Operations Management - Just in Time and Material Resource Planning Essay

Operations Management - Just in Time and Material Resource Planning - Essay Example Let's look at an example of 2 Motorcycle manufacturers. The end product in this case is the motorcycle while the inventory required could vary from engine, engine components, wheel etc to nuts, bolts and spares. Manufacturer 1 stocks up inventory for all spares and components because he believes customer service could be better optimized with constant supply of materials. Accordingly, his relative requirement for working capital increases as he needs to invest more in procurement and storage of the components. Not having enough capital to invest, he also borrows capital and ends up paying interest for this purpose increasing his cost. Indeed he would in the this scenario like to pass o the burden to the consumer thereby scaling up the price of his product to cover his cost and still maintain his profit margin. To the contrary, Manufacturer 2 follows Just in Time inventory management system. He maintains excellent terms with his suppliers that they would as and when required immediately supply him with components required for his end product. Accordingly, his relative requirement for working capital is almost negligible as he does not have the requirement to block his capital for procurement and storage of the components.