Production Planning Flashcards
What is a global supply chain?
the network between a firm and its suppliers and consumers that incorporates all transactions on an international level, from sourcing raw materials to supplying finished goods and services to customers.
What is a local supply chain?
short distances between producers, suppliers, and consumers within a confined, domestic location.
Advantages of JIT
The system eliminates the need for buffer stocks, so minimizes storage costs as stocks are delivered as and when required in the production process.
Wastage is thus required as inventory does not perish, get damaged or become obsolete while waiting to be used. Hence, JIT is a form of lean production.
The firm’s liquidity position improves, as cash is not tied up in inventory, improving cash flow position.
Disadvantages of JIT
Due to smaller order quantities, economies of scale are less likely to be achieve.
The system relies heavily on technology to ensure efficient stock control and movement, but this can be very expensive and vulnerable to technical faults and breakdowns.
The effectiveness of JIT depends on the efficiency and reliability of third-party suppliers.
Furthermore, suppliers can charge higher prices for urgent deliveries of stocks.
JIT stock management is inflexible in catering for sudden increases in demand. There is the inability to meet unexpected changes in demand.
Advantages of JIC
A JIC stock control system uses buffer stocks so is flexible enough to accommodate any sudden and unexpected increase in the demand for a product.
As a reserve or buffer stock exists, production can still continue even if suppliers deliver stocks late.
As larger quantities of stock are purchased, bulk-buying economies of scale can also be achieved to a greater extent compared to a JIT system.
It prevents a loss of customers and maintains customer satisfaction because their needs are being met (since firms don’t have to wait for stocks to arrive in order to complete production).
Disadvantages of JIC
There are additional costs associated with JIC, which can include insurance and maintenance (including security) of stocks.
Stocks are also subject to damage or theft.
JIC is unsuitable for stock management of perishable products such as fresh produce (fruits and vegetables) and livestock products, such as beef, pork and poultry (game) products.
Stockpiling (holding large volumes of stock) can harm the firm’s cash flow and working capital, especially if the stocks are not highly liquid.
