Question

While JIT has proven to be a very efficient system if properly implemented, it carries with it a measure of risk. Discuss the sources of risk in a JIT system and possible solutions to the risks identified.

Answer 1

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With a JIT system in place the company gets the chance to optimize their inventory, have only useful things socked in the most useful amount at a particular time. Even then, JIT is susceptible to shortage of stocks from time to time if the forecasts for the demands are not calculated factoring in the different variables. It is also the issue of implementing JIt in the first place. This is due to the fact that any company is somewhat resistant to change in the small terms and therefore, JIT requires a lot of planning to implement and initially run. JIt does not have control over the time frame of the inventory therefore it proves to be a potential risk of JIT. JIT is also a risk in case of natural phenomenons occurring which could result in stoppage of supplies from other companies and essentially be a risk.

To counter the following risks, companies can utilize the safety stock in the case the inventory falls short, it can take into account the periods of up and downs and essentially be regulated in accordance and allow the company access to stock in dire situations. Forecasts need to conducted by the computer and as many variables as it can be fed will result in a better forecast. In the case of a natural disaster, companies need to be able to source the product from another supplier just in case their supplier is unable to do it. Therefore, with all the forecast data, safety stocks and security, JIt can, at some levels, influence the time frame.

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