JIT and Dell

Costs associated with inventory make up one of the most critical cost areas within an organization. Whether the company manufactures goods or sells finished products, inventory carrying costs and their component parts can represent a significant portion of the company's cost structure. In addition, having the wrong amount of inventory on hand can result in severe difficulties. This research examines a particular type of inventory management, just-in-time (JIT), and examines how JIT was implemented at Dell Computer, a leading multinational personal computer manufacturer.

Reduction of inventories is the main reason that companies have sought alternative inventory management methods. The use of smaller batches leads to the need for less inventory at any particular point in the production process. Cash flow is improved due to less capital investment in inventory. Less inventory on hand leads to savings in other areas as well, such as smaller space requirements, decreased materials handling costs, decreased record keeping costs, decreased insurance and tax obligations, and less scrap and obsolescence (Blanchard, 1992, p. 44).

Quality is an integral part of the JIT philosophy, and American managers have introduced some Japanese operating principles (such as quality circles) wholesale into American companies. In other cases, companies have studied the underlying principles of JIT to understand how they can be properly and appropriately implemented in indi

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-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 depending on the situation at hand, and a smaller workforce which handles 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. Another accounting benefit is the elimination of the need to make the distinctions in costs of raw materials inventory, work in progress inventory, finished goods inventory, and cost of goods sold. Costs of JIT Implementing JIT is not without costs, however, and these costs can be significant. A major cost of JIT is that of reworking the accounting system to depict the JIT situation accurately. Traditional accounting systems work against JIT philosophy by often hiding managerial inefficiencies. There are costs associated with training and retraining workers in order to create the flexible workforce that JIT requires. There may also be nonquantitative costs in this area as workers ex

Category: Business - J