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- 10 Marks
Question
You are the Accounts officer for Unimech Garages, a company that provides mobile vehicle repairs for faulty vehicles on the Accra – Kumasi and Accra – Takoradi highways. The company has adopted the Just-In-Time (JIT) inventory control system for its operations. The JIT inventory control system was adopted because all repairs performed vary from vehicle to vehicle, and there is no need to stock any spare parts since the repair team has no idea of the next repairs to be conducted as well as the type of spare parts they would require. Again, this inventory system was implemented to prevent employees from committing the offence of selling stocked spare parts for their individual gains.
Required:
Suggest FIVE (5) benefits the company would derive from this inventory system. (10 marks)
Answer
Benefits of Just-In-Time (JIT) Inventory System:
- Appropriateness: The adoption of the JIT inventory system ensures that the company receives and dispatches the appropriate spare parts and items as required, minimizing unnecessary stockpiling.
- Cost Reduction: The company benefits from reduced inventory and setup costs because spare parts are only ordered when needed, avoiding the costs associated with holding excess inventory.
- Service Quality: The quality of services delivered to customers improves because only high-quality parts are ordered to fix the problems of drivers and vehicle owners, ensuring that repairs are effective.
- Waste Control: The adoption of the JIT system helps eliminate waste and excess inventory that are not required, leading to more efficient operations and reduced costs.
- Eliminate Customer Delays: The system ensures that services delivered to customers are as fast as possible, as spare parts required for operations are available as and when needed, reducing delays.
- Emphasis on Value Addition: The company’s adoption of the JIT system ensures the elimination of non-value-added activities such as the internal movement of spare parts, focusing resources on activities that directly contribute to customer satisfaction.
- Inventory Security: JIT reduces the risk of employees selling stocked spare parts for personal gain, as inventory is minimized and controlled more effectively.
- Tags: Cost reduction, Inventory Management, Just-in-Time, Service Quality, Waste Control
- Level: Level 1
- Topic: Operations strategy
- Series: APR 2022
- Uploader: Theophilus