Purchasing is the act of buying the goods and services that a company needs to operate and/or

manufacture products. Given that the purchasing department of an average company spends an
estimated 50 to 70 percent of every revenue dollar on items ranging from raw materials to
services, there has been greater focus on purchasing in recent years as firms look at ways to
lower their operating costs. Purchasing is now seen as more of a strategic function that can be
used to control bottom-line costs. Companies are also seeking to improve purchasing processes
as a means of improving customer satisfaction.

THE TRADITIONAL PURCHASING PROCESS

The traditional purchasing process involved several steps—requisition, soliciting bids, purchase
order, shipping advice, invoice, and payment—that have come to be increasingly regarded as
unacceptably slow, expensive, and labor intensive. Each transaction generated its own paper
trail, and the same process had to be followed whether the item being purchased was a box of
paper clips or a new bulldozer.

In this traditional model, purchasing was seen as essentially a clerical function. It was focused on
getting the right quantity and quality of goods to the right place at the right time at a decent cost.
The typical buyer was a shrewd negotiator whose primary responsibility was to obtain the best
possible price from suppliers and ensure that minimum quality standards were met. Instead of
using one supplier, the purchaser would usually take a divide-and-conquer approach to
purchasing—buying small amounts from many suppliers and playing one against the other to
gain price concessions. Purchasing simply was not considered to be a high-profile or career fast-
track position—when surveys were taken of organizational stature, purchasing routinely rated in
the lowest quartile.

That attitude has changed in recent years, in part because of highly publicized cases wherein
companies have achieved stunning bottom-line gains through revamped purchasing processes. In
addition, increased competition on both the domestic and global levels has led many companies
to recognize that purchasing can actually have important strategic functions. As a result, new
strategies are being used in purchasing departments at companies of all size.

Analysts observe that in this new purchasing environment, a guideline known as the total cost of
ownership (TCO) has come to be a paramount concern in purchasing decisions. Instead of
buying the good or service that has the lowest price, the buyer instead weighs a series of
additional factors when determining what the true cost of the good or service is to his or her
company. According to Anne Millen Porter in Purchasing magazine, these factors can include
"price, freight, duty, tax, engineering costs, tooling costs, letter of credit costs, payment terms,
inventory carrying costs, storage requirements, scrap rates, packaging, rebates or special
incentive values, [and] warranty and disposal costs." To lower TCO, companies are taking a
number of steps to improve purchasing.

STRATEGIC SOURCING
Strategic sourcing is one of the key methods that purchasing departments are using to lower costs
and improve quality. Strategic sourcing involves analyzing what products the company buys in
the highest volume, reviewing the marketplace for those products, understanding the economics
and usage of the supplier of those products, developing a procurement strategy, and establishing
working relationships with the suppliers that are much more integrated than such relationships
were in the past. During this process, the team conducting the analysis should ask these
questions:

 Why do we buy this product or service?

 What do we use it for?
 What market conditions do suppliers operate under?
 What profit margin do suppliers seek to obtain?
 What is the total price of purchasing from a particular vendor (in other words, the cost of
the item plus the costs associated with quality problems)
 Where is the good or service produced?
 What does the production process look like?

The products that are purchased in the highest volume will be the best candidates for cost
reductions. That is because once those products are identified, the company can then justify the
time and expense needed to closely study the industry that supplies that product. It can look at
the ways key suppliers operate, study their business practices to see where the most money is
added to the final cost of the product, and then work with the supplier to redesign processes and
lower production costs. This maximizes the contribution that suppliers make to the process.

By knowing the market and knowing how much it costs for a supplier to do business, the
purchasing department can set "target prices" on goods. If the supplier protests that the price is
far too low, the purchasing company can offer to visit the supplier's site and study the matter. As
one purchasing executive explained in Industry Week: "We have 15 to 20 people who study the
cost of everything we purchase. We know what it costs for a supplier to make a part, including
all the overhead and the profit. So if a supplier comes in once we've given him a target price and
says, 'You guys are crazy,' we send one of our engineers to visit the company. They look at the
supplier's production process to see if they can spot a problem that's causing the supplier's prices
to be higher. If necessary, our engineer helps the supplier rearrange the production line to make it
more efficient." Proponents argue that these "supplier alliances" can result in improved
buyer/seller communication, improved planning, reductions in leadtime, concurrent engineering,
decreased paperwork, and better customer service.

The alliances also can sometimes register significant improvements in product quality. Buyers
can build clearly-defined quality targets into their target prices. It will then work with the
supplier to improve the manufacturing process until that quality target is met. Such a process can
yield enormous benefits for buyers, including reduced inventory levels, faster time to market,
significant cost savings, and reduced development costs.

Not all suppliers can meet the high standards demanded in this purchasing environment. Some
studies indicate that companies that adapt strategic sourcing have lowered the number of
suppliers they use by an average of nearly 40 percent. What characteristics makes a good
supplier, then? If the supplier is willing to partner, then analysts have identified several traits that
good suppliers share:

 Commitment to continuous improvement

 Cost-competitive
 Cost-conscious
 Customer-oriented
 Encourages employee involvement
 Flexible
 Financially stable
 Abe to provide technical assistance

Analysts indicate that suppliers receive some benefits in the emerging purchasing dynamic as
well. Reduced paperwork, lower overhead, faster payment, long-term agreements that lead to
more accurate business forecasts, access to new designs, and input into future materials and
product needs have all been cited as gains. Other observers, meanwhile, point out that some
buyer-supplier relationships have become so close that suppliers have opened offices on the site
of the buyer, an arrangement that can conceivably result in even greater improvements in
productivity and savings. Of course, companies are not going to form such "partnerships" with
all of their suppliers. Some form of the traditional purchasing process involving bidding and
standard purchase orders and invoices will continue to exist at almost every company, and
especially at smaller companies that do not have the financial weight to make large demands on
their suppliers.

