The Balancing Act: JIT vs. JIC in inventory management

In the realm of inventory management, the contrasting strategies of Just-in-Time (JIT) and Just-in-Case (JIC) represent pivotal choices for businesses, who in this fast-paced world of supply chain and logistics look to achieve a delicate balance between efficiency and cost savings. From the cost efficiencies of JIT to the resilience advantages of JIC, the choice depends on your company’s particular goals. This feature story delves into the dynamic landscape of these approaches, examining the pros and cons that shape their adoption, explore considerations for balancing these methods, and dissect the strategies that underpin efficient inventory management.

Ensuring what you need and when you need it requires the right inventory philosophy, whether it’s Just-in-Time (JIT) or Stockpiling/ Just-in-Case (JIC). Lying on two opposite ends of the inventory spectrum, both are relevant to a wide range of businesses, especially those dealing with tangible products.
While manufacturing and distribution commonly utilize these strategies, various industries, including retail and food and beverage, find themselves positioned along the JIT vs. JIC curve based on their specific needs and circumstances.

In this tug of war, for businesses to thrive and carry out either just-in-case or just-in-time inventory learning objectives or a combination of both require planning and a solid grasp of the inventory systems and current & future trends.

In the world of manufacturing, JIT inventory management is a lean strategy that focuses on acquiring stock based on real-time conditions. The JIT model works by replenishing inventory “just in time” to fulfill orders, intending to have materials arrive exactly when they are needed. To maintain a lean and vendor-independent system, it is essential to continuously improve the JIT approach. JIT operates as a pull strategy, where inventory is requested only when needed, but it is different from a proactive inventory management strategy as it is reactive.

In contrast, JIC inventory management entails preemptively stocking up before demand arises. This proactive supply chain management system anticipates potential consumer needs and strives to prevent shortages. This way, the inventory levels and the constant availability of raw materials assure production teams that they can reliably fulfill customer demand.

Like any system, both of these options come with their own set of advantages and disadvantages.

JIT inventory management boasts several compelling advantages for businesses. To start with, it enhances cost efficiency by minimizing holding costs, reducing the need for extensive storage space and excessive inventory. This, in turn, contributes to improved cash flow as resources are freed up for other operational needs.

Talking abut the advantage of JIT inventory management system, Mihir Mohanta, General Manager Supply Chain at Mother Dairy Fruit & Vegetable says “JIT inventory management can facilitate growth and profitability in several ways. It helps to improve operational efficiency & working capital use. There is no ideal inventory that sits in warehouses, blocking both space & working capital. In the case of perishable supplies, the wastage is also less. The design puts an automatic check on overbuying & over-stocking. JIT is agile too. It reduces the amount of time taken to change over inventory when fluctuations in demand occur or products change.”

Additionally, JIT fosters streamlined processes and higher quality control, as smaller, more manageable batches are produced. Its customer-centric approach, space optimization, and alignment with lean manufacturing principles make JIT a strategic choice for organizations aiming for efficiency and customer satisfaction.

However, the JIT inventory management system is not without its drawbacks. One notable disadvantage is the heightened risk of disruptions due to its reliance on precise timing and minimal safety stock. JIT leaves little room for error in demand forecasting, making businesses vulnerable to fluctuations in customer needs or unforeseen supply chain hiccups.

Mr Mohanta said, “In the case of JIT, companies order bare minimums of items based on projections. However, if there is a sudden, unexpected surge in demand, there may not be enough inventory or supplies on hand. In this case, the companies are too dependent on the suppliers too. However, they have little control over the supplier’s operations, and even previously reliable partners can experience disruptions that ultimately cause delays for the receiving company. JIT strategy sometimes can be expansive for some seasonal products where prices drop to the lowest level during a specific period, but as they cannot stock & carry forward inventory, they cannot take price advantage.”

Additionally, the system may struggle to adapt to sudden spikes in demand, potentially resulting in stockouts and customer dissatisfaction. Balancing the benefits of cost savings and streamlined processes with the risks of supply chain vulnerabilities poses a continual challenge for organizations implementing JIT.

JIC inventory management presents several advantages that cater to businesses seeking a more precautionary approach. One significant benefit is the reduction of potential disruptions and uncertainties in the supply chain.

Anil Kumar Mishra, National Logistics Head (South Asia), Pladis Global shares that Stockipiling/JIC inventory provides resilience and risk mitigation, and customer satisfaction, economies of scale.

He goes on to explain, “JIC provides a buffer against supply chain disruptions, ensuring a steady supply of essential goods even in times of crisis, such as natural disasters or geopolitical events or COVID. It helps mitigate the risks associated with uncertainties in demand and supply fluctuations Maintaining sufficient inventory levels can help meet customer demand promptly, leading to higher customer satisfaction. Stockpiling enables businesses to take advantage of favourable market conditions. For example, buying in bulk when prices are low can result in cost savings in the long run.”

This is an abridged version of the feature story published in the Logistics Insider Magazine-India. To read the complete story, click here.

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