The end of JIT?

From the August 2022 print edition

If there’s one thing that supply chain professionals excel at, it’s contingency planning. They’re good at thinking about what might go wrong, then coming up with solutions to deal with those potential disasters.

A few years ago, someone in supply chain or manufacturing might have thought about what to do if, say, 25 per cent of the goods or commodities they need suddenly became unavailable due to natural disaster, political unrest, or similar events. With 75 per cent still available, most businesses could muddle through until supply came back online.

Or at least, that was true until the pandemic. Many had never considered contingencies for when 100 per cent of supply dried up. At the height of COVID-19-related lockdowns, those businesses had to scramble to find something, anything, with which to replace certain products.

And while taking a break from all that scrambling, many began to muse about the future of the just-in-time (JIT) model. Was it still effective? Or had it become unnecessarily risky in such an unstable, unpredictable world?

It wasn’t just the pandemic that fuelled this JIT scepticism. Other recent catastrophes like the cargo ship, the Ever Given, getting stuck in the Suez Canal for six days in March 2021, clogged ports on the US east coast, as well as the war in Ukraine have all contributed to these just-in-time jitters.

Critics have pointed to the potential fragility of the model, with some suggesting it be replaced with a rebooted structure that wouldn’t leave the supply chain (and ultimately customers) high and dry.

The JIT model was developed by Toyota decades ago and involves only moving material right before it’s needed. That means organizations don’t have to store as much inventory because they only keep as much on hand as they need.

But while innovation is important, we should be careful not to abandon completely the just-in-time model. It has provided advantages to supply chains for decades, allowing for reduced waste, improved efficiencies, reduced cost, and other benefits.

Rather than trying to eliminate the strategy, just-in-time supply chains and manufacturing should evolve. It’s a good idea to rethink how much inventory to keep on hand, as well as where within the supply chain to keep it.

A just-in-case model (JIC) of inventory management system can provide advantages as well. But it can also lead to issues including increased storage costs and potentially wasted stock. Companies usually fall somewhere on a spectrum between the two, and should consider where on that spectrum they belong, based on their needs.

There’s been increased attention on nearshoring as a potential solution, but that can never be a complete fix. Bringing manufacturing closer to home can also raise costs, and some things simply can’t be made here in North America.

While disruption has highlighted its weaknesses, I wouldn’t expect JIT to disappear entirely. Yet businesses may reconsider if it’s best for them, make modifications, or look at backup strategies.

Michael Power is editor of Supply Professional magazine.