Operations Management: An Integrated Approach, 5th Edition

JIT AND LEAN SYSTEMS ACROSS THE ORGANIZATION

Implementing a philosophy such as JIT will inevitably have consequences for every aspect of the organization. The entire organization is affected by JIT, primarily because organizational barriers are eliminated. Functions that have not had much communication with each other in the past must now work together. Included are functions such as marketing, manufacturing, and engineering, which in traditional systems have separate agendas but now need to work together to achieve the goals of the organization as a whole. Let's see how some of these functions are affected.

Accounting is strongly affected by JIT. Traditional accounting systems generally allocate overhead on the basis of direct labor hours. The problem with this method is that it does not accurately describe the actual use of overhead by different jobs. For example, jobs that are labor intensive in nature may be assigned a disproportionately high share of overhead. These numbers may lead management to make inappropriate decisions. JIT relies on activity-based costing to allocate overhead. In activity-based costing, specific costs are identified and then assigned to various types of activities, such as inspection, movement of goods, and machine processing. Overhead costs are then assigned to jobs depending on how many activities a particular job takes up.

Marketing plays a large ...