EMPOWERING TEAMS
In addition to strategic sourcing, there are other methods companies can use to improve
purchasing. One is creating cross-functional teams that involve purchasing personnel in every
stage of the product design process. In the past, purchasers were not involved at all in the design
process. They were simply instructed to purchase the necessary materials once a new product
had been created. Now, purchasers (and suppliers) are increasingly included from the start of the
new product process to ensure that the products needed to create product are readily available
and are not prone to quality problems. Suppliers tend to be experts in their field, so they bring a
large knowledge base to the design process that would otherwise be missing. This can help
prevent poor designs or manufacturing mistakes.

These teams have broken down barriers and helped abolish the old manufacturing method that
was known as the "over the wall" method of productions—each business unit would work on a
project until its portion of the job was completed. It would then "throw the product over the wall"
to the next functional team that was waiting to perform its part of the manufacturing process. The
new cross-functional teams often include personnel from purchasing, manufacturing,
engineering, and sales and marketing.

Purchasing teaches other members of the team how to deal directly with suppliers, cutting the
purchasing personnel out of the loop. This is important in that it eliminates much of the time-
consuming work that buyers had to deal with (soliciting bids, creating purchase orders, etc.) and
frees them to concentrate on the part of their job where their expertise most pays off: finding
suppliers and negotiating prices and quality standards. "Purchasing should be concerned with the
strategic planning aspects of procurement process," purchasing director Ben Lapner told
Purchasing magazine. "Buying itself deals with the daily transactions and replenishment actions
that should be performed as close to the company's end user as possible."

JUST-IN-TIME PURCHASING
Just-in-time (JIT) manufacturing became one of the biggest trends in all facets of industry in the
1990s. JIT companies maintain only enough inventory to manufacture the products they need in
the very near future. Parts are ordered on a near-continuous basis and often go directly from the
loading dock to the assembly line. The benefits of this system include reduced inventory,
improved quality, reduced leadtime, reduced scrap and rework, and reduced equipment
downtime. However, when a company shifts to JIT manufacturing, it must also shift to JIT
purchasing.

JIT purchasing requires a nearly 180-degree change in purchasing philosophy. Traditional

purchasing meant building a supplier list over time by constantly adding new suppliers,
spreading purchases around, and maintaining higher inventory levels in case demand for a
product soared or quality from a supplier dipped suddenly. JIT purchasing demands that buyers
narrow their supplier list to a chosen few who can deliver high-quality products on-demand and
in a timely fashion.

Writing in Industrial Management, Bernhard Hadeler stated that JIT purchasers must look for a
minimum of three things in suppliers:1) demonstrated excellent quality; 2) ability to make
frequent, on-time deliveries; and 3) ability to provide very large volume commitments or single
sourcing arrangements. Quality may be the toughest of these standards for suppliers to meet; the
JIT purchaser should deal only with companies that utilize statistical analysis to verify the
quality of their output. Failure to do so should eliminate the supplier from even being asked to
submit a bid.

For frequent, on-time deliveries, it often helps if the supplier is located in the same geographic
region as the buyer. That way, it is easier for the supplier to react to a sudden, unexpected
demand for its product, and it costs far less to make the frequent deliveries that are needed.
Those lower costs can in part be passed on to the buyer.

In single sourcing arrangements, it is not uncommon for the buyer to exert some influence over
the supplier's business processes. The buyer has made such a significant commitment to the
supplier, and is such a large portion of the supplier's total business, that it has the right to expect
some say in the supplier's business practices. For some suppliers, this is an uncomfortable
arrangement.

PURCHASING CARDS
As transaction costs soar (some companies report spending as much as $300 per transaction in
clerical and other costs), companies are looking to buy smarter and cut costs any way possible.
One popular method is recent years is to supply certain employees with purchasing cards, or
corporate procurement cards.

The cards are similar to credit cards; in fact the big three credit card companies—VISA, Master-
Card, and American Express—are among the leaders in purchasing cards. In most cases, the
cards are used to purchase small business items, and then a master bill is sent straight to the
purchasing department. But Catherine Romano stated in Management Review that the cards do
differ from true credit cards in key ways. In some cases, the cards work only between a buyer
and suppliers identified in advance, eliminating the bank that is involved with credit cards.
Additionally, the cards can be coded to include a variety of important transaction information
that reduces the amount of paperwork needed to track the sale, including sales tax data, customer
code (such as job number or cost center), taxpayer identification number, and more. This coding
allows companies to receive valuable information about each transaction and greatly streamlines
the purchasing process.

The cards are beneficial to suppliers as well. The most important advantage is that the vendor
receives payment much more quickly than in the past—sometimes in as short a period as two or
three days. Additionally, the supplier saves money by not having to issue and mail an invoice,
and the supplier knows the credit worthiness of the customer before the transaction is even
processed.

Read more: Purchasing - advantage, benefits, cost, The traditional purchasing process, Strategic
sourcing, Empowering teams, Just-in-time purchasing, Purchasing cards
http://www.referenceforbusiness.com/small/Op-Qu/Purchasing.html#ixzz0stD0wOTS

Just-in-time (JIT) is an inventory strategy that strives to improve a business's return on

investment by reducing in-process inventory and associated carrying costs. Just In Time
production method is also called the Toyota Production System. To meet JIT objectives, the
process relies on signals or Kanban (看板 Kanban?) between different points in the process,
which tell production when to make the next part. Kanban are usually 'tickets' but can be simple
visual signals, such as the presence or absence of a part on a shelf. Implemented correctly, JIT
can improve a manufacturing organization's return on investment, quality, and efficiency.

Quick notice that stock depletion requires personnel to order new stock is critical to the
inventory reduction at the center of JIT. This saves warehouse space and costs. However, the
complete mechanism for making this work is often misunderstood.

For instance, its effective application cannot be independent of other key components of a lean
manufacturing system or it can "...end up with the opposite of the desired result."[1]. In recent
years manufacturers have continued to try to hone forecasting methods (such as applying a
trailing 13 week average as a better predictor for JIT planning)[2], however some research
demonstrates that basing JIT on the presumption of stability is inherently flawed.[3]

Effects

A surprising effect was that factory response time fell to about a day. This improved customer
satisfaction by providing vehicles within a day or two of the minimum economic shipping delay.

