Calculating the Reorder Level: This is the specific stock quantity that triggers a new purchase order. It is calculated as: .
Just-in-Time (JIT): A lean management technique where stock is ordered only as needed for production, virtually eliminating buffer stocks to minimize holding costs and waste.
Just-in-Case (JIC): A traditional strategy where significant buffer stocks are maintained to ensure the business can handle unexpected supply chain disruptions or spikes in demand.
| Feature | Just-in-Time (JIT) | Just-in-Case (JIC) |
|---|---|---|
| Primary Goal | Minimize waste and holding costs | Ensure supply stability and reliability |
| Buffer Stock | Minimal to zero | High levels maintained |
| Supplier Relationship | Highly integrated and frequent | Less frequent, transactional |
| Risk Factor | High risk of production halts | High risk of obsolescence and high costs |
Graph Interpretation: When analyzing a stock control chart, always identify the vertical distance of the 'jump' to find the Reorder Quantity, and the horizontal distance between the reorder point and the delivery to find the Lead Time.
Sanity Check: If a calculation results in a reorder level lower than the buffer stock, it is likely incorrect, as the reorder level must account for usage during the lead time on top of the safety margin.
Context Matters: In exam questions, consider the product type; perishable goods (like milk) or high-fashion items favor JIT, while non-perishables with volatile demand favor JIC.
Confusing Reorder Level with Reorder Quantity: The level is a trigger point (when to order), whereas the quantity is the amount ordered (how much to buy).
Ignoring Opportunity Cost: Students often forget that money tied up in excess stock is capital that cannot be used for other investments, which is a significant hidden cost of poor stock control.
Static Lead Times: In reality, lead times can vary; failing to adjust buffer stocks for supplier unreliability is a common real-world and theoretical mistake.
