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

Presentation Overview Definition of Just-in-time PurchasingDefinition of Just-in-time Purchasing Different usesDifferent uses How it will help your companyHow it will help your company Examples of Just-in-time PurchasingExamples of Just-in-time Purchasing

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

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

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

Lowered variety in suppliersLowered variety in suppliers Reliable delivery schedulesReliable delivery schedules High quality materials usedHigh quality materials used Reduced wasteReduced waste

Demands on Purchasing of JIT Reduced number of suppliersReduced number of suppliers Stable and good communication throughout a firmStable and good communication throughout a firm Locating suppliers nearbyLocating suppliers nearby Long-term relationshipsLong-term relationships Helping suppliers to increase qualityHelping suppliers to increase quality Not to get hung up by single sourcingNot to get hung up by single sourcing Buying from small firmsBuying from small firms

Limitations of JIT Difficulty to change old waysDifficulty to change old ways More pressure on workersMore pressure on workers Success is variedSuccess is varied Employee commitmentEmployee commitment Production levelsProduction levels Employee skillsEmployee skills

Differences between JIT and Traditional Purchasing JIT Purchasing Smaller lot sizesSmaller lot sizes More frequent deliveriesMore frequent deliveries No rejection from the supplierNo rejection from the supplier Long-term contractsLong-term contracts Buyer decides delivery scheduleBuyer decides delivery schedule Innovation encouragedInnovation encouraged Minimal paper workMinimal paper work Less formal communicationLess 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

Why organizations use JIT Purchasing Reduce wasteReduce waste Increased cycle timesIncreased cycle times Higher quality in productsHigher quality in products Fewer suppliersFewer suppliers Reduction in warehousesReduction in warehouses Dependable deliveryDependable delivery

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

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

Example - Faxban What techniques are used in faxban? EDIEDI KanbanKanban Blanket OrderBlanket Order Purchasing CardPurchasing Card

Example - Faxban What were the outcomes? Transaction processing reducedTransaction processing reduced Reduction in accounts payable functionReduction in accounts payable function Money savedMoney saved Reduced wasteReduced waste Direct communication resulted in less ambiguity between supplier and HoneywellDirect communication resulted in less ambiguity between supplier and Honeywell Time reducedTime reduced

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.

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

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

Summary, cont. Higher quality material usedHigher quality material used

Bibliography "Faxban: Just-In-Time purchasing made simple." (14 February 2001). Foster, S. Thomas. Managing Quality: An Integrative Approach. Upper Saddle River, New Jersey: Prentice Hall, Foster, S. Thomas. Managing Quality: An Integrative Approach. Upper Saddle River, New Jersey: Prentice Hall, 2001.

Bibliography, cont. "Just-in-Time." (12 February 2001). "Just-in-Time Purchasing." "Just-in-Time Purchasing." (14 February 2001). (14 February 2001).