Managing the supply chain Essay Example | Topics and Well Written Essays - 750 words

Managing the supply chain - Essay Example The theoretical opposite of this is the Material Requirements Production (MRP) system, which operates using more of a ‘push’ approach. It gives more importance to predicting the raw material that will be required for production, through a budget costing approach. This means the goods are produced in advance and stored until they are demanded and consequently sold. These two methods teach very different styles of supply chain management, and yet neither of them has lost their value in the field of supply chain management due to their unique advantages for different types of goods. Furthermore, there are even some products, the production of which may benefit from the employment of a hybrid of these two methods instead of just one strict methodology. Each of these two systems is still in existence because they are very useful for products of different nature. JIT is system which is more useful goods which are of a perishable nature, or are in danger of not being demanded l ater on. For example, considering a factory which produces food products which are not made with preservatives will employ the system of JIT in its supply chain. This is because JIT ensures minimum wastage of goods produced (Hirano, 2009). The protocol it follows for production is that the production chain waits to receive an order from the customer, and only then starts the process of production. If, for example, a firm that implements JIT receives the order for a thousand units of the product, they will not already have the product in stock. Instead, they will begin their manufacturing after the order is received and confirmed, which means that these thousand units will be produced only after the order. This reduces the chance that there will be some units, which will lie in stock after production because they are not in demand. Such a situation would lead to the good either spoiling, due to its perishable nature, or becoming obsolete in sometime. The perishable goods refer mostly to food products or other goods which use perishable materials in their production, thus rendering the nature of the good prone to expiry. This is relevant to consumer goods other than food also, such as beauty products or lotions, all of which have set expiry dates. JIT is useful for such products, because otherwise if the goods are left in stock for too long, they expire and cause losses to the manufacturer. This is also relevant to durable goods, which run the risk of becoming obsolete due the continuous technological advancement that is taking place, such as computers. Thus, such goods also need to be produced in a supply chain implementing JIT, since if the goods stored in stock become obsolete, they will become useless and cause loss to the manufacturer. Another advantage of the JIT system is that it minimizes the need for storage space for the company. A disadvantage, however is that the company is forced to streamline their production method in order meet each demand in an efficient and timely manner, so that the customer does not have to wait for unreasonable amounts of time. In contrast, the MRP system ensures that the customer receives an immediate response to their demand (Hall, 2008). This system implements budgeted production, which forecasts the demand for goods it will have to meet in the near future, and then produces accordingly. The advantage of this system is it saves time and provides a