Reference no: EM132757534

Question: Nanting Ltd is a company that manufactures printed circuit boards.

Two major components of printed circuit board are aluminum and copper foils. These materials were purchased from two main suppliers, Network Ltd and Datwork Ltd. The directors of Nanting Ltd are considering implementing a JIT production system. To implement JIT production, Nanting Ltd needs to invest $100,000 in annual tooling costs to reduce set-up times. The directors expect that JIT production will reduce its average inventory by $500,000 and that the relevant costs for materials in storage, handling and inspection will reduce by $30,000 per year. The company's cost of capital for investment in inventory is estimated to be 10% per year. The JIT production will help to improve efficiency and quality of its products, where workers are trained and to be able to handle all the production processes. This will result in a reduction of 800 units from rework. The cost of rework per unit is expected to be $20. Due to its expected improvement in quality and faster delivery, Nanting Ltd is expected to increase its selling price by $1 per unit based on the current sales of 30,000 units.

Required: (A) Calculate whether the proposal for JIT production is financially feasible;

(B) Discuss three benefits of JIT production to Nanting Ltd; and

(C) Discuss three factors that can influence the success (or otherwise) of JIT production implementation in any company.