‘Things that are running smoothly should not be subject to any control. If you commit yourself to just finding and fixing problems, you’ll be able to carry out effective control (within an organization) with fewer personnel’ (Minoura, 2003).
The statement of Minoura appears to correspond to the philosophy that Atrill and McLaney (2013) mention with respect to just-in-time (JIT) management. By reducing the resources spent on control, Minoura decreases the chances of the issues prediction and suggests fixing the problems when they occur. Atrill and McLaney (2013) point out that such an approach is based on very optimistic assumptions, but it can become the ground for the culture of continuous improvement.
My view is obscured by my personal qualities: I do not like leaving things without control, and the idea of predicting and preventing issues is more attractive to me. At the same time, Minoura’s suggestion apparently allows freeing certain amounts of resources that can be spent on other useful tasks. As a result, I suppose that a particular organization is likely to benefit from switching between JIT methods and enhanced control depending on the situation. Atrill and McLaney (2013) suggest the Nissan example that uses just-in-time techniques with some of its suppliers but also adds an element of control by having more traditional relationships with other suppliers just-in-case.
JIT methods are the type of techniques that can be employed as a part of a working capital strategy to manage inventories (Atrill & McLaney 2013a; Financing strategy and working capital strategy n.d.). This method consists in agreeing with the supplier that the supply is going to be delivered just in time for its use (Atrill & McLaney 2013). JIT applicability is apparently not limited to manufacturing enterprises; basically, it can be employed if there is a chance to develop positive relationships with the suppliers. For example, Sîrbu and Saseanu (2012) mention JIT being used in fashion stores to facilitate the satisfaction of demand that depends on seasons and fashion trends. Kapoor and Mullen (2012) discuss a number of examples of using JIT in healthcare, in particular, the United Healthcare company: its 200 pharmacies have been using JIT and have managed to reduce the stored inventory by 45%, which means the savings of $45 million (p. 35).
In other words, JIT can be used to improve inventory management successfully, in particular, by cutting the related costs, which technically become the supplier’s concern (Kapoor & Mullen 2012). The supplier can also benefit in the terms of storage time by rearranging its production schedule (Atrill & McLaney 2013). However, JIT also has several disadvantages. First, it requires building relationships with the supplier and perfecting the JIT processes, which may require reorganizations. Also, there is a chance that the supplier fails to provide the inventory in time. Besides, the arranged agreement with the supplier may prevent the manufacturer from taking advantage of a more profitable alliance. In fact, the supplier can charge a price for the need to store the inventory. As a result, JIT has both advantages and disadvantages, which seem to be universal for any organizations that can apply this method, but the minuses can be balanced if JIT is not the only way of inventory management as was demonstrated by the Nissan example (Atrill & McLaney 2013; Atrill & McLaney 2013a).
Reference List
Atrill, P & McLaney, E 2013, Accounting and finance for non-specialists, 8th edn, Pearson Learning Solutions, New York.
Atrill, P & McLaney, E 2013a, Accounting and finance for non-Specialists PowerPoints on the Web: Chapter 12.
Financing strategy and working capital strategy n.d., Web.
Kapoor, B & Mullen, T 2012, ‘Integration of Just In Time (JIT) Inventory in Outpatient Pharmacy Information Systems’, Journal of Cases on Information Technology, vol. 4, no. 14, pp. 27-40.
Sîrbu, MO & Saseanu, AS 2012, ‘Quick response implementation in the fashion industry’, Valahian Journal of Economic Studies, vol. 3, no. 3, pp. 37-44.