered by products getting damaged and out

dated.

` Storage of inventory.

` Min/Max inventory approach as more costly thanJIT.


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` The cost of freight is lower as the volumes are

maximized.

` Fewer emergency shipments from suppliers, and

to customers, because of late deliveries.` Pricing is often better due to the purchasing power

of buying in bulk.


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` A company will only order what it needs to use or

is guaranteed to ship out to customers.

` Products not held in inventory for extended

periods of time.` Keeps inventory costs and levels low

` Improves cash flow

` Eliminates the damage of obsolete or outdated

inventory


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` Requires a committed work force, able to mitigate

any costly mistakes.

` It also relies upon high volumes of products that

are needed daily and weekly.` There is no safety stock and no way to protect

against stock outs.

` During emergencies, companies incur high freight

charges.


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` Min/Max inventory based system used when

companies have cyclical and infrequent demand

from customers.

` It can be less expensive approach, provided acompany understands fully all its costs of

inventory.


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` Inventory costs include more than just the cost of

the part or material on the shelf.

` cost of freight both to the warehouse, and out to

customers.` Damage and obsolete inventory

` time spent

` overtime paid to employees to receive and re-

package product for urgent shipments.


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` Protect against stock-outs.

` Keeps freight costs low.

` Negotiate lower pricing for the product.

` Less chance of losing business due to a shortageof product.


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` Just-in-time (JIT) is an inventory strategy thatstrives to improve a business's return oninvestment by reducing in-process inventory andassociated carrying costs.

`

The doctrine of JIT is to make sure that anyinventory purchased, is immediately used or sold.` This ensures parts and materials dont remain in

inventory for too long a period.` Few companies which use JIT Inventory

Management are Harley Davidson, Toyota, Dell etc.


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` JIT keeps inventory levels low by using or

shipping product as soon as its purchased.

` JIT is an excellent way to alleviate the daily costof money.

` JIT keeps inventory holding cost down.

`

JIT frees up important cash reserves so it canbe used in other parts of the business.


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` No hard and fast rule to succeed with JIT.

` JIT succeeds with strong economies of scale or

large purchasing power.

` JIT succeeds when a company has constant

linear demand for products.

` JIT needs a committed work-force who'll

address issues immediately.


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` Reduced setup time.` The flow of goods from warehouse to shelves

improves.

` Employees with multiple skills are used more

efficiently.

` Production scheduling and work hour

consistency synchronized with demand.

`

Increased emphasis on supplier relationships.` Supplies come in at regular intervals throughout

the production day.


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Amar Purani 09

Ashish Chaplot 23

Deepa Thakkar - 34

Durvi Khimasiya - 42


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jit vs min or max

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