THE ELEMENTS OF JIT
Purchasing activities generally include all of the functions involved in the
procuring of material, from the time need is determined to its receipt and use.
These functions include: establishing lot size, selecting suppliers, evaluating suppliers,
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negotiating with suppliers, inspecting incoming parts, determining mode of
transportation, and setting product specifications. [Ref. 3:p. 28]
1. Establishing Purchase Lot Size
Under traditional and many Government purchasing operations, surplus items are
ordered so that any disruption in supplies can be tempered by drawing down inventories.
This ties up large amounts of investment dollars in inventories.
JIT purchasing operations are much different than traditional purchasing
operations. The smaller the lot size, the better. The goal is to drive the lot size as small
as possible, preferably piece for piece. This alleviates the need to tie up precious
capital in inventories. Under the JIT purchasing practice, small lot sizes are important
enough to overcome the obstacles of higher freight costs and loss of quantity discounts.
[Ref. 3:p. 29] It is important to note that piece for piece shipping is not always the best
case. Ifthe costs of piece for piece shipping are greater than inventory costs, it may be
better to hold inventory