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

Which one of the following is a defining feature of a JIT purchasing arrangement between a manufacturer and its suppliers?

JIT purchasing uses few certified suppliers on long-term contracts who deliver small quantities frequently and with assured quality. This removes incoming inspection and buffer stock. Bulk orders, frequent re-bidding among many suppliers, or month-long buffers are features of traditional purchasing, not JIT.

  1. ALarge bulk orders placed quarterly to earn volume discounts
  2. BLong-term contracts with few certified suppliers making frequent small deliveries of defect-free materialCorrect
  3. CCompetitive bidding every month among many suppliers to lowest price
  4. DHolding buffer stock equal to one month of consumption

Explanation

JIT purchasing relies on a small number of reliable suppliers under long-term agreements, delivering small lots frequently with assured quality, so inspection and buffer stock are minimised. Bulk quarterly orders, monthly bidding and buffer stocks all contradict this approach.

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