The cost of price negotiations is reduced with long-term contracts. This assures commitment of the company and the supplier to each other. Since the supplier is reviewed ahead of the company's production (even before the contract is signed), the manufacturer reduces its inspection costs, scrap costs and downtime (Andel, 1999, p. SCF13).
A JIT company also has lower labor costs than a non-JIT company because it must cross-train workers in order to take full advantage of the JIT environment. This results in workers who can fulfill multiple roles and a smaller overall workforce can handle the needs of the company.
JIT also helps reduce the need for cost allocations. This leads to information that is more useful for decision-making. Direct traceability of costs is increased with materials handling facilities dedicated to single manufacturing cells, and line workers performing machine maintenance. As a result, control moves closer to the point of production and more closely matches responsibility with cost cont
...