Production processes - AQAJust-in-time (JIT) stock control

Just-in-time (JIT) is a stock control method where the business doesn’t store any raw materials. Instead, it has regular deliveries that bring only what is needed before its existing raw materials run out, so buffer stock is not needed.

The business orders smaller but more frequent quantities of stock that are taken straight to the production line on the factory floor. For this method of stock control to be effective, a business needs a good relationship with its suppliers. Suppliers will ideally be local to reduce both delivery costs and lead time.

JIT stock control can have disadvantages. For example, there may be times when a business runs out of stock because of late deliveries.

Advantages of JIT

• The business can remove any buffer stock space they had, which would previously have been used for storage meaning more space can be used for production.
• Smaller but more frequent deliveries mean that the products will be fresher. A business can also have new stock delivered more frequently, this is particularly important for perishable items such as fresh fruit and vegetables.
• The business will no longer have large amounts of capital tied up in stock that could go out of date or out of fashion. This capital can then be reinvested or spent elsewhere.
• Having less stock that could go out of date will reduce waste, saving
• JIT reduces production costs, allowing the business to price its products to give it a more competitive advantage.

Disadvantages of JIT

• It can be hard for businesses to react to unexpected changes in demand, for example a heatwave causing an increase in the demand for ice cream.
• Businesses are unable to use bulk-buy discounts if they only buy in small quantities.
• Customers could receive a poor service if the business misjudges the amount of stock it needs and allows products to go out of stock.