Gellie Vale T.

Managbanag BSA-4
MAS 3 MWF 7:00-8:00PM

January 4, 2017

Just-In-Time, Backflush and Economic Order Quantity

Just-in-Time (JIT) is Japanese management philosophy which eliminates waste

associated with time, labor, and storage space. Basics of the concept are that the
company produces only what is needed, when it is needed and in the quantity that is
needed. The company produces only what the customers requests, to actual orders,
not to forecast. JIT can also be defined as producing the necessary units, with the
required quality, in the necessary quantities, the last safe moment. It means that
company can manage with their own resources and allocate them very easily.
Backflush costing on the other hand is often associated with JIT operation.
Backflush costing describes as costing system that delays recording some or all of the
journal entries relating to the cycle from purchase of direct materials to the sale of
finished goods. With this approach, on the goals is to keep the inventory of raw
materials as low as possible. Thus, orders of raw materials are scheduled so that the
goods arrive just before the production commences. By the time the invoicing for the
materials is received, the goods are produced, costs are calculated, and the products
are sold at a rate that covers the expenses. This minimizes transactions at that point,
thus keeping the ledgers balanced and factual, but without the need to make multiple
postings all through the production process.
Economic Order Quantity (EOQ) is the amount or size of inventory that is
ordered a tone time which minimizes the ordering and annual inventory costs. It aims at
maintaining the amount of materials at a desired level at a minimum cost. The inventory
level is closely monitored, and a fixed number of units are set so that each time that it
reaches its reorder level, the exact quantity is ordered. It is applied especially if there is
continuous demand for the product, and the new order is delivered in full.
EOQ is a production method that aims at maintaining the amount of materials at
a desired level at a minimum cost while JIT or backflush is a Japanese management
philosophy which aims at providing customers with the right kind and amount of stocks
at the right time. EOQ maintains a fixed amount of material in its inventory and has a
reorder level wherein it must be replenished to avoid shortages and extra costs while
JIT or backflush focuses on meeting customers demands on time with the right quality
and quantity with minimum resource, time, and material wastes. All of them are intended
to reduce costs and increase the companys profitability. While EOQ is dependent on
financial and marketing strategy, JIT and backflush is dependent on the work ethics and
commitment of the entire workforce of the company.