Managing Stock - Just in Time
Business: Cambridge International GCSE (2027 Exams), topic 4.1.6
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.
Just in time
- JIT means a business holds no stock.
- Raw materials and components arrive exactly when needed.
- Deliveries go straight to the factory floor, not to storage.
- There are no large, occasional warehouse deliveries.
- JIT requires a strong relationship with suppliers.
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).
Test yourself on Managing Stock - Just in Time
For a lemonade business using JIT, what may happen in a heatwave?
Which of the following is an advantage of JIT?