The following reasons have been offered for holding inventories: 1. To balance ordering or setup costs and carrying costs.
2. To satisfy customer demand (e.g., meet delivery dates).
3. To avoid shutting down manufacturing facilities because of
(a) machine failure
(b) defective parts
(c) unavailable parts
4. Unreliable production processes.
5. To take advantage of discounts.
6. To hedge against future price increases.
A)Explain how the JIT approach responds to each of these reasons and,consequently,argues for insignificant levels of inventories.
B)The theory of constraints (TOC)criticizes the JIT approach to inventory management,arguing that it fails to protect throughput.Explain what this means and describe how TOC addresses this issue.

Question

Quizplus · Accepted Answer

The JIT approach responds to each of these reasons by arguing for insignificant levels of inventories. JIT eliminates or significantly reduces the need for inventories, as it emphasizes the delivery of raw materials, components or finished goods just in time to meet production demand. JIT reduces lead times, improves productivity and quality, eliminates waste and cost, and increases customer satisfaction.

Answer:D
 The theory of constraints (TOC) criticizes the JIT approach to inventory management, arguing that it fails to protect throughput. TOC argues that the goal of any organization should be to make more money by increasing throughput, reducing inventory, and reducing operating expenses. TOC recognizes that some inventories may be necessary to buffer against variability, uncertainty or bottlenecks, but only to the extent that they protect throughput. TOC suggests a solution called drum-buffer-rope (DBR), which identifies the constraint, exploits it, and subordinates everything else to it. The constraint becomes the "drum" that sets the pace of production, while the buffer protects the constraint from disruption, and the "rope" ensures that work is released to the system only when the constraint is ready for it.

The Following Reasons Have Been Offered for Holding Inventories: 1