Table of Contents
TOC \o "1-3" \h \z \u Introduction to the company PAGEREF _Toc5926163 \h 1
Ordering System PAGEREF _Toc5926164 \h 1
1.Just in the time ordering system PAGEREF _Toc5926165 \h 1
Advantages of Just In Time PAGEREF _Toc5926166 \h 1
Disadvantages of Just In Time PAGEREF _Toc5926167 \h 2
Forecast-Base Ordering System PAGEREF _Toc5926168 \h 2
The advantage of the forecasting-Base ordering system PAGEREF _Toc5926169 \h 3
2.The disadvantage of the forecasting-Base ordering system PAGEREF _Toc5926170 \h 3
References PAGEREF _Toc5926171 \h 3
Introduction to the company
The company operates in consumer manufacturing products, the CEO of the company wants to educate the employee about the ordering system.
Just in the time ordering system
Just in time (JIT) has the aim to order the inventory when the production is going to start, in other words just in time defined as the order receives for production place the order for raw material or production components rather than they are just in the warehouse. This system only works on the basis of customer orders. For example, software houses, etc.; (Sakakibara, Flynn, & Schroeder,1993).
Advantages of Just In Time
No Inventory or zero inventory needs to store in the warehouse, as soon as the company receive the order company will order the material and manufacture the product according to the customer desire. Mostly these products are customized and manufactured on the order of customers. Due to the zero inventory, there will be lots of cost saving such as warehouse which is known as handling the cost.
Better production and time saving is also one of the benefits of just in time. Low wastage of raw material incurred as the company only order the limited quantity of material due to the order.
Disadvantages of Just In Time
Sometimes it is not possible to get the material available in the market due to the shortage of demand and supply, due to this issue the order can deliver and the customer can be dissatisfying. Customer retention may be difficult in this situation as the market is full of competition.
A long-term supplier relation is also required in this system, so retention of the customer as well as supplier some time it can create difficulty for the business to manage. More than one supplier is required for one type of product.
Forecast-Base Ordering System
Forecasting based ordering system is defined as a system which operates on previous years trends by considering the current market situation such as the increasing or decreasing trends of the market. This is a very old and traditional system. In which companies follow their previous year order and forecast the next year. Companies place the order a few time during the whole fiscal year which is already decided and negotiated with the supplier on a date and delivery time; (Helms,Ettkin, & Chapman,2000).
The advantage of the forecasting-Base ordering system
The good benefit of this system company already knows how much they have to order to meet the customer requirement. So companies always manage the supply and demand it does matter material is in not available in the market or not, they order timely.
Senior management can take better decision for the upcoming future. As they have already date available for the supplies of the year.
The disadvantage of the forecasting-Base ordering system
Future is uncertain, companies cannot rely fully on the previous year as the current business environment is very dynamic. So it is better to hold less inventory rather than to stock for the whole year.
Handling cost of the raw material will be a burden which can reduce the company profit.
Sakakibara, S., Flynn, B. B., & Schroeder, R. G. (1993). A framework and measurement instrument for just‐in‐time manufacturing. Production and Operations Management, 2(3), 177-194.
Sayer, A. (1986). New developments in manufacturing: the just-in-time system. Capital & Class, 10(3), 43-72.
Helms, M. M., Ettkin, L. P., & Chapman, S. (2000). Supply chain forecasting–collaborative forecasting supports supply chain management. Business Process Management Journal, 6(5), 392-407.
Jacobs, F. R. (2011). Manufacturing planning and control for supply chain management. McGraw-Hill.
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