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Just-in-time Purchasing

Just-in-time Purchasing. Katherine Hogan OISM 470W February 19, 2000. Presentation Overview. Definition of Just-in-time Purchasing Different uses How it will help your company Examples of Just-in-time Purchasing. Just-in-time Purchasing.

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Just-in-time Purchasing

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  1. Just-in-time Purchasing Katherine Hogan OISM 470W February 19, 2000

  2. Presentation Overview • Definition of Just-in-time Purchasing • Different uses • How it will help your company • Examples of Just-in-time Purchasing

  3. Just-in-time Purchasing • An approach to purchasing that requires long-term agreements with few suppliers

  4. Brainstorming How can just-in-time purchasing be used in your organization?

  5. Advantages to JIT • Reduces the need for central warehousing and storage • More personal relationship with suppliers • Long-term relationships that help to certify suppliers • Receiving inspection is reduced and in some cases eliminated

  6. Lowered variety in suppliers • Reliable delivery schedules • High quality materials used • Reduced waste

  7. Demands on Purchasing of JIT • Reduced number of suppliers • Stable and good communication throughout a firm • Locating suppliers nearby • Long-term relationships • Helping suppliers to increase quality • Not to get hung up by single sourcing • Buying from small firms

  8. Limitations of JIT • Difficulty to change old ways • More pressure on workers • Success is varied • Employee commitment • Production levels • Employee skills

  9. JIT Purchasing Smaller lot sizes More frequent deliveries No rejection from the supplier Long-term contracts Buyer decides delivery schedule Innovation encouraged Minimal paper work Less formal communication Traditional Relatively large lot sizes Less deliveries at higher quantities 2% rejection from supplier Lowest price is main objective Time consuming, formal paperwork Formal communication Differences between JIT and Traditional Purchasing

  10. Why organizations use JIT Purchasing • Reduce waste • Increased cycle times • Higher quality in products • Fewer suppliers • Reduction in warehouses • Dependable delivery

  11. Example – Faxban What is Faxban? • It combines production floor fax machines and kanban re-supply signals to lower transaction processing and save money

  12. Example - Faxban Who uses it? • Honeywell started using this with their suppliers How does it work? • Re-supply orders are faxed from the production floor by the workers to suppliers

  13. Example - Faxban What techniques are used in faxban? • EDI • Kanban • Blanket Order • Purchasing Card

  14. Example - Faxban What were the outcomes? • Transaction processing reduced • Reduction in accounts payable function • Money saved • Reduced waste • Direct communication resulted in less ambiguity between supplier and Honeywell • Time reduced

  15. Exercise We are opening a shop that makes different types of chairs. Discuss in groups the advantages of being a shop with traditonal purchasing values and JIT values.

  16. Exercise, cont. Remember that we make many different types of chairs What are the advantages to both types of purchasing?

  17. Summary of JIT Purchasing • Many advantages that lead to reduction in waste, storage, and other aspects that lead to saving money and time • Long-term relationships with suppliers • Many different techniques are used depending on the demand of the company

  18. Summary, cont. • Higher quality material used

  19. Bibliography "Faxban: Just-In-Time purchasing made simple." . 1997. <www.innovativepurchasing.com/articles/Faxban.html > (14 February 2001). Foster, S. Thomas. Managing Quality: An Integrative Approach. Upper Saddle River, New Jersey: Prentice Hall, 2001.

  20. Bibliography, cont. "Just-in-Time." <www.clubpom.com/Student_Wing/Public/JITtutorial.html#web > (12 February 2001). "Just-in-Time Purchasing." <www.cl.uh.edu/bpa/hadm/HADM_5731/ppt_presentations/20inven/tsld029.html > (14 February 2001).

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