Also, the factory began building many vehicles to order, eliminating the risk they would not be
sold. This improved the company's return on equity.

Since assemblers no longer had a choice of which part to use, every part had to fit perfectly. This
caused a quality assurance crisis, which led to a dramatic improvement in product quality.
Eventually, Toyota redesigned every part of its vehicles to widen tolerances, while
simultaneously implementing careful statistical controls for quality control. Toyota had to test
and train parts suppliers to assure quality and delivery. In some cases, the company eliminated
multiple suppliers.

When a process or parts quality problem surfaced on the production line, the entire production
line had to be slowed or even stopped. No inventory meant a line could not operate from in-
process inventory while a production problem was fixed. Many people in Toyota predicted that
the initiative would be abandoned for this reason. In the first week, line stops occurred almost
hourly. But by the end of the first month, the rate had fallen to a few line stops per day. After six
months, line stops had so little economic effect that Toyota installed an overhead pull-line,
similar to a bus bell-pull, that let any worker on the line order a line stop for a process or quality
problem. Even with this, line stops fell to a few per week.

The result was a factory that has been studied worldwide. It has been widely emulated, but not
always with the expected results, as many firms fail to adopt the full system[4].

The just-in-time philosophy was also applied to other segments of the supply chain in several
types of industries. In the commercial sector, it meant eliminating one or all of the warehouses in
the link between a factory and a retail establishment. Examples in sales, marketing, and customer
service involve applying information systems and mobile hardware to deliver customer
information as needed, and reducing waste by video conferencing to cut travel time[5].

[edit] Benefits

Main benefits of JIT include:

 Reduced setup time. Cutting setup time allows the company to reduce or eliminate inventory for
"changeover" time. The tool used here is SMED (single-minute exchange of dies).
 The flow of goods from warehouse to shelves improves. Small or individual piece lot sizes reduce
lot delay inventories, which simplifies inventory flow and its management.
 Employees with multiple skills are used more efficiently. Having employees trained to work on
different parts of the process allows companies to move workers where they are needed.
  Production scheduling and work hour consistency synchronized with demand. If there is no
demand for a product at the time, it is not made. This saves the company money, either by not
having to pay workers overtime or by having them focus on other work or participate in training.
 Increased emphasis on supplier relationships. A company without inventory does not want a
supply system problem that creates a part shortage. This makes supplier relationships extremely
important.
 Supplies come in at regular intervals throughout the production day. Supply is synchronized with
production demand and the optimal amount of inventory is on hand at any time. When parts
move directly from the truck to the point of assembly, the need for storage facilities is reduced.

[edit] Problems

[edit] Within a JIT system

Just-in-time operation leaves suppliers and downstream consumers open to supply shocks and
large supply or demand changes. For internal reasons, Ohno saw this as a feature rather than a
bug. He used an analogy of lowering the water level in a river to expose the rocks to explain how
removing inventory showed where production flow was interrupted. Once barriers were exposed,
they could be removed. Since one of the main barriers was rework, lowering inventory forced
each shop to improve its own quality or cause a holdup downstream. A key tool to manage this
weakness is production levelling to remove these variations. Just-in-time is a means to improving
performance of the system, not an end.

Very low stock levels means shipments of the same part can come in several times per day. This
means Toyota is especially susceptible to flow interruption. For that reason, Toyota uses two
suppliers for most assemblies. As noted in Liker (2003), there was an exception to this rule that
put the entire company at risk because of the 1997 Aisin fire. However, since Toyota also makes
a point of maintaining high quality relations with its entire supplier network, several other
suppliers immediately took up production of the Aisin-built parts by using existing capability
and documentation. Thus, a strong, long-term relationship with a few suppliers is better than
short-term, price-based relationships with many competing suppliers. Toyota uses this long-term
relationship to send Toyota staff to help suppliers improve their processes. These interventions
have been going on for twenty years and have created a more reliable supply chain, improved
margins for Toyota and suppliers, and lowered prices for customers. Toyota encourages their
suppliers to use JIT with their own suppliers.

Chapter 12
Short-Run Decision Making:
Relevant Costing and Inventory Management

Learning Objectives
1. Describe the short-run decision-making model and explain how cost behavior affects the information
used to make decisions.
2. Apply relevant costing and decision-making concepts in a variety of business situations.
3. Choose the optimal product mix when faced with one constrained resource.
4. Explain the impact of cost on pricing decisions.
5. Discuss inventory management under the economic order quantity and JIT models.

1. SHORT-RUN DECISION MAKING

Short-run decision making involves choosing among alternatives and tends to be short-run in nature
with an immediate end in view.

Sound short-run decision making results in decisions that achieve an immediate objective and serve the
overall strategic goals of the organization.

A. The Decision-Making Model

The six steps in the decision making process are as follows:

1. Define the problem.

2. Identify alternatives as possible solutions to the problem; eliminate alternatives that are not feasible.
3. Identify the relevant costs and benefits associated with each feasible alternative; eliminate irrelevant
costs and benefits from consideration.
4. Total the relevant costs and benefits for each alternative.
5. Assess qualitative factors.
6. Select the alternative with the greatest overall benefit.

B. Ethics in Decision Making

In tactical decision making, ethical concerns relate to the way in which decisions are implemented and
the possible sacrifice of long-run objectives for short-run gain.

Objectives should be attained within an ethical framework and be consistent with the company’s
missions and goals.

C. Relevant Costs Defined

Relevant costs:

 are future costs, and

 differ among the alternatives.

An irrelevant cost can be:

  a past cost, or
 a future cost that does not differ among the alternatives being considered.

A sunk cost is a cost for which the outlay has already been made.Sunk costs are the result of past
decisions and cannot be changed by current or future action. The acquisition cost of equipment
purchased in the past is a sunk cost. After sunk costs are incurred, they are unavoidable. Since sunk
costs are past costs that do not differ among the alternatives, sunk costs are irrelevant costs.

