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CMA Final · Strategic Cost Management · Just in Time (JIT)

Which of the following is the primary reason a firm adopting Just in Time (JIT) purchasing typically negotiates long-term contracts with a small number of suppliers?

JIT firms use few suppliers on long-term contracts so that they receive frequent, small deliveries of reliably good quality straight to the production line. This removes the need for incoming inspection and large stocks, which is the core aim of JIT purchasing, unlike bulk buying or buffer stocks.

  1. ATo obtain larger quantity discounts by ordering in bulk batches
  2. BTo secure frequent, small-lot deliveries of consistent quality directly to the production lineCorrect
  3. CTo build up safety stock buffers against demand fluctuations
  4. DTo reduce the number of production cells on the shop floor

Explanation

JIT purchasing relies on a few reliable suppliers who deliver small lots frequently, with assured quality, so that inspection and stock-holding are minimised. Bulk ordering and buffer stock contradict the JIT philosophy of minimal inventory.

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