The elimination or minimization of inventories, lead times, and so forth creates a need for radical changes in traditional accounting procedures. JIT demands (1) flexibility on the shop floor, and (2) flexibility in accounting practices, because many traditional characteristics of the production process must be either eliminated or altered to a significant extent (Holbrook, 1985). These characteristics are as follows:
1. WIP is eliminated by reducing batch sizes (preferably to just one).
2. Raw materials inventories are eliminated by requiring suppliers to deliver directly to the shop floor just#in#time for use in the manufacturing process.
3. Scrap and rework are eliminated by an emphasis on total quality control of design, of the manufacturing process, and of materials.
4. Finished goods inventories are eliminated by reducing lead times, so that, in effect, all products are made to order.
5. Materials handling costs are eliminated by redesign of the shop floor to permit materials to move directly between adjacent work centers.
The major uses of the greatest significance of the accounts payable application involve the determination of trade credit requirements, and the determination of other short#term financing requirements (Joy, 1990). Important uses of the accounts include the identification of a firm's short#term debt obligations, the monitoring and control of a firm's trade credit a
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