Corporate Finance Speech or Presentation Example | Topics and Well Written Essays - 2000 words

Corporate Finance - Speech or Presentation Example g too little has its problems and costs like the cost of lost profits that would have been made because of lost sales, the problem of loss of costumer loyalty and patronage, the cost of making more orders from time to time because of limited inventory on hand. Just in time (JIT) practice reduces an inventory level which means lower investments in inventories. It also greatly improves the lead time reliability due to shorter delivery- lead time. There is reduced lead times and set-up time increases scheduling flexibility. Many companies had reported improved quality levels in using JIT. It is also believed that extensive valued analysis reduces cost of purchased materials. There will be lower investments in factory space for inventories and product. There will be also less obsolescence risk in inventories and less paper work and a reduction in scrap and rework. On the other hand, the arguments against JIT include the following: JIT presupposes a disciplined act and as such it demands a long term commitment from management to do it. It management is changing or if there is no stability, it possibly the company may lose what would have earned under the ordinary way of maintaining inventories. There is also great possibility that there would be large initial cost that would possibly not compensated by short term returns. JIT presupposed anticipated demand and supply of its products and if management commits mistake along the way, the effect could be disastrous. JIT also making a stable agreement with supplier for the timely delivery of inputs for production and this may also create problems with supplies of terms large of money to implement the plan for JIT. Related with the large cost is also a risk that will have to be considered by the companies in wanting to implement JIT1. The formula above uses D, which refers to annual demand for the product, O which stands for ordering cost per unit and C, or the carrying cost per unit. In so computing minimum