Contemporary Logistics Case 2: Just-in-Time in Kalamazoo

Case #2: Just-in-Time in Kalamazoo

Question 1: What is the total annual cost of maintaining the components inventory under

the present system?

I added all of the Inventory Maintenance costs to get a total inventory maintenance cost per year to be $1,151,522

Question 2:What would be the total annual cost of maintaining the components

inventory under the JIT system (assuming no safety stocks)?

$24,862. I found this answer by adding the higher unit cost and average freight cost per unit(surface) using the JIT together, then I multiplied that number by the number of unites used each week.

Question 3: Should Ballenger take into account any other costs or benefits from the JIT

system? If so, what are they?

Ballenger should have less concern with the problems associated with keeping a large inventory. These problems including shrinkage or concerns over less demand for the product by customers.

Question 5: If the JIT system is adopted, what changes, if any, should occur in the

relationships between Ballenger’s firm and his suppliers of components? Discuss.

Ballenger would have to perfect his production system and prevent as many defects as possible. He would also need to have a quick and proper delivery system for his products.

Question 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 on Exhibit 3-C. Should Ballenger

buy them? If so, at what price?

a. He would make profit for buying the lights at a low price.

b.This would go against the principles of the JIT system. There would be issues with storing the lights.

c. I would not buy if the cost was close to $28,000. It would have to be much, much lower than that.