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ACCA Applied Knowledge · Business and Technology · The relationship between accounting and other business functions

A manufacturer adopts a just-in-time (JIT) purchasing approach. Which of the following is the most likely consequence for the purchasing function?

Under JIT, purchasing typically develops close relationships with a small number of reliable suppliers who make frequent, small deliveries just as materials are needed. This keeps inventory low, but it makes supplier reliability and quality critical, as there are no buffer stocks.

  1. ALarger buffer inventories of raw materials held
  2. BCloser relationships with a small number of reliable suppliers making frequent deliveriesCorrect
  3. CPlacing a single large order each year to obtain bulk discounts
  4. DReduced need for supplier quality checks

Explanation

JIT relies on frequent small deliveries, so purchasing builds close, dependable relationships with few suppliers. Buffer stocks and annual bulk orders are contrary to JIT. Quality must be high, since there is no spare inventory to cover defects.

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