A firm specializing in motor homes located in Kalamazoo, Michigan. Discusses changes in inventory and other cost since the recent expansion of its market from the local Midwest to a national one. The companies also have to deal with another major problem because it only manufactures a few of it components while the others are purchased form outside vendors. In an attempt to reduce component part expenses, the president of the company considers implementing the Just-in-time system in his firm. The just in time is a system developed by Toyota designed to control quality develop supplier and distributors’ relationship and minimize inventory.
1.What is the total annual cost of maintaining the components inventory under the present system? Under the present system the total cost to maintain the component per year is $1,292824.00
2.What would be the total annual cost of maintaining the components under the JIT system (Assuming no safety stocks)? The annual cost of maintaining the components under the JIT system would be
3. Should Ballenger take into account any other cost or benefits from JIT system? if so what are they?
With the JIT system Ballenger would be less concern about maintaining a large inventory and they would less likely to experience shrinkage. The just-in-time system will also ensure that parts are available to manufacture products and will better serve customers more effectively and efficiently.
4. If the JIT system is adopted are there safety sticks of any item that should be maintained? If so which ones and how much If JIT system is adopted DVD players should be placed under capacity safety because they seem to be quite expensive.
5.If JIT system is adopted, what changes if any should occur in the relationships between Ballenger’s firm and his suppliers of components? Discuss They would need to be more alert keen and discipline in terms of delivery therefore the firm and the supplier would have to maintain good communication skills to avoid any defects.
6. Assume that Ballenger has switched to the JIT system and that he receives a surprise phone call from a competitor who is going out of business. The competitor wants to sell Ballenger 7,000 dome lights of the type listed in Exhibit 2-A. Should Ballenger buy them? If so, at what price? I don’t think that Ballenger should purchase these lights because according to the JIT system one of its aim is to instill discipline and this therefore will ruin such vision not only that but Ballenger would also have to consider storage for these light bulbs.
7. Carrying cost are 20 percent. Is there a level of carrying cost at which both Ballenger’s present system and a JIT system have similar cost what is that? There won’t be a level when the two systems have the same cost but if so it would be at a extremely high rate possible exceeding 100 percent.
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