The Following Reasons Have Been Offered for Holding Inventories

question 66

Essay

The following reasons have been offered for holding inventories:
1. To balance ordering or setup costs and carrying costs

2. To satisfy customer demand (e.g., meet delivery dates)

3. To avoid shutting down manufacturing facilities because of
(a) machine failure
(b) defective parts
(c) unavailable parts

4. Unreliable production processes

5. To take advantage of discounts

6. To hedge against future price increases
Required:
a. Explain how the JIT approach responds to each of these reasons and, consequently, argues for insignificant levels of inventories.

b. The theory of constraints (TOC) criticizes the JIT approach to inventory management, arguing that it fails to protect throughput. Explain what this means and describe how TOC addresses this issue.

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Definitions:

Taiwanese Chan Monastery

A Buddhist monastery in Taiwan practicing Chan Buddhism, emphasizing meditation and mindfulness.

Formal Occasion

An event characterized by a strict adherence to traditional or prescribed forms, ceremonies, or etiquette, often involving official or important social gatherings.

Rituals

Acts or procedures established by custom or prescribed by authority as proper to a certain formal occasion.

Shamanic Performances

Ritualistic activities led by shamans, who are regarded as intermediaries between the human and spiritual worlds, involving practices for healing, divination, and community bonding.