Jit Strategy - Equipment Rental

8. Equipment rental is a key element of Loctite to sell equipment. Some sales representatives preferred to “loan” equipment to targeted customers and waive the charge. In response to this the Lean Team adjusted the rental prices of the equipment (see Exhibit TN-1). Was this revised program a good idea and why or why not?

9. The equipment rental program is an important service that Loctite provides to prospective equipment buyers. The Lean Team used queuing theory to determine the quantity of each

, as they got fast delivery in one day of custom made products in shorter period. JIT inventory as a strategy was so strongly implemented in the firm that its success rates was 90% by 2001 and was expected to reach 95% until 2002. As Loctite bought huge batches of stock and stored them for long and then order another batch of which made the distribution center to balloon with stock.JIT strategy will be helpful reducing the amount of waste produced and ensures the timely quality monitoring at every step of the production. Another advantage of the strategy is reduced cost of inventory storage and less cost in the supply chain.

Answering the second part of the question the factors that might make the implementation hard is the pressure that the suppliers of the raw materials might face.

i. Suppliers could offer a huge disadvantage as the usual lead-time for any batch to be delivered was 8-12 weeks(See Exhibit 8) by the suppliers, and on an average customer places order by 10 weeks. So there is a likelihood that the ordered goods could arrive 2 weeks late, subsequently the lead-time for delivery of the equipments can be delayed.

ii. Another disadvantage for the supplier is that if any of the equipment does not function well or breaks can make the processes to stop and create a buffer in the production. JIT can be delayed by rush orders on delay by the supplier end, for the most part in light of provider deferrals and surge orders. Matching up with the speedy orders is hard for the suppliers to cope up with and this could seriously influence the material quality.