Just in time (JIT) and just in case (JIC)
Conceptual Understanding: While inventory creates a safety net for companies, maintenance and potential waste of resources can have significant implications for companies and the environment. Manufacturers must evaluate and analyse each market and determine whether a JIT or JIC strategy is the best to follow.
JIT and JIC are two production strategies used by manufacturers that have both advantages and disadvantages to them.
A manufacturing company will choose one of these strategies to follow for many reasons that include the products they are producing, the nature of the market and the nature of the economy. Watch these videos first:
Just in time (JIT): A situation where a firm does not allocate space to the storage of components or completed items, but instead orders them (or manufactures them) when required. Large storage areas are not needed and items that are not ordered are not made.
Advantages of JIT
Production to order with materials being supplied JIT cuts down on storage space
Reduced capital investment as capital is not tied up in unused raw materials or unsold products.
Reduced work in progress
Increased efficiency
Improved stock control
Disadvantages of JIT
If any of the stock is faulty then more has to be ordered from a supplier which could slow down the lead time and production process.
Companies may not benefit from economies of scale if they are purchasing smaller quantities.
Just in case (JIC): A situation where a company keeps a small stock of components (or complete items) or ones that take a long time to make, just in case of a rush order.
Just in Case (JIC) manufacturing is the traditional model of production, in which products are created in advance and in excess of demand.
JIC can waste resources because inventories must be maintained and requires additional costly storage warehouses.
Advantages of JIC
The manufacturer has a “buffer’ of goods in stock in case of unforeseen circumstances; e.g. non delivery of supplies
The manufacturer can respond quickly to a demand for a product
The manufacturer can produce a steady flow of product and have a stable workforce
Less capital costs than JIT e.g. information and communication technology systems, stock control systems.
Able to stockpile supplies or finished products.
Economies of scale
Less transport costs
Disadvantages of JIC
Have to hold a large inventory
A large investment at the start of business
It occupies a lot of space, which can be expensive due to warehouse/storage needs
These products might spoil leading to waste
If trends change you could be left with a lot of unsellable products