[lyzgrace]

Maybe I’m just tired, but I came across an MCQ that I don’t really understand.

Under a successful JIT system, what will likely happen to the:

Cycle time? Number of suppliers?

A) Decrease Decrease

B) Increase Increase

C) Decrease Increase

D) Increase Decrease

Answer: JIT inventory system results in more frequent, small orders and ideally eliminates inventory. A decrease in purchase order costs and/or an increase in inventory carry costs would make JIT more attractive. The number of suppliers in a successful JIT system is generally fewer. Smaller orders are being delivered and ideally eliminate the financial burden of carrying inventory.

I understand the cycle time, but can somebody explain why a JIT inventory system would result in a decrease in suppliers? I had assumed that, with smaller more frequent orders, MORE suppliers would be needed because there is less of a safety cushion for timing, so if one or more suppliers are out of stock, they would need additional suppliers on standby.

AUD: 82
FAR: 78
BEC: 75
REG: 8/1 score release!!

[barelystayingsane]

Many suppliers don't want to deal with the continuous delivery of resources to accommodate your JIT production, so they will terminate their contract with you. You will only be left with those suppliers willing to send you frequent deliveries throughout the day, week, etc. Thus, you will be left with fewer suppliers.

[SeattleAccountant]

Everything that barelystayingsane said + a lot of times suppliers might not have/don't want to invest in the same or compatible system for JIT to work smoothly i.e. in real time, thus number of eligible suppliers will decrease.

Becker Class of Jan - Aug 2013: FARB DONE!!!!
CPA license pending 🙂

[lyzgrace]

That makes sense, Seattle.

This is the answer I was given from my course instructor:

For JIT systems, one of the challenges is ensuring materials are available when needed (not too early either). This creates a dependency on the suppliers. Therefore, the best practice is to reduce the number of vendors/suppliers they do business with and make certain that a very strong relationship is maintained with the remaining vendors. In general, think of the average business such as a local grocery store. A grocery store needs to have a strong relationship with, for example, its produce suppliers so that they are getting the produce in a timely manner. Not too soon or they'll have an over-abundance and be more inclined to not sell/spoil. And not too late or customers will be dissatisfied with the produce selection. So, they need to be able to trust and rely on their supplier. They can't have multiple suppliers because it would be too challenging to schedule JIT inventory with multiple vendors and yet be successful.

I still think it's an unfair question that would depend greatly on the industry. I want to rely on my supplier no matter WHAT kind of inventory system I use. Whatevs. Guess that's just one of those nuggets I need to remember.

AUD: 82
FAR: 78
BEC: 75
REG: 8/1 score release!!

[barelystayingsane]

My Becker textbook highlighted the cost of JIT as the reduction in the number of suppliers, so it's definitely a nugget you'll have to remember. But I don't think it's an unfair question, because this is actually how JIT systems work in the real world. It's true that you want a relationship with your supplier where you can rely on him or her, regardless of the inventory system. But the fact is that JIT reduces the operating cycle and inventory flows through so fast that you won't always have time to thoroughly do a quality control. There is usually more reliance on quality control by the supplier.

[Author]

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