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Just in Time in Kalamazoo

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Submitted By shyshy01
Words 1078
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Case 2-1 Just-in-Time in Kalamazoo
Summary and Assessment:
President, Jim Ballenger’s, firm specializes in manufactured mini motor homes in Kalamazoo, Michigan. The majority of the mini motor homes are assembled from components purchased from outside vendors. It has come to Jim’s attention that transportation and inventory cost contributed to a relatively large portion of his components parts expenses. In an effort to reduce cost Mr. Ballenger considers implementing the just-in-time (JIT) system which was developed by the Toyota Motor Company. Mr. Ballenger and the rest of his management team are well aware of key principles, requirements and trade-offs that are necessary to occur in order to allow JIT system be successfully implemented. Unlike other kinds of management decisions, this one, due to its complicated nature, requires special consideration and financial calculations. Thus far, the company’s executive assistant created a summary of random sample of component inventory in numbers. The purpose of the summary is to identify which of two systems is more financially beneficial. Although cost-efficiency factor will have a weighty impact on management’s final decision, yet other more significant conditions will probably have a final say in the choice between the two production systems.

Answers to discussion questions from chapter (pg 43): 1. What is the total annual cost of maintaining the components inventory under the present system?

A: $1,151,522.00

2. What would be the total annual cost of maintaining the components inventory under the JIT system (assuming no safety stocks)?

A: 1,292,824.00

3. Should Ballenger take into account any other cost or benefits from the JIT system? If so, what are they?
A: If Jim Ballenger were to start using the JIT system, due to the reduction of inventory he would also see a reduction on

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