McDeal Fabricated Products (MFP) manufactures a wide range of internally designed products. Over the past years, sales are generated mainly from the company's website and catalogues to trade customers. Catalogues are updated regularly and are mailed to customers every three months. The company has a wide customer base, mainly due to its promise that all orders will be filled within two weeks. However, the current practice poses difficulty for the company to forecast its sales.

The company uses a basic production planning. Production of particular products is not scheduled until orders are arrived from customers. The company need to maintain a high inventory levels to ensure that it has sufficient amounts of raw materials to fulfil customers' orders.

In January 2020, MFP has been invited to submit proposals. If accepted, the company would become the preferred supplier to a major customer. The planning process requires the MFP's design team to work closely with the customer's design team to agree on product specifications. At a recent staff briefing, the Board of Directors indicated their intention to achieve the preferred supplier status, and to reduce the number of products sold to existing customers. Through this strategy, the board believe that a number of benefits can be achieved, including:

• greater certainty with regard to sales levels; a reduction in inventory levels; and
• improved cash flow.

They also indicated that the ability to forecast sales and cash flow would enable them to offer a long-term wages agreement, providing guaranteed increases in wages over a three year period.

Besides, the directors stressed that the proposal would lead to a fundamental change in the production process from the 'high-inventories-level model' which ensures that the "two week promise" can be met, to a just-in-time model. The Board of Directors have asked you, the senior management accountant, to provide suggestions as to how this might be achieved.

Question

1. Evaluate three (3) changes that will be required to the information systems at MFP to support the move to just-in-time production.

Answer rating: 100% (QA)

Transitioning to a justintime JIT production model requires significant changes to the information systems at McDeal Fabricated Products MFP to suppor... View the full answer