Material pulling system is a system of production, in which parts and semi-finished products are submitted to the next technological operation only in needed amount. The product specific technological level is determined by the size order of the next level. The main function of the pull system is the objective setting for the last production chain. The objectives of the materials pull system are: prevention of increasing fluctuations in demand or production volumes from the next process of the preceding; minimization stocks size parameters changing between technological processes; simplification maximization of inventory management in the production process through its decentralization. Application of KANBAN system allows reducing inventories stocks of finished goods by 50%.
Introduction of materials pull system (KANBAN) in Media Storage Inc. will lead to the production effectiveness increasing and space problems solving. That would happen because the main approach of pull system is to avoid huge inventory stocks. According to the text, a company spends a lot of space for the stocks and because of the space limitation it cannot install the new production line and technology. KANBAN system implementation would lead to the stocks reduction because production personnel of one production line would make the amount of semi-finished products that would be needed at the next production chain. This would prevent not only for stocks reduction but also to increase of production productivity, a decrease of cycle time that is used to production and free space increment.
Therefore, the materials pull system introduction would solve Media Storage’s space problems and simultaneously increase production efficiency and effectiveness and would help to control the production process in each stage.
MA19-36. Product costing using activity-based costing and just-in-time: a value chain approach.
A value chain is a tool to analyze the potential of making sources, which are provided by the company, more valuable for customers and identify synergies. It also can be described as the lace of companies that are working together in order to meet customers’ needs and satisfy market demands. The value chain of Wearwell Carpet Company consists of three major yarn manufacturers (producers of high-quality carpets), the transport company (CTC) (ships and deliver the finished goods to the customers’ stores), and ten customers (they are carpet retailers in the ten largest building markets throughout the country).
The cost categories that would be included in the cost of the product for financial reporting purposes can be different because of the distinctive methods of costs evaluation. In the basement would be the costs of the materials and production processes that three Wearwell’s carpet producers will put. This is also can be seen as the costs of production contracts. The system of product cost value may include the administrative expenditures, outlays on customer service staff and the costs of main office usage (rent). Therefore, the cost of product can be differ because of different methods of calculation can be used.
The cost categories that would be included in the cost of the product for pricing and other management purposes will consists of: costs of production contracts, seined with the producers, expenditures on the managerial staff and on the customer service staff (or, as in the case noted, sales staff), office usage outlays (rent), taxes.
Just in time (JIT) approach is based on the synchronization process of material resources delivery in the right amounts and at the moment when it is in need, in order to minimize inventory expenses. The Wearwell Carpet Company in order to apply JIT system has to change the control levels in the organisation. Company has to create special management position that will control the chain of production and delivery process, regulate specific situation and interact with Wearwell value chain.
Activity-based costing (ABC) method is method of stocks controlling and production expenses minimisation. Depending on costs, inventory stocks are divided into three groups A, B and C according to their proportion and total cost of acquisition. The most important feature for the Wearwell Company in ABC method implementation is its strict position about products sells strategy. The most important cost drivers of the company are the production costs submitted by the carpets’ producers.