Final answer:
It is true that identifying cost drivers is crucial when implementing the Just-In-Time philosophy because it allows for the reduction of waste and optimization of efficiency by understanding and addressing the factors causing variations in costs.
Step-by-step explanation:
The statement that identifying cost drivers is an essential step in implementing the Just-In-Time (JIT) philosophy is true. In a JIT environment, the primary focus is on eliminating waste and improving efficiency. This includes the reduction of inventory levels, which signifies that understanding the factors that influence costs becomes crucial. Cost drivers are the elements that cause costs to change, for example, machine setup times, the number of units produced, or hours of processing time. By identifying these drivers, a company can work towards reducing or entirely eliminating them, thereby streamlining operations and minimizing inventory build-up, which is the essence of JIT. Examples of cost drivers in a manufacturing process could include machine setup hours for products requiring frequent changeovers, the cost of raw materials, or the cost of quality inspections. By pinpointing these drivers, a business can adjust its operations to be more JIT-compliant, ultimately improving profitability and efficiency.