A is corrent. In this situation, the company will be receiving fewer materials at any point in time, increasing the likelihood of stockout; at the same time, the average inventory will be less, resulting in a reduction in the carrying costs.
B is incorrect. While the supplier may ask for a concession in its selling price which would raise the manufacturer’s purchasing costs, the manufacturing company will be receiving fewer materials at any point in time increasing the likelihood of stockout, thereby resulting in an increase in stockout costs.
C is incorrect. While the supplier may ask for a concession in its selling price which would raise the manufacturer’s purchasing costs, the cost of quality would not necessarily be affected by the JIT purchasing system.
D is incorrect. With fewer purchase orders being processed by the manufacturer, the ordering costs are likely to decrease. However, the cost of quality would not necessarily be affected by the JIT purchasing system.
