Managerial Accounting Question?

Question

Would you advice a controller(The manager in charge of of the accounting department)to ignore a situation,where a company is not using JUST-In-Time Purchasing,particulary since he is not the purchasing agent?
In preparing your answer,consider the IMA's standards of ethical Conduct?

Answer 1

Just in time has it's negative aspects. And certain systems gain little in the use of its principles. One of the current negatives to KIT is that most large companies are purchasing parts/materials/inventory from foreign suppliers, China, Brazil. etc. First, the distant and transportation mode make KIT almost impossible. You are diminishing your services for a lower price. Another downside to KIT and international trade is that the foreign work week and individual work ethics are a function of cultural ideas based on long entrenched systems and an older, more deliberate decision making process. The company of my employ tested JIT and it was less than a client pleasing endeavor. If the material ISN'T on time, which happens with some frequency, it is your client/customer who is most affected. (Can you say return business?) Even if you use domestic vendors the current trend in manufacturing is for reduced inventory of completed units on hand. Also, a volatile raw material markets, due to availability and fluctuations in pricing (i.e. steel) have moved many manufacturers to reconsider feeder stock levels. The current trend is to consign your inventory to a third party supplier. This keeps inventory available for issue but off the end user company books with positive tax implications.

So maybe your company has it's reasoned approach.