Relier Pairs Just in time vs. just in caseVersion en ligne This section attempts to address the question of how much stock a company should hold. par Emilio Sebastian Estrella 1 A just-in-time strategy aims to minimise stocks so that cash is freed up and can be used in other areas of the business 2 Limitations: -Purchasing economies of scale may be lost because order sizes are reduced, leading to higher costs. -There are high risks. Production may halt if a small part of the supply chain breaks down. Any delay in delivery becomes critical for production. -It restricts a firm’s ability to react to significant, unexpected orders. 3 Benefits just in case 4 If a company follows a just-in-case ethos, it will keep large quantities of stock and will be able to meet unexpected orders quickly 5 Limitations just in case 6 Benfits: -Reduced stock holding improves cash flow -It encourages staff to be more careful; with no additional stock, staff know they need to get things right first time. -There are positive benefits for stock-holding costs. With less warehouse space needed and with less chance of waste and damage, costs are reduced. -With less stock holding, there may be more space available for production, which could increase capacity. Benefits of just in time: -Storage costs are higher. -There is an increased risk of wastage. -Working capital is tied up in stocks, which reduces liquidity -Production can continue if the supply chain is disrupted. -Larger orders should lead to purchasing economies of scale, reducing average costs. -Unexpected orders can be fulfilled quickly. Limitations of just in time
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