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To What Extent Could It Be Said That Location Decisions Are Especially Important For Firms Operating On A Just-In-Time Basis?

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Introduction

To What Extent Could It Be Said That Location Decisions Are Especially Important For Firms Operating On A Just-In-Time Basis? Just-In-Time production is a system which is sensitive to customer demand and involves keeping stock to a minimum. A great deal of working capital can be tied up in stock. Having raw materials delivered to the workplace 'just in time' allowed them to be used immediately and therefore reduces the need for high levels of working capital and can improve the financial performance of a firm. In order to function efficiently, a just-in-time system requires high levels of managerial and organisational skills and reliable suppliers. Location decisions depend on various factors, some of which can also have an effect on a just-in-time business. The location's proximity to the required raw materials is one such factor. In most cases, a firm using a just-in-time system will be a bulk reducing business, meaning that their raw materials outweigh their final product. ...read more.

Middle

Just-in-time production can have severe disadvantages in that there can be difficulties in coping with sharp increases in demand and there is the possibility of a loss of reputation if customers are let down by late deliveries. Deciding upon a location close to the market and the customers can greatly benefit the firm in combating these disadvantages as it can help to reduce lead times (the time between the order and the delivery of goods). A reduced lead time can not only ensure better service to the customer but also cheaper transportation costs. On the other hand, it could be argued that location is of little importance to a firm operating on a just-in-time basis. There are various other factors that could be said to be more important to a just-in-time system than the firm's location. The keys to successful JIT implementation are numerous. It is important to reduce or eliminate setup times, which can be done through better planning, process redesign and product redesign. ...read more.

Conclusion

Total Quality Management is another catalyst of a successful JIT system. A firm should require total quality assurance from their suppliers and implement a zero defects quality program. Errors leading to defective items must be eliminated, since there are no buffers of excess parts. A quality at the source program can be implemented to give workers the personal responsibility for the quality of the work they do. With such a measure in place, JIT can be used effectively without any inputting factors from the location of the workplace. So, in answer to the question 'To what extent could it be said that location decisions are especially important for firms operating on a just-in-time basis?' I would argue that it is only to a small extent. There are far more influential factors that can be met to ensure an efficient and effective just-in-time production system. There is much more focus on operations management and human resources than the firm's location. It appears that it is what goes on inside as opposed to the outside that counts for the most. Michael J. Rankine ...read more.

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