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Just-in-Time Production System & Backflush Costing System

Brief History o Father of JIT Taiichi Ohno o Also called Stockless Production, Lean Production, Zero Inventory Production (ZIP) Philosophy: Characteristics/ Features o Great reduction of inventories o Long-term agreements with suppliers o Automation o Purchasing Raw Materials (or Materials) Reduced number of suppliers (but long-term agreements) Improve quality of materials Improve procurement function (reduce storage cost and time) Obstacles like layout of production process, frequency of schedule changes, attitudes of purchasing agent and suppliers, reliability of freight carriers, distance from suppliers Blanket POs (well-developed JIT purchasing) o Factory Organization (Use of JIT cells or work cells) High degree of empowerment Reduction in floor space requirement (space savings) JIT partial implementation is adopted

Push (Just-in-Case) vs. Pull (Just-in-Time) Approach Advantages/ Strengths o Increased velocity; reducing cycle time o Carrying cost savings (with illustration) o Savings in cost of defects and reduction of production losses (with illustration) Disadvantages/ Weaknesses/ Limitations JIT in Practice o JIT Manufacturing o Lean Manufacturing (like TQM) o Kanban System (communications system used to achieve JIT production) o Examples of companies who use JIT (partial and/ or full) Implementation o People involvement, purchasing and supplier relationships, product design and processing, plant layout

Backflush Costing
(Backflushing, Backflush Accounting, JIT Costing, Delayed Costing, Endpoint Costing, Post-Deduct Costing) Definition o o Accounting for flow of manufacturing costs (like process costing, job costing, etc.) To be used in mature JIT production system

Purpose (Essence) What companies can use this costing system Similarities with and Differences from other costing systems (or features that stand-out) o No detailed tracking of WIP inventory o Use of RIP account Advantages and Disadvantages Application (Illustration)

Topics Connected to Both JIT and Backflushing

Performance Measurements o Use of Key Performance Indicators (BSC) o Manufacturing Cycle Time