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Just in time system

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FM Exams › Just in time system

  • This topic has 1 reply, 2 voices, and was last updated 3 years ago by John Moffat.
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  • August 8, 2021 at 4:50 pm #630821
    John1998m
    Participant
    • Topics: 73
    • Replies: 40
    • ☆☆

    After watching your lecture on JIT this is what I understood by that:

    JIT is a theory which states to keep the inventory to an absolute minimum but that does not mean that the business doesn’t have any inventory at all otherwise they would be out of the business. That means business only have inventory which they think they can sell it to the customer. They don’t carry excessive inventory which could not be sold.

    Therefore, it means that the business will only order new inventory from suppliers only in case of any demand otherwise it would be obsolete.

    In the JIT approach; the number of orders will be more because we will order each time when we get any excess demand from the customers whereas holding cost will be less because we will not hold huge inventories.

    August 8, 2021 at 5:28 pm #630843
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54699
    • ☆☆☆☆☆

    What you have written is correct (except that it is not a theory, it is a practical policy that is very common).

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