How do JIT demand-based systems differ from forecast driven systems?
JIT demand-based systems or as they are called (Just In Time) is a production strategy that strives to improve a business return on investment by reducing in-process inventory and associated by carrying costs. In other words it involves a production process that operates solely on customer demand. The reasoning for a JIT system is very simple it is used to highlight the system’s hidden cost of monitoring the inventory. It is not a simple way for a company to get used too at all. The JIT overview breaks down how all of the company’s inventory is looked at and how it compares to management.
Forecast Driven systems predict the forecast of sales based on the numbers of forecast models. This type of forecast is then passed down through the supply chain so that a manufacturing plan can be made to meet the sales demand. Since the manufacturing often produces more than one variation of an item and many times the products are customized and this makes this forecasting process extremely complex. What are the major pros and cons of JIT and lean manufacturing systems? What do they have to do with nonvalue added or wasted activities?
There are major pros and cons of the JIT system. One pro is Reduced Inventory costs. JIT manufacturing reduces company inventory costs because inventory is acquired upon customer demand. This relieves the financial stress of stocking inventory for future use, reduces the need for expansive storage solutions, and reduces the risk of maintaining stock that expires or becomes outdated. It is very convenient for them to have this process available for them because that leads to less stress for the manufacturing to have to deal with. Another pro that is major for JIT systems is the better use of its cash flow. They allow companies to utilize cash for other operating expenses because the need of maintaining stored inventory levels are eliminated. The benefit of not...
References: International Journal of Management Vol. 12 No.1 March, 1995. Dr. J.Bandyopadhyay
OM Student Edition. Collier/Evans Ch.9, 14, 7.
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