Jit in Kalamazoo Case Study

Case Background:

Jim Ballenger is the president of a medium-size firm. Recently Ballenger became aware that his inventory costs and transportation expenses were a relatively large portion of the firm’s overall costs. Ballenger is evaluating these costs and attempting to see if there is a better alternative to the present system used by his firm that would result in a substantial reduction in costs. To this end, he is trying to decide if his company should use the just-in-time (JIT) system.

Ballenger’s firm has expanded from a local Midwest market to a national market. His firm has suppliers in Southern California, the Pacific Northwest and Michigan. The firm manufactures mini motor homes but the firm does not manufacture many of the components it uses to produce the mini motor homes. The product is produced from components purchased from the suppliers. Historically, the firm assembled the mini motor home components in an efficient order.

Ballenger heard about JIT at a professional meeting. JIT is a production system established by the Toyota Motor Company; it has been around for more than fifty years. JIT is well known today and it has many supporters. There is a plethora of information available about the JIT system and numerous studies have been conducted about its benefits and weaknesses.

Ballenger has a number of issues to look at in evaluating JIT. Included among these are the following:

Increased freight costs of smaller more frequent shipments.

Loss of savings from buying discounted components from suppliers going out of business.

Possibility of uneven production as a result of tight supplies and defective components.

The relationship between the firm and the suppliers; would the suppliers see themselves as a part of the production team which is needed in the JIT model?

Ballenger is also aware that his current practice results in the following costs:

Public warehousing with $500,000-$1,000,000 in inventory with a 1.5 percent per...