2. SOME COMMON RELEVANT COST APPLICATIONS

We all are aware of the need of quantitative numbers to make decisions, but there is a need to examine
qualitative factors. Many times it is difficult to quantify qualitative factors, such as quality of materials,
late orders, customer relations, and so on. Qualitative factors are very important when making
decisions.

There are four major types of relevant costing decisions mentioned in this section: make or buy, keep
or drop, special order, and sell or process further. Cornerstones can be used to illustrate each of the
decision types.

Cornerstone 12-1: How to Structure a Make-or-Buy Problem

 See Mowen and Hansen text for demo problems.

Cornerstone 12-2: How to Structure a Special-Order Problem

 See Mowen and Hansen text for demo problems. 

Cornerstone 12-3: How to Structure a Keep-or-Drop Product Line Problem

See Mowen and Hansen text for demo problems. 

Cornerstone 12-4: How to Structure a Keep-or-Drop Product Line Problem with

Complementary Effects

 See Mowen and Hansen text for demo problems.

Cornerstone 12-5: How to Structure the Sell-or-Process-Further Decision

 See Mowen and Hansen text for demo problems.

3. PRODUCT MIX DECISIONS

In some cases product resources, such as materials, labor, or equipment, may be limited.

Constraints are limitations due to limited resources or limited product demand. A manager must
choose the optimal mix given the firm’s constraints.

A. One Constrained Resource

When there is one scarce resource, determine which product results in the highest contribution margin
per unit of the scarce resource.

For example, if the scarce resource is machine hours, for each product calculate the contribution
margin per machine hour as follows:

The quantity needed of the product with the highest contribution margin per machine hour should be
produced before producing the other products.

Cornerstone 12-6: How to Determine the Optimal Product Mix with One Constrained
Resource

 See Mowen and Hansen text for demo problems.

Cornerstone 12-7: How to Determine the Optimal Product Mix with One Constrained
Resource and a Sales Constraint

 See Mowen and Hansen text for demo problems.

B. Multiple Constrained Resources

When more than one resource is limited, linear programming can be used to determine the optimal
solution.

4. PRICING DECISIONS

Two approaches to pricing:

1. Cost-based pricin g—Cost-based pricing uses a markup, or percentage applied to the base price, to
determine the selling price.

2. Target costing and pricin g—Target costing determines the cost of a product or service based on the
price (target price) that customers are willing to pay. The marketing department deter mines what
characteristics and price for the product are acceptable to customers, then engineers design and develop
the product so that cost and profit can be covered by that price.

Cornerstone 12-8: How to Calculate Price by Applying a Markup Percentage to Cost

 See Mowen and Hansen text for demo problems. 

Cornerstone 12-9: How to Calculate a Target Cost

 See Mowen and Hansen text for demo problems. 

5. DECISION MAKING FOR INVENTORY MANAGEMENT

A. Inventory-Related Costs

Ordering costs are the costs of placing and receiving an order. Examples include the clerical costs of
processing an order, the cost of insurance for shipment, and unloading costs.

Setup costs are the costs of preparing equipment and facilities for production. Examples include wages
of idled production workers, lost income from idled production facilities, and the costs of test runs
(labor, materials, and overhead).

Carrying costs are the costs of carrying inventory, such as storage and handling costs, the opportunity
cost of funds invested in inventory, and insurance and taxes on the inventory.

Since both ordering costs and setup costs are costs of acquiring inventory, they are treated in the same
manner.

Stockout costs are the costs associated with having insufficient amounts of inventory. Stockout costs
include:

lost sales (both current and future)

costs of expediting (overtime or increased transportation costs)

costs of interrupted production

B. Traditional Reasons for Holding Inventory

Traditional reasons for holding inventories are:

to balance ordering or setup costs and carrying costs

to satisfy customer demand (meet delivery dates)
to avoid shutting down manufacturing facilities due to machine failure, defective or unavailable parts,
and/or late delivery of parts.
to buffer against unreliable production processes
to take advantage of discounts
to hedge against future price increases

C. Economic Order Quantity: The Traditional Inventory Model

An inventory policy addresses two questions:

How much inventory should be ordered (or produced)?

When should the order be placed (or the setup performed)?

Order Quantity and Total Ordering and Carrying Costs

The order quantity used should minimize the total cost of ordering and carrying inventory.

Total inventory-related costs = Ordering cost + Carrying cost

= P D /Q + C Q /2

 where:
P = the cost of placing and receiving an order (or the setup cost for a production run)
 D = the known annual demand
 Q = quantity (the number of units ordered each time an order is placed or the lot size for a production
run)
 C = the cost of carrying one unit of stock for one year

The economic order quantity is the order quantity that minimizes the total cost.

Cornerstone 12-10: How to Calculate Ordering Cost, Carrying Cost, and Total
Inventory-Related Cost

 See Mowen and Hansen text for demo problems.

D. Computing EOQ

The economic order quantity is calculated as:

The EOQ is the order size that results in ordering costs equaling carrying costs.

The economic order quantity model can also be used to determine the most economical size of a
production run. The only difference is that setup costs for starting a production run are substituted for
ordering costs.
Cornerstone 12-11: How to Calculate the EOQ, Ordering Cost, Carrying Cost, and
Total Inventory-Related Cost

 See Mowen and Hansen text for demo problems.

E. EOQ and Inventory Management

The traditional approach to inventory management is called a just-in-case system.

The traditional manufacturing environment uses mass production of a few standardized products that
typically have a very high setup cost. The high setup cost encourages a large batch size and long
production runs. Diversity is viewed as being costly and is avoided.

F. Just-In-Time Approach to Inventory Management

Competitive pressures have led many firms to abandon the EOQ model in favor of a just-in-time (JIT)
approach to manufacturing and purchasing. JIT offers increased cost efficiency and simultaneously has
the flexibility to respond to customer demands for better quality and more variety.

