Case study-DHLC
Diet for Healthy Life Company (DHLC) produces four types of frozen TV dinners that it sells to supermarkets and independent grocery stores. The company operates from two locations: a manufacturing plant and a refrigerated warehouse located a few blocks away. (Administrative offices are located in the manufacturing plant.)
The type of dinners to be produced each week is scheduled a week in advance, based on customer order. The number of dinners produced, however, is always the same. The company runs its production facilities at full capacity – 20,000 units per day – to minimize fixed manufacturing costs per unit.
Every Friday, local suppliers deliver to DHLC factory the fresh vegetable, chicken, fish, and other ingredients required for the following week's production.
(Materials are abundant in the region.) These ingredients then are cut into meal-sized portion, "fresh frozen" using special equipment, and transported by truck to the refrigerated warehouse. The company maintains an inventory of frozen ingredients equal to approximately two weeks' production.
Every day, ingredients of 20,000 dinners are bought by the truck from warehouse to the factory. All dinners produced in a given production run must be of the same type. However, production workers can make the machinery "setup" changes necessary to produce a different type of frozen dinner in about 10 minutes.
Monday through Thursday, DHLC produces one type of dinner each day. On Friday, it manufactures whatever types of dinners are needed to balance its inventories. Completed frozen dinners are transported back to the refrigerated warehouse on a daily basis.
Frozen dinners are shipped daily from the warehouse to customers. All shipments are sent by independent carriers, DHLC usually maintains about a 10-day inventory of frozen dinners in the warehouse. Recently, however, daily sales have been averaging about 2,000 units less than the level of production, and the finished goods inventory has swelled to a 25-day supply.
Noura, the controller of DHLC, recently read about JIT inventory system used by Toyota in its Japanese production facilities. She is wondering whether a JIT system might benefit DHLC.
Instructions
1- In general terms, describe a JIT manufacturing system. Identify the basic goals of a JIT manufacturing system and any basic conditions that must exist for the system to operate effectively.
2-Describe if the JIT philosophy can be adopted/applied in all departments of the organization rather than only in inventory management. What role could people play in the organization to make this JIT system work?
3- Pinpoint any non-value-added activities in DHLC operations that might be reduced or eliminated in a JIT system. Also, identify specific types of costs that might be reduced or eliminated.
4- Assume that DHLC does adopt a JIT manufacturing system, how would the relationship with its suppliers change? Describe the impact of this relationship on price, quality, and delivery and on lead time.
5-Explain whether or not you think that a JIT system would work for DHLC. Provide specific reasons supporting your conclusion.