Just in time - it’s a set of techniques to increase productivity , improve quality and reduce the cost of

operation . It basically aims to ensure that inputs into the production production process only arid when
they are needed It is basically ,,,what you want … when you want …how much you want .

Its core philosophy is identifying and eliminating waste and continuous improvement. This is important
in a country like ours where resources are scarce. There are auto component companies in India that
have excelled in implementing the JIT concept.

How Does Just-in-Time Inventory Work?

The just-in-time (JIT) inventory system minimizes inventory and increases efficiency. JIT production
systems cut inventory costs because manufacturers receive materials and parts as they are needed for
production and so do not have to pay storage costs. Manufacturers are also not left with unwanted
inventory if an order is canceled or not fulfilled

The just-in-time (JIT) inventory system is a management strategy that aligns raw-material orders from
suppliers directly with production schedules. Companies employ this inventory strategy to increase
efficiency and decrease waste by receiving goods only as they need them for the production process,
which reduces inventory costs. This method requires producers to forecast demand accurately.

Sales forecasting
is the process of estimating future sales. Accurate sales forecasts enable companies to make informed
business decisions and predict short-term and long-term performance. Companies can base their
forecasts on past sales data, industry-wide comparisons, and economic trends.

It is easier for established companies to predict future sales based on years of past business data. Newly
founded companies have to base their forecasts on less-verified information, such as market research
and competitive intelligence to forecast their future business.

Sales forecasting gives insight into how a company should manage its workforce, cash flow, and
resources. In addition to helping a company allocate its internal resources effectively, predictive sales
data is important for businesses when looking to acquire investment capital.

Sales forecasting allows companies to:

Predict achievable sales revenue;

Efficiently allocate resources;

Plan for future growth.

What Is Inventory Management?

Inventory management refers to the process of ordering, storing and using a company's inventory. This
includes the management of raw materials, components and finished products, as well as warehousing
and processing such items.

To achieve these balances, firms have developed two major methods for inventory management: just-
in-time (JIT) and materials requirement planning (MRP).

Materials Requirement Planning

The materials requirement planning (MRP) inventory management method is sales-forecast dependent,
meaning that manufacturers must have accurate sales records to enable accurate planning of inventory
needs and to communicate those needs with materials suppliers in a timely manner. For example, a ski
manufacturer using an MRP inventory system might ensure that materials such as plastic, fiberglass,
wood, and aluminum are in stock based on forecasted orders. Inability to accurately forecast sales and
plan inventory acquisitions results in a manufacturer's inability to fulfill orders.

Economic Order Quantity

The economic order quantity (EOQ) model is used in inventory management by calculating the number
of units a company should add to its inventory with each batch order to reduce the total costs of its
inventory while assuming constant consumer demand. The costs of inventory in the model include
holding and setup costs.

The EOQ model seeks to ensure that the right amount of inventory is ordered per batch so a company
does not have to make orders too frequently and there is not an excess of inventory sitting on hand. It
assumes that there is a trade-off between inventory holding costs and inventory setup costs, and total
inventory costs are minimized when both setup costs and holding costs are minimized.

Days Sales of Inventory

Days sales of inventory (DSI) is a financial ratio that indicates the average time in days that a company
takes to turn its inventory, including goods that are a work in progress, into sales.

Business process reengineering

is the act of recreating a core business process with the goal of improving product output, quality, or
reducing costs.Typically, it involves the analysis of company workflows, finding processes that are sub-
par or inefficient, and figuring out ways to get rid of them or change them.
 Facility Location
is the right location for the manufacturing facility, it will have sufficient access to the customers,
workers, transportation, etc. For commercial success,

Overall objective of an organization is to satisfy and delight customers with its product and services.
Therefore, for an organization it becomes important to have strategy formulated around its
manufacturing unit. A manufacturing unit is the place where all inputs such as raw material, equipment,
skilled labors, etc. come together and manufacture products for customers. One of the most critical
factors determining the success of the manufacturing unit is the location.