G. Basic Features of JIT

JIT (just-in-time) manufacturing is a demand-pull system. Products are produced only when
demanded by customers.

JIT purchasing occurs when parts and materials arrive just in time to be used in production.

Differences between JIT and traditional manufacturing are summarized below:

 pull-through system based on  push-through system

System: demand

Inventory  suppliers deliver parts just in time to  higher levels of inventory than JIT
effects: be used in production  inventory used as a buffer because
 uses a few suppliers with long-term of delayed reaction time
 contracts
Plant layout:  manufacturing cells consist of a set
of machines that produce a
particular product or product family
 multiskilled labor where workers are
trained to operate all machines
within
the cell
 requires less space and reduces lead
times
Grouping of  service departments providing
employees: support services, such as materials
stores, are reassigned to work with
manufacturing cells
 cell workers perform more of
support services, such as setup and
preventive maintenance
Employee  increased employee participation,
empowerment: which increases productivity and
cost efficiency
 input from employees is sought
 managers act as facilitators to
develop people and skills
Total quality  poor quality cannot be tolerated
control: without inventories
 quest for defective-free products
Traceability of  uses more direct tracing of overhead
overhead costs: costs and less driver tracing and
allocation
 use of manufacturing cells results in
more costs being directly traceable
to products
H. Setup and Carrying Costs: The JIT Approach
The traditional approach takes setup costs as given and then tries to minimize total carrying costs and
setup costs.
JIT attempts to reduce setup costs (or ordering costs) by:
 greater number of suppliers with
short-term contracts
 departmental structure with
machines performing similar
functions are located together in a
department
 specialized labor where workers
operate a specific machine
 service departments providing
support services are centralized
 a central stores location handles
materials
 a central purchasing department
places all purchase orders for
materials
 less participation by employees in
management of organization
 managers act as supervisors
 acceptable quality level (AQL)
permits defects to occur as long as
they do not exceed a certain level
 relies more on driver tracing and
allocation
 reducing the time it takes to set up for production, and
reducing the number of orders through long-term contracting.

If setup and ordering costs are insignificant, the only remaining cost to minimize is carrying cost,
which is minimized by reducing inventories to insignificant levels.

Online
Home Search Subject Index Cartoons McKenzie Workshops
Store

  From Now On

The Educational Technology Journal

 Vol 12|No5|January|2003

Please feel free to e-mail this article to a friend, a principal, a parent, a

colleague, a teacher librarian, a college professor, a poet, a magician, a
vendor, an artist, a juggler, a student, a news reporter or anyone you think
might enjoy it. Other transmissions and duplications not permitted. (See
copyright statement below).

Just in Time Technology

by Jamie McKenzie

(about author)

© 2002, Jamie
McKenzie
Photo © 2002, Jamie McKenzie
San Juan Islands
all rights reserved.
This is the lead chapter from Jamie McKenzie's newest book, Just in
Time Technology: Doing Better with Fewer now shipping.

Chapter One
It makes sense to have just enough technology, just in time to get the job
done. Just in time technology!

If we use an expensive tool infrequently, we usually rent it or we

borrow from a neighbor. We learn to share, to take turns, and to be
strategic.

Few families buy a computer for every person in the household even
if they can afford it. Family members are expected to take turns.
Plan ahead. Schedule your time.

The more expensive the tool and the more rapid its typical
obsolescence, the more we might gain by strategic deployment. This
holds true for schools, for businesses, and for families. Strategic
deployment is well planned movement of equipment to maximize
and optimize use.

Just in time technology is a notion whose time has come. Schools

and businesses alike see the mounting financial burden of
maintaining computer networks when software and hardware
companies keep introducing upgrades and new versions that make
rapid and frequent replacement of equipment imperative.

Just in case technology is a wasteful, even profligate approach to

resource management that threatens to distort school and business
budgets, seducing managers into delaying roofing repairs in order to
maintain current, trendy digital equipment and networks.

I. Technology as Goal

For a decade now, schools have been urged by a procession of

visionaries to equip all classrooms and all children with high
powered, globally connected digital tools.
These promoters have put the cart squarely before the horse and
sadly ahead of program development.

The tools became program.

“We are doing the computer.”

“We are doing technology.”
“We are doing the Internet.”
“We are doing handhelds.”

And state governments often poured urgency on this digital

bandwagon by creating technology grants, curriculums, tests and
standards as if technology were a content area rather than a set of
tools.

School leaders found themselves pressured to network their schools

before anyone had a very clear notion of how these tools would
enhance student performance.

Not only did wiring classrooms become a priority - so did the

purchase of many computers for each classroom as organizations
such as the CEO Forum equated the level of curriculum integration
with the number of computers per classroom.

Microsoft, Toshiba, Apple and other companies promoted “Any time,

any where learning” and laptop schools as a form of educational
Nirvana, rushing to equip many independent schools and pilot
schools with a laptop for each student. One-to-one computing is all
the rage.

We could label this kind of technology procurement and deployment

the “just in case” technology model - a strategy that fills classrooms
with equipment before clarifying purpose, value, or strategy. The
discovery of purpose and learning strategies is evidently expected to
occur some time following installation.

A decade after the creation of the first laptop schools, the evidence
of value remains elusive and some program evaluations have
proven quite disappointing. See data in Chapter 15 - “After Laptop.”

This book argues for a dramatically different approach.

II. Technology in Its Place

No computer or digital tool before its time!

(or it is time)

Basic Beliefs

1. Avoid doing technology for the mere sake of technology.

2. Learn when to use classic tools and when to use new tools.
3. Know when to go unplugged.
4. Digital is not always best.
5. eCommerce is rarely a suitable focus for schooling.
6. People with little background or training in education rarely
understand or appreciate the best strategies to improve classroom
learning.
7. No computer or digital tool before its time!

In some quarters this just in time approach will be judged heresy, as

the assumption for these folks is that more technology is always
better.

