• The supply chain encompasses all the businesses involved in ensuring a product is manufactured and supplied to the final customer. Supply chain management is an important process for most businesses, especially with the increasing trend towards outsourcing/offshoring. Businesses will strive to have an optimised supply chain because it usually translates into lower costs for the company.

• Supply chains need to be managed to reduce costs, minimise transportation, eliminate bottlenecks and maximise customer value. According to the Council of Supply Chain Management Professionals (CSCMP), supply chain management encompasses the planning and management of all activities involved in sourcing, procurement, stock and logistics management. Modern supply chain management requires IT links with all suppliers and distribution companies and the constant monitoring of deliveries and dispatches of parts/components/finished goods.

• Local supply chains use only regional suppliers and manufacturers in an area close to the business’s own area. This can be beneficial to small businesses that cannot easily build links and relationships with global suppliers. The 2020 pandemic contributed to supply problems for those businesses using non-local suppliers.

• Production delays, material shortages, rising transport costs and increasing transport unreliability affected many countries and highlighted another advantage of having local suppliers for all key parts, components and business services.

• Before 2020, many businesses focused on developing global supply chains with the lowest-cost suppliers. Globalisation, freer international trade, low shipping costs and improved global communications all contributed towards the trend for using lowcost global suppliers.

These are two approaches to stock management. One, JIC (justin-

case), focuses on the importance of always having sufficient

stock to meet nearly all eventualities. The other, JIT (just-in-time),

focuses on reducing stock-holding costs to a minimum.

The benefits and aims of JIT – the just-in-time stock control

principle – were explained in Chapter 30. Traditionally, businesses

tended to rely on the JIC principle of stock control – ‘just-in-case’.

Failure to hold enough stocks of parts and components could

result in production being halted when stock runs out. Failure to

hold enough stocks of finished goods could mean customer

dissatisfaction if demand cannot be met immediately or in the short

term.

Virtually all businesses hold stock of some kind. Banks and

insurance companies will hold stock of stationery, and retailers

have stock of goods on display and in their warehouses.

Manufacturing businesses will hold stock in three distinct forms:

• Raw materials and components. These will have been

purchased from outside suppliers. They will be held in stock

until they are used in the production process.

• Work in progress. At any one time the production process

will be converting raw materials and components into finished

goods and these are ‘work in progress’. For some firms, such

as construction businesses, this will be the main form of stock

held. Batch production tends to have high work-in-progress

levels.

• Finished goods. Having been through the complete

production process, goods may then be held in stock until sold

and dispatched to the customer.

Read section 33.1 again to understand the important principles on

which JIT is based and the requirements for it to operate

effectively. These requirements – such as close relationships with

suppliers and excellent transport links – are less important with JIC

and these are some of the differences between the two systems.

However, the essential difference between the JIT and JIC

strategies is that with JIT stock is minimised or, if possible,

eliminated whereas in JIC, stock is held at a sufficient level to act

as a buffer if there are production problems or delays with the

delivery of component parts. The operation of JIC is usually

represented by the stock control graphs which are analysed in