Page 1 - CIMA MCS Workbook May 2019 - Day 2 Suggested Solutions

Day 2 Suggested Solutions

SUGGESTED SOLUTIONS

CHAPTER EIGHT

TASK 1 – JUST IN TIME, QUALITY AND THEORY OF CONSTRAINTS

To: Linus Maas

From: Finance Manager

Date: Today

Subject: Just in time, quality and theory of constraints

Just in time

Many traditional production lines work on the principle that keeping stock is very important.
Stock of raw materials means there are always sufficient materials to feed into production. Work
in progress at each stage of production means that there shouldn’t be a hold up in any part of the
process due to one part breaking down or one part being quicker than another. Holding stock of
finished product means that companies should always be able to fulfil customer demand.
Jord, however, uses a just in time (JIT) purchasing and production system. The aim of a JIT
manufacturing process is to have a smooth running, efficient process that minimises the amount
of inventory held by the business at any time.

You won’t notice much by way of raw materials, work in progress or finished product sitting
around the factory. This is because JIT operates such that raw materials are brought in only when
they are needed for production. Production only happens to a precision planned schedule that
means production is finished just in time for the parts to be shipped to site.

In other words, everything works backwards from customer demand. Once we have a customer
order, we can use our sophisticated scheduling software to work backwards from build time,
through the manufacturing time and supplier lead times to determine when each item needs to
be ordered. The software also feeds into our production plan and ensures that the factory
equipment will be available just when it is needed and that factory workers are available to run
the machinery.
This incredibly efficient way of working ensures that we only incur cost directly in relation to a
specific order. There is no waste – material will never be ordered and then not used and we don’t
have stock sitting around with the risk of being damaged. Machinery will only be used to actively
make product for a specific customer. Because our software is so good, the use of machinery, and
our workers, is optimised to minimise down time. Plus, without the need to store inventory, we
don’t need large amounts of warehousing, saving more cost.
Quality

With a JIT operation, failures in the production process have a much larger impact than if we had
large levels of inventory held at the factory.

For instance, if a supplier is a couple of days late delivering timber, we would have no buffer of
timber stock available and production would have to be delayed. This would have a knock on
effect on deliveries to site and therefore on the house completion date as we would not have a
buffer inventory of completed panels that we could send instead.
KAPLAN PUBLISHING 85