But this book will argue that smart schools, students, and teachers
learn to be discerning and strategic users of technologies. They
share, take turns and move tools about to optimize returns on
investments. When selecting a tool, they give full consideration to all
technologies ranging from books and the human question to probes,
digital cameras and PDAs. They also learn to unplug, turn off and
tone down.

Smart schools are neither digitally obsessed nor technologically

possessed. They have learned to say “No!” to distractions, silly toys
and untested innovations that might reduce their focus on
education’s bottom line - the improvement of student learning.

III. JITT Strategies

This approach requires a good deal of cooperation, planning, and
strategy. The following strategies often make the difference between
success and disappointment:

Cultivating

Advance program and unit development is required so that

scheduling and planning are possible. These units can then become
required elements in each curriculum document with all teachers at a
grade level expected to complete the unit. The creation of units
reduces the uncertainties and the randomness of unplanned events.

Focusing

Develop technology rich learning units only in those disciplines and

areas where it makes sense. Choose depth and quality over thinly
distributed, superficial, and inconsequential uses.

Moving

Put the equipment where it will do the most good and move it
frequently as needs shift. Lightweight laptop carts can visit 2-4
classrooms a day without much difficulty. If one teacher only needs
the equipment for a few periods, move it elsewhere during the
“dead” periods. Beware of carts too heavy to move easily.

Sharing

Many learning tasks will flourish when pairs and trios of students
share laptops or other tools. The same may be true for a team of
teachers moving laptop carts about. One teacher may wish
equipment in the morning but gladly give up afternoon access.

Scheduling

Who gets what when? Someone needs to take responsibility for

deciding and communicating who will need how much equipment at
which times. Haphazard allocation and movement is wasteful.

Forecasting

Someone needs to take responsibility for anticipating needs likely to

arise during coming weeks and months.

Supporting

Making smart use of fewer computers requires support services to

keep equipment in great shape and to help with the scheduling and
movement.

Empowering

Equipment becomes an extension of the teachers’ and the students’

interests and volition - an invited guest meant to serve and
strengthen. No more presumptions.

Encouraging

Those who take the risks of using new tools need to hear
acknowledgment, recognition, etc. They also need emotional support
when facing difficulties.

Expecting

No equipment sitting idle. Use it or lose it. Teach the curriculum.

Make the units happen. Everybody.

Assessing

Gather data to see how various technology units are influencing

student skills and performance. Shed, cull, weed, and eliminate
those units and activities that make few discernible contributions.
Tallying

Keep track of how much equipment is actually used. Set clear goals
for usage and track real usage vs. that goal. Look at revising
strategies to meet usage goals. No denial.

Teaming

Certain kinds of teaming can reduce the need for formalized

scheduling and planning, as laptop carts may be shared across four
teachers at one grade level if they have strong collaborative skills
and inclinations.

Orchestrating

To avoid haphazard implementation, someone with clout (a

principal?) needs to keep an eye on the system-wide use of
equipment, noting its breakdowns, squeaking joints, lurches, delays,
gasps, and stumbles. The larger the school and the more complex
its culture, the more leadership is needed to keep the system
humming smoothly and productively.

Rethinking

Based on experience, some strategies will prove more successful

than others and the program must be reviewed with an eye toward
shedding the poor strategies in favor of those with the best chances
for success.

Revising

Periodic reviews and rethinking will lead to revision, synthesis,

modification, and invention of new approaches and combinations of
strategies

IV. The Unwired Classroom

When computers first arrived in classrooms twenty years ago, they

brought with them many headaches and challenges in the form of
electrical cords, attachments, peripherals, and other entanglements.
Sometimes it was hard to find room for them. Sometimes they felt
like intruders.

In recent years, with the rush to network schools, the amount of

wiring and cabling escalated dramatically in ways that often
hampered the use of the equipment and led to restrictions and
inflexibility. Connections often dictated placement. Movement was
rare.
With the arrival of high performance wireless notebook computers,
we stand at the beginning of a promising new phase. The wireless
notebook, especially when delivered to classrooms in sufficient
quantities, is likely to bring about a welcome shift in attitude and use
by classroom teachers.

After several decades of limited progress toward widespread

integrated use (as evidenced by reports such as Technology Counts
1999 and the work of Hank Becker), wireless notebook computers
may prove an ally in the effort to recruit the enthusiastic daily use of
those teachers who have been hitherto reluctant, skeptical and late
adopting when it comes to new technologies.

Wireless laptops can help to eliminate many of the barriers,

obstacles, and inconveniences that have contributed to teacher
reluctance in the past, but the focus of use must be on curriculum
and learning.

If wireless notebooks are used for powerpointless activities, many

teachers will wisely persist in resisting their use. We must offer
standards-based learning experiences with these new tools if we
wish to see broad-based use.

V. What are the advantages of wireless laptops under optimal

conditions?

• Ease of Movement
• Relaxed Fit
• Strategic Deployment
• Flexibility
• Cleanliness
• Low Profile
• Convenience
• Simplicity
• Speed

In visiting schools to prepare this book, I frequently encountered

situations that fell short of optimal. These challenges, frustrations
and limitations of wireless computing are outlined at some length in
Chapter Five - “Models of Movement.” This chapter looks at the
advantages of mobile computing when it is done effectively.

Ease of Movement
Laptops allow for easy movement within a classroom or across a
school. Laptops also make possible the clustering and combining of
enough units in each classroom to achieve critical mass - enough
computers to do something worth doing.

Because desktop computers tended to be large and heavy, they

required special furniture and were rarely moved around to where
they might do the most good or be used most frequently.

Laptops are free to roam wherever students are learning. They

require no special furniture. They can sit next to books and papers
on a regular desk surface. They can fit on a lap. They can rest on a
floor on a rug.

When one teacher is finished with a technology rich lesson and has
little need for the laptops, they are simply loaded into a cart and
rolled down the hall to someone who is ready and eager to begin a
unit. No need to sit idle while non-computer tasks are taking place.

Ease of movement is likely to encourage more frequent daily use of

each computer.

