Final answer:
Just-in-time (JIT) manufacturing helps achieve minimal inventory holding costs by reducing the need to maintain large stocks of components or finished products, leading to a lean and efficient production system with costs mostly focused on actual production rather than storage.
Step-by-step explanation:
The concept of just-in-time (JIT) manufacturing is pivotal in modern production processes. By adopting JIT, manufacturing industries, like the American car manufacturers of the 1980s, revolutionized their supply chain systems. Instead of maintaining large inventories of parts and finished products, companies arrange for daily deliveries of necessary components, thereby significantly reducing the amount of inventory that needs to be stored. This approach not only helps in identifying quality issues promptly but also minimizes storage costs and enhances efficiency within the production cycle.
The implementation of JIT manufacturing creates a scenario where large warehouses became obsolete, driving a shift towards establishing many smaller factories closer to the main assembly plants. These factories competed for contracts and sometimes relied on non-union, lower-wage labor, pressuring the traditional gains achieved by unionized workers.
Despite these socio-economic impacts, from a production standpoint, minimal inventory holding costs can be achieved through JIT. This is because the system is designed to avoid overproduction and excess stockpiling of resources, leading to a reduction in inventory-related expenses. It is a sharp contrast to the economies of scale observed in large-scale warehouses like those of Costco or Walmart, where the cost per unit decreases with an increase in the volume of production. In JIT, the focus is on producing only what is necessary at the right time, effectively conserving resources and reducing capital tied up in unused inventory.
Strategically, JIT allows manufacturers to be more agile, responding quickly to market demands without the burden of excessive inventory. However, this also means that a stoppage at one point in the supply chain can halt the entire production process, as illustrated by the strikes in a Dayton, Ohio factory in the mid-1990s.
In conclusion, just-in-time manufacturing offers numerous benefits in terms of efficiency and cost-savings by eliminating the need for large inventory volumes, which correlates directly with d. Minimal inventory holding costs.