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Just-In-Time Procurement Practices

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“ JIT has eliminated the need for a conventional purchase order and storage area. ” (Best Practice: Just-In-Time Procurement System, 2007) Most of the organizations were forced to leave a sufficient amount of spaces on their company premises in order to store materials. JIT has eliminated the need for a big storage area. The management of stored materials was a big problem for organizations because of the difficulty in keeping materials fresh. Climate changes, insect attacks, and handling problems were the major headaches for the logistic managers in keeping the material usable till the time of production.

“ It eliminated the need for a warehouse and attendants, and the warehouse now houses the procurement department, and the attendants are involved in other productive tasks. ” (Best Practice: Just-In-Time Procurement System, 2007) Moreover, the formalities of preparation of legal documents like purchase orders are not at all required in a JIT system. “ The automated JIT system provides the opportunity to order supplies when needed from a personal computer. The system provides information on the supplier's quality and delivery of products” (Best Practice: Just-In-Time Procurement System, 2007) Computerised management of purchasing has reduced a lot of headaches for the purchasers.

Purchasers quiet often preloaded their computers with the detailed databases of their suppliers and hence identification of proper suppliers even at the last moment is possible for them. Negotiations through telephone calls can be reduced a lot because of the convenience of internet technologies. Another advantage of JIT is the assurance of price stability in the market. For example, suppose a company has purchased the raw materials three months before actually they needed it for production. The company may fix the price of the produced goods based on the price of the raw materials they purchased.

But the prices of the raw material can come down in this three months period. But even then the manufacturing company may not be able to reduce the price of their finished goods because of the higher prices of the raw materials at the time of their purchasing.

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