Jit purchasing arrangements-jit benefits, Managerial Accounting

JIT purchasing arrangements

JIT philosophy also extends to adapting JIT purchasing techniques whereby delivery of material immediately precedes their use. By arranging with suppliers for more frequent deliveries stocks can be out to a minimum
Considerable savings in material handling expenses can be obtained by requiring suppliers to inspect materials before their delivery and guarantee their quality.

This improved service is obtained by giving more business to fewer suppliers and placing long tern purchasing orders, therefore the suppliers has an assurance of long term sales and can plan to meet this demand.

Companies that have executed JIT purchasing techniques have claimed to substantially reduce their investment in raw materials and work in progress stocks.

Other benefits comprise:

1. Considerable savings in factory space.
2. Big amount discount.
3. Savings in time from consulting with less suppliers
4. Reduction in paper work arising from issuing (long term orders) to a few suppliers rather than individual purchase order to many suppliers.

Posted Date: 12/6/2012 7:14:33 AM | Location : United States

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