There are two opposite ends of the inventory philosophy spectrum: Just-in-time (JIT) and Just-in-case (JIC). In this article, we will only focus on the JIC method and explain what it is and its application.
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JIC is an inventory management practice based on expected sales and requires companies to purchase supplies proactively to meet any level of demand within defined parameters. The term "inventory" refers to raw materials and supplies used in production, unfinished items in various stages of the manufacturing process, and final products. This method is not restricted to only manufacturing and distribution; it is also commonly used in finance and other industries.
In other words, companies reorder stock even before it reaches the minimum level so that they can sell inventory while the suppliers are supplying the goods. The time from when the firm reorders the stock to the time the supplier provides the new stock is known as lead time.
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The JIC method does bring many advantages:
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There are several points about JIC inventory management that organisations should consider to successfully carry out effective inventory objectives:
Companies that choose JIC are proactive, which means they make purchases beforehand to maintain a healthy stockpile and avoid running out of raw materials during unforeseeable slow and stop production.
This method is recommended for companies with unpredictable demand or unstable environments when suppliers are unreliable. Generally, it aims for a sustainable process because companies always have reliable suppliers and stable demand.
If companies can keep up with any level of demand, they can increase their competitive edge and even boost the market. After the disruption of the supply chain due to the global pandemic Covid-19, some companies have adopted this strategy, understocking their inventories as these are particularly popular items with few substitute choices.
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Currently, using digital technology to incorporate agility and resilience into operations is the favoured approach. Businesses can benefit from a just-in-case inventory strategy while avoiding its limitations by utilising contemporary inventory management software.
Advanced management software can assist manufacturers in numerous steps with a user-friendly interface. Inventory optimisation software can assist with accurate stock classification, demand forecasting, determining the best amounts of safety stock, and risk of run-out reporting.
For example, for companies that have many warehouses or assembly facilities, those tools can enable managers to define preferred stocking levels for automatic replenishment and track supplies across different sites. You can have total insight throughout your whole stock portfolio thanks to the combination of the aforementioned data points in one system.
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In short, the JIC strategy has both advantages and disadvantages. Choosing a stockpiling technique requires planning and a solid grasp of current and future customer demand. Companies are advised to choose the right method depending on their own characteristics. Retailers and manufacturers can obtain the best of both worlds by combining JIC with forecasting and inventory management software to insure against an uncertain supply chain for the least amount of extra money above JIT.