IB Business Management HL 5.6.2 JIT and JIC Question Bank

Explain one advantage and one disadvantage for C M of changing its stock control method from just-in-case (JIC) to just-in-time (JIT).

A possible advantage for CM of changing the stock method from JIC to JIT: As CM buys agriculture produce/ stock, these products need to be well stored and possibly refrigerated. Moving to JIT will significantly reduce costs of storage and spoilage. The gross profit margin, which has fallen by 2 %, is likely to increase rather than decrease. The very high current ratio of 2.4 will fall, as CM will not stock financially unproductive assets.

A possible disadvantage for CM of changing production /stock method methods from JIC to JIT:
Given the nature of the industry, the farmers are likely to prefer CM buying large quantities seasonally. Ordering lower quantities when needed might create problems/costs for the farmers, who might not prioritize CM any longer. CM will also lose its reputation for CSR based on long-term commitment to farmers to buy large quantities.

Moreover, given the unpredictable nature of farming, not having buffer stock could result in CM being out of stock with the consequences of losing clients/reputation and therefore revenue and profit. CM is likely to lose its reputation for flexibility with the retailers in terms of quantity and delivery if not enough agriculture produce is available.

Accept any other relevant/applicable advantage / disadvantage.
Award [1] for each advantage / disadvantage identified and an additional [1] for development with application to CM. Award a maximum of [2] per advantage / disadvantage.
[2] cannot be awarded per role if the response lacks either explanation and / or application.

For example:
For an identification or a description of an advantage/ disadvantage with or without application [1].
For explanation of a relevant advantage/ disadvantage with no application [1]. For explanation of a relevant advantage/ disadvantage and application [2].