Case 2-1 Just-in-Time in Kalamazoo
Summary and Assessment:
President, Jim Ballenger’s, firm specializes in manufactured mini motor homes in Kalamazoo, Michigan. The majority of the mini motor homes are assembled from components purchased from outside vendors. It has come to Jim’s attention that transportation and inventory cost contributed to a relatively large portion of his components parts expenses. In an effort to reduce cost Mr. Ballenger considers implementing the just-in-time (JIT) system which was developed by the Toyota Motor Company. Mr. Ballenger and the rest of his management team are well aware of key principles, requirements and trade-offs that are necessary to occur in order to allow JIT system be successfully
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 in Exhibit 2-A. Should Ballenger buy them? If so, at what price?
A: The answer to this question lays in the main principles of JIT system. The very first rule stated that “inventory in itself is wasteful and should be minimized” (Murphy & Wood, 2011, p.41). Thus, from the theoretical point of view buying those 7,000 dome lights would an eruption of the JIT system. However, if the competitor will be willing to get rid of the dome lights at any suggested price and Ballenger’s firm will to find inventory space without adding to the inventory costs, then purchasing 7,000 dome lights would be a good idea. The dome light price per unit should be not more than $ 0.50. 7. Carrying cost are 20 percent. Is there a level of carrying costs at which both Ballenger’s present system and a JIT system have similar costs? If so, what is it?
A: The level of carrying costs at which both Ballenger’s present system and JIT system have similar costs is 160%.
Discussion questions for conference area: 1. Which system (current or JIT) is more suitable for this mini motor company? Why do you think so? 2. If Ballenger continues to use his current system,