Shine Motor Inc. has decided to switch to a "just-in-time system" of manufacturing and distribution for its vehicles. Which one of the following is most likely to occur?
A) Inventory levels will increase.
B) Component parts and subassemblies are now replenished only when needed.
C) Finished goods inventory will decrease, but raw materials and work-in-process inventories will increase.
D) The workers at any given process will produce units before they are needed.

Question

Quizplus · Accepted Answer

Just-in-time systems are designed to reduce or eliminate inventory by replenishing component parts and subassemblies only when they are needed in the production process. This system helps to reduce waste, improve efficiency, and lower costs. Option A is incorrect because a just-in-time system aims to reduce inventory, not increase it. Option C is partially correct, as finished goods inventory will decrease, but raw materials and work-in-process inventories will also decrease in a well-functioning just-in-time system. Option D is incorrect since producing units before they are needed goes against the principles of a just-in-time system.