Once upon a time, there was a guy named Just In Time (JIT) who was loved by many for being cost efficient. He was first used in the Toyota Production System and has been trending for over 50 years.
Sometime last year, an intruder named Covid 19 came along and people began to rethink their position regarding JIT as he led to supply chain disruptions and exposed organisations to OOS risks, need for increased strategic planning and lack of control over delivery lead times.
Recently I’ve heard and read papers from many supply chain professionals talking only about the cons of JIT and how the pandemic has exposed them. While this is true to an extent, we haven’t really looked at full applicability. Many even suggested that businesses would look to invest in warehouse spaces.
We forget to ask ourselves a few questions;
1. What exactly made JIT so popular in the last 3 decades?
2. How many businesses have the capacity to invest in warehouse spaces and begin to stock up?
3. What exactly makes JIT system unfit for your organisation at the moment?
4. What do you actually need to build a resilient supply chain?
5. What other strategies will you employ that won’t require planning?
6. Are you linking budget to strategy?
Because visibility has not been top notch and there have been changes in consumer buying behaviour, a bullwhip effect seems inevitable and will affect stockpiles. We will return to asking questions;
1. How much to stock? What basis?. Aren’t we also at the risk of over or under-stocking too?
For organisations that can stock up and utilise great inventory optimisation strategies, that’s fine. Carry on. But if you can’t because you can’t. Stay with JIT and do it right. Doing it right eliminates a few risks. You may consider the following;
1. Ensure a one team approach with private and public sectors playing active parts.
2. Leverage Local suppliers as global supply chains are easily disrupted compared to regional supply chains.
3. Consider the Key elements of strategic sourcing and implement them.
4. Manage supplier relationships. Keep in mind that in tracking or evaluating supplier performance or suitability – Cost, Quality and Time are not enough. How about supplier financial capacity, compatibility/culture alignment. Are they still as buoyant as they were last year? Are they still in line with your organisational values?
In summary, Keep a highly strategic procurement team. Understand your sales trends and variances. Track in-transit inventory. Visibility is key.
JIT inventory system is not perfect as we know and because you aren’t liquid enough to always stock up. Yes you! I’m talking to you… you can flip some cons to pros. JIT relies heavily on supplier engagement and encourages high quality goods which is paramount for competitiveness.
Also, effective risk management is important in ensuring JIT success and building resilience. I will be sharing more insights about Supply Chain Risk Management soon.
If circular supply chains are the future, JIT Inventory system which reduce wastes would help make them less complex. Simple doesn’t really mean less efficient or less effective, think about it.
