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 An approach to purchasing that requires long-term agreements with few suppliers

Brainstorming How can just-in-time purchasing be used in your organization? This requires active involvement from the trainees. They should all discuss the different ways that their company can use this tool.

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 In many cases, having more personal relationships with suppliers makes the quality of the service higher. You know exactly who you are dealing with every time.

Lowered variety in suppliers Reliable delivery schedules High quality materials used Reduced waste Lowered variety in suppliers leads to better relations.

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 Suppliers have to be nearby in this type of purchasing because of the more frequent delivery schedule required.

Limitations of JIT Difficulty to change old ways More pressure on workers Success is varied Employee commitment Production levels Employee skills Most companies are very much accustom to the traditional ways of storing inventory and the other methods that go along with that. To all of a sudden just change the whole process can be very difficult to become accustom to. With the shorter cycle times involved, there is more pressure and stress on the workers to get the work done quicker. The success of JIT is varied from company to company. What works very well in some companies can be a total failure in others. Employees must be committed to the JIT process in order for it to work efficiently. They must set the improvement of quality as their ultimate goal. The production level that works the best for a JIT system is one that has medium to high production. The employees must have very flexible skills and be willing to learn new ones at all times.

Differences between JIT and Traditional Purchasing 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 In JIT there is a high emphasis on three aspects(product quality, delivery performance, and price) but the supplier has a no reject policy from the buyer in the JIT system. On the other hand there is a 2% level of acceptance in the traditional. The buyer and seller have a less formal communication relationship for JIT compared to traditional. Many of the changes to orders are altered merely by a telephone call or another informal way of communication. Tradition purchasing has the constraint of having to declare delivery dates and quantity on purchase orders.

Why organizations use JIT Purchasing Reduce waste Increased cycle times Higher quality in products Fewer suppliers Reduction in warehouses Dependable delivery All of these points were metioned in the discussion on what JIT Purchasing is all about. These are the main points that highlight exactly why this method of purchasing works and more and more companies are switching to it every year. Although there are many other important aspects of JIT purchasing when companies are considering switching to it, these tend to be the ones that are always towards the top of every company’s list.

Example – Faxban What is Faxban? It combines production floor fax machines and kanban re-supply signals to lower transaction processing and save money Faxban is a JIT system that combines several different JIT techniques. Among these techniques are EDI, Kanban, Blanket Order, and Purchasing Card. Honeywell’s supply management used this system to develop arrangemnts with suppliers. Honeywell’s faxban process combined some of the very best purchasing techniques to maximize the process. In combining these techniques (metioned above) they not only save money and time, but many other positive things come from faxban.

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

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

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

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. It is important for the trainees to understand how exactly the JIT purchasing system works and why it is an important tool in many companies world wide. To help understand there will be an open discussion regarding this tool. Everyone is to break into groups and work out the problem together. Half the groups will follow the traditional purchasing technique and the other half will use JIT.

Exercise, cont. Remember that we make many different types of chairs What are the advantages to both types of purchasing? The trainees should recongnize that in JIT we can special order the parts as we need them. Seeing that we make many different types of chairs, keeping tons of supplies around for all of the different types will result in large storage costs. Having suppliers deliver the supplies as we need them will help to lower that.

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 JIT purchasing has many different advantages. But, along with these come some constraints and demands. As time goes on more and more companies are switching over the the JIT Purchasing technique as opposed to the traditional ways. But, the JIT system works for different companies for different reasons. Most companies are still working to find out how it will work the best for them with still maximizing the rewards.

Summary, cont. Higher quality material used

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.

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).