FNO began arguing for COWs (computers on wheels) and flotillas

several years ago (see the March, 1998 issue, “The WIRED
Classroom: Creating Technology Enhanced Student-Centered
Learning Environments.” http://fno.org/mar98/flotilla.html

But the use of flotillas and laptop carts was always somewhat
frustrating and difficult because it was hard to move things around
and manage the network connections as long as the computers
required cables for electricity and network connections. Those who
asked for movement were often told it was not a practical option.

Sadly, until now, the preferred model in most classrooms has been a
thin and even distribution of 3, 4 or 5 computers per classroom, often
bolted down at the back of the room in a fixed location on computer
tables. This model provides far less student access than a wireless
laptop cart with 15 units and proves frustrating to teachers who need
critical mass to launch significant projects such as writing as process
or WebQuests.

The math is simple.

If 25 elementary students need to spend 8 hours each on their

writing project, they require 200 hours of computer contact time. Five
computers provide 125 hours of contact time per week if used 5
hours each day during a 5-day week. It will take 2 weeks for these
students to complete their one assignment if all five computers are
used almost constantly.

But many teachers will not allow students to use computers all day
long. While they are teaching math and other lessons, they may
demand the full attention of the entire class. During this time, the
computers sit idle.

In contrast, a laptop cart with 15 computers would provide the 200

hours in 5 mornings so two teachers could switch the cart from room
to room and finish the writing in both classes that week. One teacher
does writing in the morning while the other does writing in the
afternoon. When they need to do other tasks, the computers leave
the room and go next door where they will be used without pause for
the rest of the day.

Thin distribution of resources has been a prime cause of the

screensavers’ disease - the lack of use by large numbers of
teachers.

In many schools, computers were distributed to all classrooms

regardless of the readiness or inclination of the receiving teachers to
blend the new tools into daily lessons. Despite research by Becker
and others indicating that use is heavily influenced by teachers’
preferences, styles and readiness levels, all teachers and all
classrooms in some buildings were treated equally. Ironically, the
most equitable distribution of equipment to fixed locations may lead
to a lack of real access and use. Becker (1999) found that
constructivist teachers allowed almost three times as much use of
computers as traditional teachers when they each had five
computers in their rooms.

Frequent movement of equipment is likely to produce more true

access and equity than thin distribution to fixed locations.

Relaxed Fit

Wireless notebook computers fit right into the classroom with little
fuss or bother.

Unlike their desktop cousins, wireless laptops are quite small. They
have a tiny “footprint” compared to desktop units. Because they take
up very little space, they can sit down just about anyplace in a
regular classroom without any special provisions being made.
With many teachers feeling skeptical and reluctant about using new
technologies, a relaxed fit is a strong selling point. Laptops do not
shift the room around or bring with them new pieces of furniture or
other encumbrances.

Strategic Deployment

Wireless notebook computers make it easy to put computing power

where it will do the most good.

We should be applying new technologies to standards-based,

curriculum-rich learning activities.

We should begin by asking what kinds of student learning we hope

to promote. Those questions then logically lead to considerations of
strategy and resources. Once we have a good sense of our purpose
and the activities we plan to launch, we can begin to design a
network that serves them well. Design should follow function.

In many schools, we see far too little consideration of movement.

The prevailing strategy is to install and lock down all new computers.
Yet this strategy is incredibly wasteful and inefficient.

Strategic Deployment involves a marriage of equipment and

program. When the biology teacher is ready to launch a major study
of the rain forest, we wheel a dozen networked computers into the
classroom - enough resources to support genuine program
integration.

Strategic Deployment takes us past tokenism and lip service to

authentic engaged learning activities.

Moving computers where they are needed and wanted may allow a
school to cut its hardware budget in half while slowing down the
purchasing and replacement cycle. Instead of installing 2-3
computers per classroom that will be used (maybe) 15% of the time,
the district cuts its order for 2000 computers down to 1000, invests
heavily in professional development, and realizes 85% utilization by
moving the equipment to where it will be welcomed (and used).

One week here. One week there. Movement spawns use!

Flexibility
Wireless notebook computers can be used in many different ways to
support a lesson, with form following function and purpose.

In trying to recruit the enthusiastic participation of all teachers

regardless of style and preference, the more flexible the delivery
system the better.

A cart of laptops can be deployed across a room in many different

ways, thereby maximizing the fit between the teacher’s style and the
way the lesson proceeds.

One teacher might prefer cooperative learning and teaming. No

problem. Laptops lend themselves well to this type of lesson, as
clusters of students gather around a single screen to consider and
analyze data.

A second teacher wants students working solo but facing the front of
the room in rows. No problem. The students sign out a laptop and sit
where they usually sit.

The key to this element is that life goes on as it normally would. The
laptops allow the teacher to execute the lesson without having to
move furniture or modify the existing norms and procedures.

Delivered to the classroom in sufficient numbers for short periods of

time, the laptops provide enough information power so that a great
lesson can be launched without any heroic scheduling strategies.
This stands in direct contrast to rooms with 3, 4 or 5 computers that
require teachers to perform balancing acts as less than half the class
can be on the computers at a time.

With desktop computers, the teacher must be very flexible. The

demands on the teacher to vary from normal routines are one of
several complications that stand in the way of many teachers
embracing new technologies.

The more comfortable and familiar we make the classroom

experience with new technologies, the more likely we are to win
enthusiastic use.

Cleanliness

Wireless notebook computers do not add mess, confusion and

disorder to a classroom.
Finally we have computers that can sit on a desk with no more mess
or bother than a textbook.

The typical desktop computer is not only large and bulky. With its
many cords and cables, it can be downright messy. Those wires and
cables either sprawl all over the place taking up lots of space on the
desktop or they can be neatly hidden away behind and below
specialized furniture that usually ends up virtually bolted against a
wall.

The desktop computer ended up occupying too much space -

dedicated space. Instead of entering the classroom like one more
tool for daily use, it demanded special treatment. Ironically, this
special treatment usually meant setting the equipment apart from the
rest of the room. In many classrooms, the computers are off to one
side.

