Managing stock: JIT and JIC
AQA also says:
Spec content: Managing stock: Just in time (JIT); Just in case (JIC).
Students should be able to: evaluate the use of managing stock using JIT to a given business. Students should recognise that the benefits of reduced costs must be balanced against the cost of more frequent deliveries and lost purchasing economies of scale. The benefits of having spare stock to satisfy demand must be balanced against the cost of holding buffer stock. Students will not be asked to draw or interpret stock control charts.
Stock Management: The Core Challenge
Every business that holds physical stock faces the same fundamental challenge: how much stock to keep at any given time. Hold too much and money is tied up in unsold goods, storage costs accumulate, and stock may deteriorate or become obsolete. Hold too little and the business risks running out — unable to fulfil orders, losing customers, and halting production.
Stock management is the process of deciding how much stock to hold and when to reorder, balancing these competing pressures.
Just-in-Time (JIT) vs Just-in-Case (JIC)
| Just-in-Time (JIT) | Just-in-Case (JIC) | |
|---|---|---|
| Philosophy | Order and receive stock only when immediately needed for production or sale | Hold buffer stock to cover unexpected demand or supply disruption |
| Stock held | Minimal — ideally zero buffer stock | Significant buffer stock maintained at all times |
| Key benefit | Eliminates stockholding costs; frees up capital | Resilience — can continue supplying customers through disruption |
| Key risk | Any supply delay immediately halts production or sales | Capital tied up in stock; storage costs; risk of obsolescence |
| Supplier requirement | Highly reliable, fast-response suppliers essential | Less critical — buffer stock provides time to source alternatives |
| Best suited to | Businesses with reliable supply chains and predictable demand | Businesses with volatile demand, long supply chains, or critical continuity requirements |
Key Trade-offs AQA Requires You to Know
JIT: Reduced Costs vs More Frequent Deliveries
JIT eliminates warehousing costs for stock held, but the more frequent, smaller deliveries required to maintain JIT may cost more per unit than bulk ordering. Frequent deliveries also have a higher carbon footprint. The net cost saving from JIT depends on whether the warehousing saving outweighs the extra delivery cost.
JIT: Cost Savings vs Lost Purchasing Economies of Scale
Bulk ordering — buying large quantities at once — typically attracts supplier discounts. JIT's small, frequent orders lose this advantage. A business implementing JIT must weigh the warehousing saving against the higher purchase price per unit it pays by ordering in smaller quantities.
JIC: Resilience vs Holding Costs
Buffer stock provides security — the business can fulfil orders even when supplies are disrupted. But stock costs money to store, insure, and manage. Stock may also deteriorate, go out of fashion, or become technically obsolete while sitting in a warehouse. The right level of buffer stock balances the cost of holding it against the cost of running out.
Key Takeaways
- JIT minimises stock held, reducing costs but creating supply chain vulnerability.
- JIC holds buffer stock for resilience, but at the cost of warehousing, capital tie-up, and obsolescence risk.
- AQA requires you to know three specific trade-offs: JIT savings vs more frequent delivery costs; JIT savings vs lost purchasing economies of scale; JIC resilience vs holding costs.
- The right approach depends on the reliability of the supply chain, the predictability of demand, and the relative costs of holding stock vs disruption.