ActivityBased Management and Todays Advanced Manufacturing Environment

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6
Chapter Six Part 1

• Activity-Based Management and Todays Advanced
  Manufacturing Environment

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Strategic Cost Management and the Value Chain
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Question

• What do Dell and Toyota have in common?

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Just-in-Time Inventory and Production Management

• No materials are purchased and no products are
  manufactured until they are needed.

The primary goal of a JIT production system is to
reduce or eliminate inventories at every stage of
production.
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Key Features of the JIT Approach
1. Smooth, uniform production rate
2. Pull method of production
3. Purchase is small lot sizes
4. Quick, inexpensive setups
5. High quality of materials
6. Effective preventive maintenance
7. Teamwork
8. Multiskilled workers
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JIT Purchasing
Long-term contracts with suppliers.
Only a few suppliers.
Grouped payments to vendor.
Parts delivered in small lots.
Minimal inspection of materials.
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Activity-Based Management
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Two-Dimensional ABC and Activity-Based Management
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Elimination of Non-Value-Added Costs
Activities
Analysis andClassification
Value-addedActivities
Nonvalue-addedActivities
Reduce orEliminate
Continually Evaluate and Improve
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Achieving Cost Reduction
Activity Reduction
Activity Selection
Reduce Non-Value-Added Costs
Activity Elimination
Activity Sharing
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Better Bagels, Inc pg 257

• 6 37
• Identify the non-valued added activities.
• 6 38
• Redesign the bagel production process so that it
  adheres to the JIT philosophy.
• Explain how the 8 key features of JIT systems
  would be present in the new process.
• What new equipment would the company need to
  purchase in order to implement the JIT approach
  fully?