Factors Influencing Facility Location

 Customer Proximity: Facility locations are selected closer to the customer as to reduce
transportation cost and decrease time in reaching the customer.
 Business Area: Presence of other similar manufacturing units around makes business area
conducive for facility establishment.
 Availability of Skill Labor: Education, experience and skill of available labor are another
important, which determines facility location.
 Free Trade Zone/Agreement: Free-trade zones promote the establishment of manufacturing
facility by providing incentives in custom duties and levies. On another hand free trade
agreement is among countries providing an incentive to establish business, in particular,
country.
 Suppliers: Continuous and quality supply of the raw materials is another critical factor in
determining the location of manufacturing facility.
 Environmental Policy: In current globalized world pollution, control is very important, therefore
understanding of environmental policy for the facility location is another critical factor.
 Proximity to sources of supply:
Firms that process bulk raw materials usually locate close to the source of supply to reduce
transportation costs. Paper mills locate close to forests, canneries are built close to farming
areas, and fish processing plants are located close to the harbors where the fishing vessels dock
 Proximity to customers: There are several reasons why an organization would locate close to
end customers. Service firms need to be close to customers to be convenient, as is the case for
grocery stores, gas stations, fast food restaurants, and hospitals. Transportation costs can also
require proximity to customers, as in the case of concrete manufacturing. Perishable products
often require that they be produced close to the final market, as is the case for bakeries and
fresh flowers.
 Community factors: Communities may offer a number of incentives to entice companies,
including waiving or reducing taxes, and providing access roads, water and sewer connections,
and utilities. Community attitudes can also play a role in an organization’s location decision.
 Some communities may actively discourage companies that might bring more pollution, noise,
and traffic to the area. Some communities may not want a prison to be located in their
community. Other communities may welcome such firms because of the jobs, tax revenues, and
economic diversity they promise.
 Labor factors: Research shows that the majority of location decisions are largely based on labor
factors, since labor is a critical variable for many firms. Labor factors include the prevailing wage
rate in a community for similar jobs, the supply of qualified workers, and the average education
level of the local population (percentage of high school graduates, etc.). Other labor factors can
include the degree of union organizing and the general work ethic of a community, as well as
other measures of absenteeism, and worker longevity in a job can play a strong role when a firm
makes a location decision.
 Other factors: Many other factors can play a role in the location decision, including quality of life
(crime rates, good schools, climate, and recreation options), access to major transportation
arteries, construction costs, proximity of the competition, and opportunities for future
expansion.

Factor Rating Method for Location Planning

Factor Rating Method

The process of selecting a new facility location involves a series of following steps:

Identify the important location factors.

Rate each factor according to its relative importance, i.e., higher the ratings is indicative of prominent
factor.

Assign each location according to the merits of the location for each factor.

Calculate the rating for each location by multiplying factor assigned to each location with basic factors
considered.

Find the sum of product calculated for each factor and select best location having highest total score.

Center of gravity
The centre of gravity is defined to be the location that minimizes the weighted distance between the
warehouse and its supply and distribution points,
What is Make To Order (MTO)?
Make to Order (MTO) is a production technique in which producers start manufacturing a product only
after the customer places an order for it. In such a case, commodities are produced in a customized
manner according to the specifications of the customer.
Advantages of Make To Order

1. Reduces wastage-When a stock of goods lies unsold, there is a wastage not only of the materials used
to make them, but also the money and labor put into producing them. In MTO, since products are
manufactured after receiving a customer’s order and in the quantity specified, wastage and loss are
minimized.

2. Less inefficiency-When a large variety of goods are made on a large-scale basis, there is a risk of
inefficiency because workers and machines need to adhere to different rules. In MTO, all efforts are
focused on making the product according to the specifications of the customer, so workers and
machines tend to be more efficient.

3. Greater variety-Since only customized goods are produced and sold, MTO offers a greater variety of
products. In fact, it provides customers the product exactly the way they want it.