Advantages And Disadvantages Of Just In Time Accounting Essay


Just-in-Time (JIT) is a production system which was invented by the Toyota Company. Simply defined, the product is only constructed after it is ordered by the customer. Because customer demands are fast and mercurial; the effectiveness of production is an important topic for a company. This essay will focus on the advantages and disadvantages of JIT, beginning by looking at the production processes both in terms of cost efficiency and the problem that would occur in a crisis. Next, we will focus on production management. To continue, we will discuss the advantages and disadvantages of production time in operating a production process under JIT conditions. This assignment will use Dell computer as a case study. Dell computer which is invented by Michael S. Dell in 1984 is one of the largest computer company in the world now; after Dell computer practices JIT, Dell computer has become the market leader over Compaq in 2001. (Broyles, et al. 2005) In general this essay will demonstrate JIT, canmet demand simultaneously, with perfect quality and no waste in production.

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JIT was first developed by Taiichi Ohno in the Toyota manufacturing plants. It become management and manufacturing philosophy in many companies in Japan during the early 1970s. As a result, Taiichi Ohno was referred to as the father of JIT. JIT was captured support by Japanese companies because the oil embargo in 1973. The shortage of natural resources was a challenge for the Toyota Company to manufacture. Therefore, Toyota Company utilized JIT to reduce the cost of the production processes and gained successful survival. Thus, JIT help Toyota decrease inventories and promote productivity efficiently. As Cheng, Podolsky, and Jarvis state ' Toyota realized that JIT would only be successful if every individual within the organization was involved and committed to it.'(2003: P.3) For this reason, I agree with that JIT has met demand simultaneously.. Next, the advantages in the production processes of JIS will be described.

To begin with, JIT can help a company improve production processes not only by improving productivity, but also by reducing a company's inventory. In a more recent website article Thompson and Strickland state (2000)'Dell's just-in-time inventory emphasis yielded major cost advantages and shortened the time it took for Dell to get new generations of its computer models into the marketplace.' In addition, JIT is based on careful plans and accurate work-cycle times to provide goods to customer. It provides a quick and unbroken workflow to make product promptly and smoothly. It is the reason that JIT can improve productivity successfully. Moreover, JIT can decrease inventory effectively. For example, JIT in Dell Computer provide a strong result. Thompson and Strickland (2000) claim that Dell computer had $342 million in their inventory in 1993. After Dell computer began practicing JIT, It helped Dell computer remained $233 million in inventory in 1998. To reduce the materials and capacity of inventory is a large benefit of JIT. In fact, it reduces the total cost of ordering and holding inventory.

However, it is worth to mention that production processes of JIT may bring some disadvantages in low inventory, especially when supplier can not provide enough materials in supply chain. It would make JIT unable to deliver products on time to customers because JIT hasn't enough inventories in the stock to supply manufacture immediately. Furthermore, JIT has to bear this higher risk of alteration in materials price in special events. According to CNN News website, Moore (1999) states that there was a strong earthquake in Taiwan, which effected the production of memory chips: prices increased by almost 25 percent and there was a subsequent shortage in 1999. It means Dell computer had to pay higher price in memory chips because they did not have enough in their inventories. Even though there are some risks of the production processes of JIT, the production processes of JIT still have quite benefits to practice. How to improve productivity in JIT effectively is depending on production management of JIT, which will be discussed in the next part of this essay.

As remarked in the introduction, JIT offers a smooth, continuous and optimised workflow. As a result, JIT will effectively save controlling cost in production management of company. It means that all of the workers who are in the factory do not have to be managed by supervisors and they just focus on following the workflow to manufacture product. What is more, JIT can help factory to produce high quality and steady products to satisfy their customer needs without high managing cost. As Kraemer, Dedrick, and Yamashiro (2000) state that Dell computer decreases the complexity of managing its supply chain, and asks its suppliers to provide high quality goods by planning and negotiating. It expresses that Dell computer not only reduces the cost of managing, but also supplies high quality products to customer. JIT also supportably decreases training cost of employee in production management because it is unnecessary to teach all of workers to produce a product; they just need to be responsible for how to produce a part of product.

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Nevertheless, there are other disadvantages about production management in JIT. The main reason is difficult to deal with unforeseen production because the workflow in JIT is fixed. If demands of customer want to change specification of product suddenly, it might be hard for JIT to modify and co-operate to deal with these accidents. In fact, in JIT there is a strong correlation between careful plans and accurate work-cycle times. As a result, if the production processes has to vary, it will be necessary to spend much time and waste managing cost in re-creating the production processes. There is causal link that all of the workflow has to be rewritten and re-designed again to match produce steps. Besides, JIT may quickly disrupt an entire supply chain while JIT processes are in place, including labor strikes, stock outs, and port lockouts. (Broyles, et al. 2005) However, controlling time is one way to avoid accident. JIT is an excellent way to save time in produce product. Subsequently, this part will be discussed next paragraph.

To continue, time is a crucial factor of productivity, How to produce promptly and satisfy with customer demands in short time is an important task. JIT utilizes detailed workflow and accurate work-cycle times to save time in the production processes and lead to a decrease in cost of wasted time. Therefore, JIT can seek the benefits of providing customer orders and reducing the average delivery time, and quickly accomplish what customer desires. Furthermore, the product is only manufactured after it is order by the customer. It can make the company more responsive to customer demands at short-term and avoid producing incorrect product. JIT provides company with a time-to-market advantage. Thus, JIT not only help company to save time in avoid producing incorrect product, but also provide customers with a minimal wait. Broyles, et al. (2005) claim that after Dell computer got customers order, and then they begin to produce the product immediately, and provide computer to customer desires.

Nonetheless, there is another disadvantage that JIT is lack of time elasticity in the production processes. If the company want to change producing of sequence suddenly, it will be no benefits to practice JIT. In addition, it has no buffer to interrupt or change the production processes because workflow and work-cycle times is created a detail at beginning. Consequently, JIT also cause limit self-improve, For instance, if one part of the produce process improve, it will make other produce process also have to improve to coordinate with it. In fact, all of the produce process in JIT is closely linked and inseparable. To suppose one part of the produce process becomes slowly or fast, it will make all of the produce process become uneven and rocky. According to article website, Cory (2001) relates 'From Cisco routers and Dell computers to the Gap's leather pants, companies have found their just-in-time manufacturing systems have let them down.' Thus, JIT is easy to cause the time of production processes has no longer decrease or increase, and limit self-improve.

To sum up, the world has evolved over the years with many new demands and supplies. Satisfying customer demands has become more important than just manufacturing the production. Traditional production processes often cause higher inventory and ineffective production processes. This assignment has explained the useful importance of JIT. The essay has given an account of and the reasons for the widespread use of JIT. Although JIT are quite attractive for these benefits, it is a double-edged sword. JIT has weaknesses in some parts which we have known. However, it still has the benefits outweigh the risks to the JIT enabled Dell computer. Moreover, after Dell computer practice of JIT results in decrease inventory, reduce cost of management, and diminish cost of wasted time effectively. In the end these benefits all result in a cost savings for Dell computer and offer higher revenue. In fact, JIT has a large variety of advantages and disadvantages that I have outlined above, among them the production processes, the matter production management and the production time.