Operations Management Managers How Does JIT and

Operations Management Managers How does JIT and lean processing affect managerial decision-making in that organization? "JIT is a form of providing supplies for customers, as the name suggests, just in time" as they are needed (Atkinson 2011) Keeping inventories low is a critical component of success for a retail organization like Wal-Mart. Inventories that build up in warehouses must frequently be sold at a loss. Overly well-stocked inventories also take space away from products that consumers actually desire, and can be sold full price.

However, inventories of desirable goods cannot be allowed to sink too low, given that if a product is out of stock, consumers will go to another store. JIT attempts to closely tailor consumer needs to what suppliers have in stock. Wal-Mart has been able to use JIT because of its status as the world's largest retailer. It has tremendous power and leverage with its suppliers. Additionally, what is a 'small order' for Wal-Mart might be very large for another company.

"Because of their importance to their suppliers, along with their software made affordable through economies of scale, Wal-Mart has made ordering a very small percent of their overall costs. By lowering ordering costs, Wal-Mart has made ordering small batches with greater frequency a profitable reality" (Atkinson 2011). For most companies, typically food or technology organizations that have high holding costs for inventory (because of perishability and the dangers of technical obsolescence) and low ordering costs, JIT is ideal.

When it adopted JIT, "Wal-Mart didn't even have particularly high holding costs, but they realized it would be profitable to lower ordering costs which led to high holding costs as a ratio of holding costs to ordering costs" (Atkinson 2011). JIT and Wal-Mart's 'lean' processing allows it to keep costs low, pass those cost savings onto customers, and thus retain its status as a company that is able to offer the lowest prices, all of the time.

Question 2: What are the benefits and difficulties does this organization face in implement JIT concepts? If they cannot use JIT, what other practices could be more suitable? The main benefits of JIT are cost savings. By ordering what is needed, and not over or under-buying, Wal-Mart does not have to sell older merchandise at a discount or use up valuable warehouse space that could be better allocated to wanted items.

"Variability in demand and variability in lead times from suppliers" causes most retailers to have 'safety stock' to ensure they will not be surprised by a sudden upsurge in demand (Atkinson 2011). By closely monitoring what consumers want and need, Wal-Mart can reduce the need to have such safety stock on hand. By using technology and opening up channels with suppliers, Wal-Mart no longer needs a substantial inventor of such 'safety stock,' thus lowering the ratio between ordering costs and holding costs and shortening lead times (Atkinson 2011).

JIT obviously requires careful monitoring of such data, which can be an additional expense for a company. For an organization as large as Wal-Mart with a reputation based upon adding up small savings for consumers over time, in a manner that makes consumers want to return again and again to.