Question

IB Business Management HL 2  

You are the COO of our mask company and the CEO has asked you some questions about our processes. Please answer these questions:

• Going forward (after the crisis), should we employ JIT or JIC inventory control? Why?

• Can you draw a stock control chart to show what likely happened from January to April of this year?

• What is our capacity utilization likely at right now? What is the disadvantage of this?

Criteria for the grading scale

JIT or JIC Gave a good recommendation on which method to use, including arguments and counter-arguments

Stock Control Chart Drew a SCC that showed what likely happened for the first 4 months of the year.

Capacity Utilization Discussed what the CU is right now and the negatives associated with it.

Answer 1

Going forward with the current scenario, it is best to go for JIC (Just in case) inventory management system. In the coming days, there is expected to be an increase in coronavirus cases. Since the curve isn't flattening out, so, it is better to go for JIC inventory control where large amount of inventory will be present. Also worth mentioning that due to the disruption of the global supply chain, it might be possible that maintaining JIT isn't possible. So, going to JIS is the best option.

The price for an n95 mask was $13.28 until Amazon ran out of inventory.

It's now $63.95 — a rise of 382 percent.

Sales continue, given the running out of inventory. The table below shows best-seller lists on Amazon's last month (the green line).

Capacity utilization right now is at 100%. Companies like 3M are saying that the demand is exceeding their manufacturing capacity. So, they are unable to meet the demands. So, it is advisable to have JIC inventory control now.

Some disadvantages of JIC are:

• Suppliers can demand high prices for urgent stock delivery.
• Higher stock retention costs are imposed, e.g. transportation, repairs, protection, and insurance.
• There is a risk of loss due to product technology development and unsold products.
• Liquidity problems can occur because JIC needs significant quantities of operating capital to be held in the product.