JIT & Inventory Control

The traditional approach to inventory management focuses on the economic order quantity (EOQ), which facilitates the determination of an optimum level of investment in inventory by minimizing the total costs of obtaining and carrying inventory. The costs of obtaining inventory (ordering costs) includ

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losophy 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 expand their areas of responsibility, but may not receive any commensurate increase in pay. As a result, employee morale may suffer. The increased emphasis on quality may also have a short-term demoralizing effect as less-competent workers realize the pressure of having to bring their skills up to the company standard (Greenblatt, 1993, p. 42). Because deliveries are made more frequently under a JIT system than in a traditional inventory control system, but the lots which are received are smaller, ordering costs and per unit costs can also increase. Some of these costs can be mitigated through the contract negotiation process, but they remain an area of concern which companies need to address. Building too much into supplier contracts can also be a problem in that such contracts may lock the company into prices that remain in effect even after the supplier's costs decline. New technology may be one factor influencing cost reduction at the supplier; more efficient production methods may b
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Approximate Word count = 3321
Approximate Pages = 13 (250 words per page)

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