Question

Please provide me 100% correct answer for this question

1. Prepare a written memo discussing the pros and cons of vertically integrating by acquiring a company that can supply input materials into your company's production processes. (control over quality and price management or other economic benefits). In today's business environment of targeted source suppliers and Just-In-Time manufacturing, is it still a good economic decision to acquire a company just to have its productive output for input into your company?

Answer 1

First of all, we have to understand Just in time approach- In this approach, We did not store any goods hence our storage cost would be nill, We have to contract with the supplier to deliver the goods as soon as we require in our production department.

Prons of JUST IN TIME-

1. It reduces storage cost as we order the goods according to our production schedule.

2. Production runs are short.

Cons of JUST IN TIME-

1. It involves a disruption in the supply chain.

2. A sudden order for goods may delay the delivery of the goods

Conclusion- JUST IN TIME approach is good if we have a supplier who delivers the goods on time, hence it is a good economical decision.