Question 1: What is the total annual cost of maintaining the components inventory under the present system?
Question 2: What would be the total annual cost of maintaining the components inventory under the JIT system (assuming no safety stocks)?
Question 3: Should Ballenger take into account any other costs or benefits from the JIT system? If so, what are they?
Question 4: If the JIT system is adopted, are there safety stocks of any item that should be maintained? If so, which ones, and how much?
Question 5: If the JIT system is adopted, what changes, if any, should occur in the relationships between Ballenger’s firm and his suppliers of components? Discuss.
Question 6: Assume that Ballenger has switched to the JIT system and that he receives a surprise phone call from a competitor who is going out of business. The competitor wants to sell Ballenger 7,000 dome lights of the type listed on Exhibit 3-C. Should Ballenger buy them? If so, at what price?
Probably not, because this would undermine the discipline envisioned by the JIT system. On the other hand, if the purchase price was very low, and there were no unique storage requirements, Ballenger might buy them.
Question 7: Carrying costs are 20%. Is there a level of carrying costs at which both Ballenger’s present system and a JIT system have similar costs? If so, what is it?
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