JIC Inventories: Solution to unexpected problems
There is more than one way to manage inventories and perform logistic processes. Even though each year new trends and methods are created, it is important that each company manages their inventories in a way that best fits its objectives and needs. As we have said on prior blog entries, the Just-In-Time (JIT) inventory management strategy, which consists of making goods arrive at the production site at the exact moment when they are needed, has become really popular on the last decades.
According to Charla Griffy-Brown (2003), JIT strategy has become one of the most popular methods to manage inventory because it allows to cut costs on storage and save time. But Griffy Brown also points out that the strategy has several disadvantages that can seriously affect a logistics company. Said method does not have a margin of error in unexpected situations. Whether a supplier did not make its delivery on time, there was an unexpected spike on demand or natural disaster that delays inventory delivery are circumstances that can severely affect a company’s ability to rapidly respond if it does not have the additional stock to keep production.
In order to take care of these problems and challenges, there’s another alternative: Just-In-Case (JIC) inventory management. This method revolves around the idea that it is necessary to have a certain amount of stocked inventory to reduce risks of shortage, spikes on demand or problems with suppliers.
While JIT strategy allows to cut cost and boost efficiency, it makes companies vulnerable and dependent to many external factors. On the other hand, JIC strategy offers multiple benefits to rapidly and efficiently respond to unexpected events in case they occur. Even though storage cost might increase, having spare inventory is a way to guarantee the flow of production. Also, it’s an excellent strategy to prevent waiting times if clients expect a product that is not on continuous production.
Besides, the JIC strategy is convergent with other logistics methods that improve efficiency on the supply chain; like FIFO strategy (First In First Out) in which the oldest inventory is the first one to be used. Implementation of multiple logistics methods gives companies the chance of improving their supply chain by using the JIC strategy.
Even though it is important to have efficient supply chains were the flow of inventory and final goods happens rapidly, logistics companies must take into account that external events can delay their supply chains. For this reason, it is a must to have a deep reflection about the risks and benefits each strategy involves.
On the field of logistics, there are no universal answers to ever-changing challenges. That is why at Woodward Logistics we pursue to master inventory management strategies and transportation methods so we can offer our clients the best logistics advice and service while taking into account the needs of their business.
Griffy-Brown, C. (2003). Just-in-Time to Just-in-Case: Managing a supply chain in uncertain times. Retrieved from Graziadio Business Review: https://gbr.pepperdine.edu/2010/08/just-in-time-to-just-in-case/
Haliday, S. (2014, Julio 2). Just-In-Time Versus Just-In-Case Parts Inventory Management. Retrieved from Acumen: http://www.acumenfl.com/blog/just-in-time-versus-just-in-case-parts-inventory-management/
Kenton, W. (2018, May 15). Just in Cime. Retrieved from Investopedia: https://www.investopedia.com/terms/j/jit.asp