While it may seem like a small thing, the neatness and simplicity of a
wireless laptop gives it a huge advantage. The less trouble they
cause, the more welcome they are likely to be. Teachers with a low
tolerance for disorder and chaos will appreciate the simplicity and
clean lines of these computers.

Low Profile

Wireless notebook computers sit low, keep a low profile and allow
teachers to keep an eye on things.

Those who have tried working with students in computer labs or

classrooms filled with desktop computers will find the low profile of
notebook computers a welcome change.

Walking around the room, it is easy to see students as they work

with notebook computers. The screens are low down, close to the
desk or table on which they sit. They tend to be no higher than a
student’s chest.

In contrast to a room of desktop computers where student heads are

concealed behind monitors that are set up high, the teacher can
keep an eye on things, judging from facial expressions who is on
task, who is confused, and who needs some attention.

If the teacher wants to see screens while students are working, it is

easy to configure the room that way. To move desktop units around
in that way would probably be too much trouble.

One major barrier to widespread use of computers has been various

control and classroom management issues that arise when students
make use of such equipment. The tall profile and size of the desktop
units contributed to the challenge of maintaining good attention and
behavior during such lessons. Laptops return visual control to
teachers in ways that make the classroom feel normal.

Convenience

Wireless notebook computers can be easy and comfortable to use.

The American Heritage Dictionary (Third Edition) defines

“convenience” as follows:

The quality of being suitable to one’s comfort, purposes or needs.

The more a new tool matches teachers’ purposes and needs, the
more likely they are to welcome the tool’s arrival. The more
comfortably the new tool fits into the daily routines, the physical
space, and the activities of the classroom, the more enthusiastically
teachers will embrace the technology.

In one classroom, I watched a teacher using laptop computers for

the very first time. After describing a research assignment, she told
students to sign out a laptop and get started. In a matter of minutes,
they were eagerly conducting the research.

For a first time use, the high level of comfort and productivity was
very impressive. Students picked up a laptop, went back to their
groups, opened the equipment, and fired up their units without any
trouble at all.

Because the equipment was so easy to use, the teacher could

concentrate on teaching. No troubleshooting required.

In this example, the laptops made the teacher’s job easier. They
delivered information power to the desktop with no more bother than
it would take to pass out a set of print dictionaries or encyclopedias.

In other classrooms and other schools, I heard many stories of

difficulties and disappointments caused by an array of equipment
issues such as brief battery life and network software demands. In
those schools, the convenience of wireless was dramatically
reduced and mobile frequently became immobile - wireless became
wired.

In some districts, the laptop carts are so heavy that a single, strong
adult will have great difficulty rolling the equipment any place. In one
elementary school I visited, the carts stay in closets and students
come down the hall for the laptops as they are needed. The laptop
cart stays put.

Simplicity

Wireless notebook computers do not require much in the way of

special effort or understanding.

Over the first two decades of their time in classrooms, computers

have won a reputation for being a bit complicated and unreliable.
The arrival of networks seemed to enhance that reputation in many
schools and districts as the performance of a computer was now
linked to the performance of the network.

“The network is down,” signaled frustration and risk. Security

concerns and risks added layers to desktops that seemed to keep
users distant from the inner workings of the computers. IP addresses
and TCP/IP added a level of mysticism to the Internet-connected
computer that could seem confounding to lay people.

Fortunately, we may be entering a new phase in districts that have

passed through the early stages of networking. Network reliability
has finally been achieved in many of these districts. Things generally
work as you wish them to work. It is not such a big thing any more.

As described in the previous section, a cart wheels into a room,

students pull out laptops and fire them up without any difficulty.
While this improved level of performance makes the use of both
desktop units and laptops simpler and more appealing, the timing
works especially well for wireless laptops, as they are arriving in
classrooms at a time when a district can actually deliver “plug and
play.”

The chances for daily use are greatly enhanced by simplicity,

comfort and reliability.

Speed

Wireless notebook computers can be deployed across a classroom

or down a hallway in seconds if the cart is not too heavy.

Time is a major issue for teachers. Fortunately, laptops can be

moved around quickly to match teacher wishes. A lightweight laptop
cart is easily wheeled across the hallway at noon so two teachers
can share the computers half a day each. There are no special
connections, no TCP/IP changes, no fuss, and no bother. It is fast,
easy, and comfortable when done correctly.

Movement within the classroom may also be fast.

Not so long ago I taught an afternoon professional development

session at a laptop school that still had laptops requiring cables for a
network connection as well as a power supply. It took more than 15
minutes to plug them into the wall! I wondered how it felt when
students arrived in class and passed through the same hurdles.

This should no longer be a problem. Theoretically, the wireless

notebook eliminates the “plug” part of “plug and play.” The fuss,
bother, and set up time associated with those wires, cables and
network connections have been removed. Teachers can move right
to the lesson. Students can focus swiftly on the learning. Unless, of
course, the network software takes forever to log students onto the
network. Unless, of course, there are battery limits and other issues.

VI. Other Issues

The advantages listed in this chapter are theoretical based on the

availability of lightweight laptop carts, batteries that last an entire
day, network software that is fast and reliable, and equipment that
performs in a trustworthy manner.

Unfortunately, as is reported in some detail in Chapter Five -

“Models of Movement,” most schools I visited have found that there
are many issues, problems and challenges when using these
wireless technologies that have undermined their effectiveness and
frustrated their users. This chapter posed the “best case” arguments
for mobile computing. Other sections will detail some of the
challenges and frustrations.
Back to January Cover

Credits: The photograph was shot by Gretchen Offutt.

Copyright Policy: Materials published in From Now On may be

 duplicated in hard copy format if unchanged in format and content
for educational, nonprofit school district and university use only and
may also be sent from person to person by e-mail. This copyright
statement must be included. All other uses, transmissions and
duplications are prohibited unless permission is granted expressly.
Showing these pages remotely through frames is not permitted.

FNO is applying for formal copyright registration for articles.

Unauthorized abridgements are illegal.

From Now On Index Page