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How JIT Eliminates Waste
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Cost Details |
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Warehousing Cost Details |
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Warehousing inventory commits you to pay for such things as fixtures, equipment to move it, maintenance, building depreciation (or rent), and operating costs such as lighting and heating.
Additional Costs: 3.6% - 9.0% |
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Building Depreciation/Rent |
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3.3% |
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$3,300 |
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Operating Costs |
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3.0% |
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$3,000 |
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Taxes |
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0.8% |
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$800 |
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Insurance |
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0.9% |
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$900 |
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Total Warehousing Costs |
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8.0% |
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$8,000 |
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Capital Cost Details |
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Whether you use a credit line from the bank, or pay out of cash flow, you pay for more than just the cost of materials. There is insurance on the inventory, there may be inventory taxes, and you run the risk of material becoming obsolete, damaged, or requiring additional preparation as a consequence of exposure to the elements.
Additional Costs: 6.6% - 16.5% |
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Capital Costs on Material |
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9.0% |
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$9,000 |
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Inventory Taxes |
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0.6% |
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$600 |
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Inventory Insurance |
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0.8% |
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$800 |
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Material Obsolescence |
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1.5% |
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$1,500 |
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Total Capital Costs |
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11.9% |
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$11,900 |
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Equipment Cost Details |
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Some of the expense involved to process the materials before they are ready for production can be more cost effectively done at TSI. This eliminates saws, simplifies handling and frees up manpower for other tasks.
Additional Costs: 1.3% - 3.3% |
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Preproduction Processing Equip. Deprec. |
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0.5% |
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$500 |
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Material Handling Equip. Deprec. |
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0.5% |
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$500 |
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Electrical Power and Special Supplies |
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0.9% |
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$900 |
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Servicing and Repair |
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0.6% |
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$600 |
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Total Equipment Costs |
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2.5% |
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$2,500 |
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Scrap Cost Details |
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When materials end up in the scrap bin in really costs. Selling to a scrap dealer realizes a small fraction of the original purchase price. Mistakes made on cuts really cost. Buying pre-cut material shifts that risk to TSI.
Additional Costs: 4.5% - 11.2% |
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Average Scrap Cost |
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9.0% |
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$9,000 |
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Total Scrap Costs |
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9.0% |
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$9,000 |
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Manpower Cost Details |
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Warehousing inventory commits you to: people to receive, store it and sometimes move it, people to operate fork lifts and preprocessing equipment, people to collect scrap, and clerical personnel to plan, track and monitor the inventory.
Additional Costs: 5.8% - 14.5% |
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Receiving & Stocking Labor |
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2.2% |
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$2,200 |
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Moving Labor |
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2.8% |
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$2,800 |
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Preproduction Labor |
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8.0% |
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$8,000 |
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Total Manpower Costs |
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13.0% |
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$13,000 |
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