Working Capital

This topic has 1 reply, 2 voices, and was last updated 5 years ago by John Moffat.

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January 3, 2021 at 11:58 am #601356
adarsh1997
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Hello John,

” A JIT system implies relatively low reorder cost”

1. Could you explain how the statement is correct?
-In a JIT system as order raw materials when we get an order; therefore for every order received, we place an order and hence increase the reorder costs/

2. Please explain where I am getting things wrong.

Thanks
January 3, 2021 at 2:45 pm #601364
John Moffat
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Certainly JIT means more orders.

However for it to be worthwhile adopting a JIT system, the reorder cost each time needs to be fairly small, otherwise the total reorder cost would get very high and make it not worthwhile doing.
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