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JIT, LIFO, FIFO (inventory management-operations strategy) -help

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Mandynguyennmm:
Hi,

can i please have help for the 2015 HSC business studies Q8 multiple choice.???
Question:
Which of the following is the best method for managing the stock of fresh milk in a supermarket??
a) JIT
b) first-in-last out
c) LIFO
d) FIFO

i am not sure why the answer is FIFO and not JIT, because it is asking for the "best method for managing stock", and i thought FIFO is more inventory valuation (doing more with the dollar value) and JIT is doing with how goods are stocked????

Thanks

emilyygeorgexx:

--- Quote from: Mandynguyennmm on May 22, 2018, 10:24:03 pm ---Hi,

can i please have help for the 2015 HSC business studies Q8 multiple choice.???
Question:
Which of the following is the best method for managing the stock of fresh milk in a supermarket??
a) JIT
b) first-in-last out
c) LIFO
d) FIFO

i am not sure why the answer is FIFO and not JIT, because it is asking for the "best method for managing stock", and i thought FIFO is more inventory valuation (doing more with the dollar value) and JIT is doing with how goods are stocked????

Thanks

--- End quote ---

Hey!

FIFO and LIFO are both inventory management and valuation strategies. So FIFO, meaning first in first out, is usually for perishable goods so in this case the milk. When in the supermarket, they try to organise the perishable goods by expiry dates. This means they would have milk that expires on the 21st of July in front of milk that expires on the 28th of July. This is to ensure that the stock that is going to expire earlier is sold first so the stock doesn't actually go to waste because its expired. The wastage of the stock then acts as a loss to the business, as they lost the sales that could have been potentially made from a customer purchasing the milk.

So therefore the answer is D, FIFO.

Hope that didn't sound too confusing!!

Mandynguyennmm:
oh i see, thank you.
But what would JIT be used for/an example of it being used??? can it not be used for perishable goods ??

thanks!!

Mandynguyennmm:
Also would LIFO mainly be used for goods that appreciate overtime e.g. for wine???

Mada438:

--- Quote from: Mandynguyennmm on May 23, 2018, 06:56:02 am ---oh i see, thank you.
But what would JIT be used for/an example of it being used??? can it not be used for perishable goods ??

thanks!!

--- End quote ---
An example of JIT (Just in Time) is Apple
Once products are ordered online, they are shipped directly from China. This reduces lead times, demands are met quickly, avoids damaging aand/or warehousing costs and it minimises the chance of stock in inventory becoming obselete (where it becomes a liability to the business).

i don't think Jit could be used for perishable goods, as perishable goods by nature have to be stored with certain characteristics (e.g stored below 15 celcius). They have to be stored SOMEWHERE. If the business sells perishable goods then they would need to own the warehouse where the goods were intially stored, hence removing the benefits of JIT. I'm not 100% sure if thats true, but thats just how i reckon it works.

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