Just-In-Time For Change – Building Effective Supply Chain Transformation

The Just-in-time (JIT) inventory management strategy is 61 years old and in a perfect world it works well. It revolutionized the automotive industry and many global manufacturing verticals, creating “lean” operations that cut costs by slimming inventory to the bare minimum, whichwas great for the balance sheet.

Manufacturers ordered sub-assemblies and components only when needed - and it was not uncommon for a manufacturer, who fully embraced JIT, to carry just three hours of inventory supply for the production floor.

“The lesson [of JIT] seemed clear,” wrote Alex Hadwick in a 2020 Reuters Events article. “Get rid of waste. Order only what was absolutely necessary. Enforce strict quality controls. Keep upstream suppliers on short notice to produce inventory as needed and watch the profits grow.” Then along came the biggest disruptor our industry has known since the start of the JIT era and threw it into chaos.

COVID “exposed a high degree of supply chain neglect. Firms are realizing they need to re-think their supply chain in terms of resilience for the types of volatility we have seen and will continue to see”, explains Gad Allon, of the University of Pennsylvania Wharton School.

A JIT alternative

This doesn’t mean that the concepts behind JIT should be thrown out as a failed business model. “There is nothing inherently wrong with being lean,” stresses Allon. But it is time to re-think JIT in the new context of resiliency and risk hedging.

Hence, organizations need to consider alternatives to JIT. Alternatives that manage cost, of course, but not at the expense of resiliency, assurance of supply, or preservation of profits and markets. Alternatives that are also underpinned by superior analytics technologies.