Content provided in partnership with
Business Services Industry
JIT savings - myth or reality? - just-in-time management
Business Horizons, May-June, 1995 by Jitendra Chhikara, Elliott N. Weiss
This JIT provision of products through a finish-to-order system would require sufficient capacity at the finishing stage. The extra capacity cost would be more than offset by the reduction in inventory. The lesson here is that, even though the cost of holding the inventory at the different stages (WIP and finished goods) would be the same, the total amount of inventory needed if parent rolls rather than SKU were stocked would be significantly lower. Cash flow savings would accrue because current safety stock in cut paper could be reduced, resulting in a one-time decrease in working capital investment. By instituting the convert-to-order system, the cash required to provide similar service levels would be significantly reduced. The caveat here is that, in addition to examining cash flows, a company should continually explore ways to improve the operating system.
We have offered three examples showing that, in addition to examining the physical flow of materials through a factory, companies need to look at the flow of cash through the organization to make well-informed inventory decisions. Though JIT offers an improved look at the factory, companies may, if they do not simultaneously look at cash-flow measures, have suboptimal systems. Barriers between functional areas--in this case, accounting, finance, and operations--must be removed for organizations to make the best decisions.
References
J. Cavinato, "What Does Your Inventory Really Cost?" Distribution, March 1988, pp. 68-72.
H. Gleckman, "A Tonic for the Business Cycle," Business Week, April 4, 1994, p. 57.
H.L. Lee and C. Billington, "Managing Supply Chain Inventory: Pitfalls and Opportunities," Sloan Management Review, Spring 1992, pp. 65-73.
S. Sakakibara, B. Flynn, and R. Schroeder, "A Framework and Measurement Instrument for Just-in-Time Manufacturing," Journal of Operations Management, 2, 3 (1993): 177-194.
W.L. Sartoris and N.C. Hill, "Innovations in Short-Term Financial Management," Business Horizons, November-December 1989, pp. 56-64.
M. Selz, "Big Customers' Late Bills Choke Small Suppliers," Wall Street Journal June 22, 1994, p. B1.
E.R. Sims, Jr., "Material Flow Is Money Flow-," Industrial Engineering, August 1990, pp. 18-19.
M.W. Tucker and D.A. Davis, "Key Ingredients for Successful Implementation of Just-in-Time: A System for All Businesses," Business Horizons, May-June 1993, pp. 59-65.
Jitendra Chhikara is a manager of financial business planning and analysis at AT&T Universal Card Services in Jacksonville, Florida. Elliott N. Weiss is an associate professor of business administration at The Darden School of the University of Virginia in Charlottesville,
COPYRIGHT 1995 JAI Press, Inc.
COPYRIGHT 2004 Gale Group
Find Research Guides for:
Find Featured Titles for: Arts
Most Popular Articles in Business
- Research and Markets : Tesco Plc - SWOT Framework Analysis
- Do Us a Flavor - Ben & Jerry's Issues a Call for Euphoric New Flavors
- eBay made easy: ready to start an eBay business? These 5 simple steps will ...
- Katrina's lawsuit surge: a legal battle to force insurers to pay for flood ...
- Wal-Mart's newest distribution center opened last month near the southwest ...
- More »