Livermore Components is a supplier of drive shafts to the motor vehicle industry. Currently it supplies two of the large car manufacturers in Australia and is also highly ranked in a tender bid to supply drive shafts to a Malaysian car manufacturer. Much of the value chain in the Australian industry is structured on the basis of JIT principles. It has been this way for some time and most of the industry participants compete on this basis. Suppliers to the large car companies (including Livermore) understand they lack bargaining power but most of them find a way to successfully participate.

The dilemma facing Livermore’s management is the offshore contract in Malaysia. If Livermore was to become the successful tenderer, the Malaysian manufacturer would also require component delivery on a JIT basis.

Required

Using your understanding of JIT principles, outline the ramifications for Livermore if successful in the tender process.