Just-in-time Purchasing

Katherine Hogan OISM 470W February 19, 2000

Presentation Overview
Definition of Just-in-time Purchasing Different uses How it will help your company Examples of Just-in-time Purchasing

Just-in-time Purchasing
An approach to purchasing that requires long-term agreements with few suppliers

Brainstorming

How can just-in-time purchasing be used in your organization?

Advantages to JIT
Reduces the need for central warehousing and storage More personal relationship with suppliers Long-term relationships that help to certify suppliers Receiving inspection is reduced and in some cases eliminated

Lowered variety in suppliers Reliable delivery schedules High quality materials used Reduced waste

Demands on Purchasing of JIT

Reduced number of suppliers Stable and good communication throughout a firm Locating suppliers nearby Long-term relationships Helping suppliers to increase quality Not to get hung up by single sourcing Buying from small firms

Limitations of JIT
Difficulty to change old ways More pressure on workers Success is varied Employee commitment Production levels Employee skills

Differences between JIT and Traditional Purchasing

JIT Purchasing
Smaller lot sizes More frequent deliveries No rejection from the supplier Long-term contracts Buyer decides delivery schedule Innovation encouraged Minimal paper work Less formal communication

Traditional
Relatively large lot sizes Less deliveries at higher quantities 2% rejection from supplier Lowest price is main objective Time consuming, formal paperwork Formal communication

Why organizations use JIT Purchasing

Reduce waste Increased cycle times Higher quality in products Fewer suppliers Reduction in warehouses Dependable delivery

Example Faxban
What is Faxban? It combines production floor fax machines and kanban re-supply signals to lower transaction processing and save money

Example - Faxban
Who uses it? Honeywell started using this with their suppliers
How does it work? Re-supply orders are faxed from the production floor by the workers to suppliers

Example - Faxban
What techniques are used in faxban? EDI Kanban Blanket Order Purchasing Card

Example - Faxban
What were the outcomes? Transaction processing reduced Reduction in accounts payable function Money saved Reduced waste Direct communication resulted in less ambiguity between supplier and Honeywell Time reduced

Exercise
We are opening a shop that makes different types of chairs.
Discuss in groups the advantages of being a shop with traditonal purchasing values and JIT values.

Exercise, cont.
Remember that we make many different types of chairs
What are the advantages to both types of purchasing?

Summary of JIT Purchasing

Many advantages that lead to reduction in waste, storage, and other aspects that lead to saving money and time Long-term relationships with suppliers Many different techniques are used depending on the demand of the company

Summary, cont.
Higher quality material used

Bibliography
"Faxban: Just-In-Time purchasing made simple." . 1997. <www.innovativepurchasing.com/arti cles/Faxban.html > (14 February 2001).
Foster, S. Thomas. Managing Quality: An Integrative Approach. Upper Saddle River, New Jersey: Prentice Hall, 2001.

Bibliography, cont.
"Just-in-Time." <www.clubpom.com/Student_Wing/Pu blic/JITtutorial.html#web > (12 February 2001).
"Just-in-Time Purchasing." <www.cl.uh.edu/bpa/hadm/HADM_5731/ ppt_presentations/20inven/tsld029.ht ml > (14 February 2001).