Just In Time & Just In Case
Business: Edexcel GCSE, topic 2.3.5
Managing Stock - Just in Time
Just in time (JIT) is a method for managing stock that aims to keep stock levels very low at all times.
Benefits of JIT
- JIT can reduce costs because a business does not have to pay for storage space for the stock and the business is likely to have less unsold stock.
- Storage also adds other costs, for example damage to stock, stock insurance and security to protect the stock.
Disadvantages of JIT
- JIT usually needs more frequent deliveries. More deliveries usually means higher transport and logistic costs. There may also be environmental costs and an impact on the local community. – Because a firm using JIT is buying in lower quantities, rather than in bulk, they will get smaller or no discounts on the materials that they are buying.
- With JIT, there is a higher chance that the business will not be able to meet demand if there is an unexpected spike in demand. This is because they do not keep stock in reserve (buffer stock).
Managing Stock - Just in Case (JIC)
JIC is the opposite of JIT. With JIC system, a business will keep a ‘buffer stock’ of materials for production and finished goods. If there are problems with the supply chain or there is an unexpected spike in demand, the company can just use the buffer stock to make goods and deliver to customers.
Benefits of JIC
- If there is an unexpected spike in demand, then a business’ buffer stock of finished products will be able to cope with it.
- If there is any problem with the supplier then the production process won’t have to stop. They can use the buffer stock to keep it going until the problem is fixed.
Disadvantages of JIC
- The main issue with JIC stock control is that businesses may end up holding lots of stuff in huge warehouses.
- Warehouses and the logistics to organise stock are both costly. This can increase the costs of a firm and therefore have a potentially negative effect on profits.
Test yourself on Just In Time & Just In Case
For a lemonade business using JIT, what may happen in a heatwave?
Which of the following is an advantage of JIT?
Which type of stock management will help a business cope if there is a sudden problem with raw material supplies?