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 individual organizations, recognizing that these organizations have unique circumstances that makes the wholesale adoption of any philosophy unlikely to be successful.
JIT is, at its fullest implementation, not merely an inventory control method, but a system of production based on the total elimination of waste. It seeks to improve the rationality on which purchasing decisions are made, and eliminates all activities that do not add value to a product or service. It requires a commitment to a high level of quality, a commitment to continuous improvement in the efficiency of an activity, and an emphasis on simplification and increased visibility to identify activities that do not add value. Under JIT, the ideal batch size is one unit, eliminating all inventory costs (Cohen, 1993, p. 40).
Benefits of JIT include reduced throughput time, better quality...