inventory-management just-in-time

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Exam code:9609

Just in Time versus Just in Case

The just-in-time (JIT) approach involves raw materials and components being ordered as required and delivered “just in time” to be used in production
Raw materials and components are ordered from a small number of trusted key suppliers just before they are to be used
- Close, long-term relationships with these suppliers need to be developed
  - Many businesses using JIT inventory management systems aim to source raw materials and components from local or regional suppliers
  - They must be flexible and reliable
  - They may be required to hold inventory on behalf of a JIT-operating customer
  - They are often in close proximity to their key JIT-operating customer

Advantages	Disadvantages
Stockholding costs, including storage rental and security, are minimised Inventory and finished goods are less likely to be damaged in storage Close working relationships are developed with a small number of trusted suppliers Cash flow is improved, as money that is not tied up in stocks can be put to other uses Unused storage space is available for productive use or can be disposed of	Bulk buying economies of scale are not generally possible Unable to respond to unexpected increases in demand without precise forecasting of demand High administration costs due to frequent ordering of stock Unreliable suppliers (e.g. late or poor-quality deliveries) can quickly halt production External factors can delay delivery of stock, e.g. increased border checks on imported goods since Brexit

Advantages

Disadvantages

Stockholding costs, including storage rental and security, are minimised
Inventory and finished goods are less likely to be damaged in storage
Close working relationships are developed with a small number of trusted suppliers
Cash flow is improved, as money that is not tied up in stocks can be put to other uses
Unused storage space is available for productive use or can be disposed of

Bulk buying economies of scale are not generally possible
Unable to respond to unexpected increases in demand without precise forecasting of demand
High administration costs due to frequent ordering of stock
Unreliable suppliers (e.g. late or poor-quality deliveries) can quickly halt production
External factors can delay delivery of stock, e.g. increased border checks on imported goods since Brexit

When you explain the JIT approach, link every benefit (less inventory, lower storage costs) to a risk (stockouts if deliveries slip)

Showing both sides proves you understand why lean systems boost profit only when suppliers are rock‑solid

Just-in-case inventory management involves a business holding a quantity of raw materials, components or finished goods as buffer stock
- Stock is held in case of shortages so as to provide a competitive edge over rivals unable to meet demand
The decision to keep buffer stocks is one that businesses have to weigh up very carefully
- Holding inventory incurs storage and security costs and can increase waste, as stock could be damaged, stolen or become obsolete
- Failing to hold enough inventory could mean a business is unable to meet demand, potentially missing out on sales revenue

Advantages	Disadvantages
Buffer stocks ensure a stable supply of goods, allowing a business to respond to increases in demand Extreme price fluctuations due to shortages of inventory can be avoided Businesses that are dependent on particular raw materials avoid supply disruption Businesses with a regular supply gain a reputation for always being able to meet customers’ needs	Holding buffer stocks can be expensive, as it requires storage facilities and inventory management systems Buffer stocks can become obsolete if the demand for a particular product or input declines Holding buffer stocks ties up cash that could be invested in other areas of the business

Lower inventory costs
- Since stock is only ordered when needed, businesses spend less on storage facilities and insurance
Less money tied up in stock
- Firms have more working capital available for other uses, like marketing or staff training
Fewer waste costs
- JIT reduces the risk of obsolete or damaged stock, especially for perishable or seasonal items

Improved supplier quality
- Businesses work closely with reliable suppliers to ensure materials meet high quality standards
Faster feedback loops
- Any quality issues are noticed and fixed quickly, as production is continuous and lean
Focus on right-first-time
- As there’s no buffer stock, production teams must work efficiently and avoid errors

Streamlined production
- JIT promotes smoother workflows and reduces idle time between stages of production
Motivated workforce
- Workers often have more responsibility and take part in continuous improvement (Kaizen)
Space-saving
- With fewer storage needs, factory space is better used for production activities

Faster response to changes
- Businesses can adapt quickly to shifts in consumer demand, reducing the risk of overproducing unpopular products
Customisation
- JIT allows more flexible and tailored production, often linked to modern mass customisation systems.
Freshness and quality
- Products are made closer to the time of sale, especially useful in food and fashion industries