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Advantages and Disadvantages of JIT-II Systems.

Companies such as IBM and Ingersoll-Rand have moved beyond JIT to JIT-II systems. In JIT-II systems, supplier sales representatives work on-site to monitor inventory levels and have access to current sales data and forecasts. The supplier representatives use this information to reorder goods automatically and meet production needs. Discuss the potential advantages and disadvantages of this arrangement. What special controls, if any, should be developed to monitor JIT-II systems?

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ADVANTAGES IN JIT-II ARRANGEMENTS

Administrative Advantages:

Efficient administration of the purchasing function is reducing lead times in JIT II companies. Having an in-plant on-site provides the customer with continuous supplier support. The time required to contact a supplier is minimized because the in-plant representative attends the customer's production planning meetings, determines the material quantities needed from the supplier, and places orders on behalf of the customer.

It can also reduce administrative costs for both the customer and the supplier as the customer no longer exclusively bears the costs of the purchasing function because the supplier pays the salary of the in-plant. Once a customer and supplier have established a JIT II partnership, an "evergreen" contract is awarded. This security allows the supplier to allocate financial resources to managing the customer's account rather than courting or renegotiating business.

As JIT II partnerships mature, supplier representatives are allowed ongoing electronic access to the customer's material planning system and can arrange electronically for the delivery of material to the customer. This access can aid in getting materials from the supplier more quickly. Some supplier representatives are even authorized to initiate the payment process to their employers once goods have been received by the customer. This results in improved cash flow for the supplier.

Logistics:

Transportation lead times are also cut through the application of JIT II to logistics. This is accomplished by organizations partnering with shipping companies to deliver incoming materials. Like the supplier's sales representative in a customer's purchasing department, the shipper's representative works inside a customer's logistics department, scheduling and monitoring the delivery of incoming materials from third-party suppliers.

Concurrent Engineering and Value Analysis:

The customer and supplier can work together early in the design cycle of new products, allowing the supplier to develop the appropriate materials for the customer and sell directly to the customer's engineers. When ...

Solution Summary

This posting discusses in great detail the advantages and disadvantages of JIT-II systems. It also examines the special controls required to monitor the system.

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