Question

) As part of its initiative to implement just-in-time (JIT) manufacturing at the plant, Harley has reduced the number of engines loaded on each truck to 100. If each truck trip still costs $1000, how does this decision impact annual total inventory costs at Harley

Answer 1

The decision will increase annual total inventory costs at Harley.

Step-by-step explanation:

The JIT manufacturing system has the key function of reducing production and delivery time. It aims to serve customers of the product (usually vehicle parts) better.

To implement just-in-time manufacturing, Harley reduces the number of engines loaded on each truck to 100.

Harley does this, to save time in the process of supply!

Obviously, the truck can take more than 100 engines at a time but it would take longer for it to be dispatched.

Now, the cost for a truck trip remains the same at $1,000 while the truck carries less load. This whole decision will cause more engines to be retained in the company's inventory. This will increase inventory costs.

As for profits, they may increase, since products are supplied faster and purchased faster from the suppliers. So in general, it may not be a bad idea to introduce JIT manufacturing.