Did COVID Turn Just-in-time Inventory Management on its Head?

Do you every ask employees at the big box stores if there are any more of “product x” in the back? In the 1970-80s the answer was likely, “let me check.” Now? The answer is, “no, what we have on the shelves is all we have.” The advent of Just-in-time inventory management revolutionized how companies manage inventory. Supply chain logistics professionals have honed this management philosophy to a well-oiled machine… until it ran out of oil. Just-in-time (JIT) inventory works amazingly well under normal circumstances. When placed under abnormal stress, the brittleness of this system is clear to see.

Is Just-in-time inventory dead? The short answer is no, but with a couple of caveats. The first caveat is based on a term that has been around for a long time but has become popularized in 2020: supply chain resilience. Supply chain resilience is a supply chain that can handle disruption and resistance and can bounce back in a timely manner. There are various ways to develop supply chain resilience. See our article on Supply Chain Resilience.

One of the “7 wastes” that Lean Manufacturing tries to minimize is excess inventory. The concept goes something like this: Excessive inventory leads to increased holding costs, ultimately costing your facility revenue and margin. The obvious conclusion is to maximize JIT inventory management. Proponents of Lean Manufacturing (I am one of those) can be myopic on this point and forget that the answers is to have, “the right amount of inventory in the right place at the right time.” Until recently this phrase implied the absolute lowest amount of inventory possible is best. For many firms, this now implies a hybrid approach. “The right amount of inventory in the right place at the right time” can imply a Just-in-case component. There is no conflict between JIT and supply chain resilience.

Perhaps in the near future it would be worthwhile to ask a clerk, “hey, do you have any more of these in the back”?

By working with an expert Supply Network Services company such as Spearpoint Logistics, your company focuses its efforts and resources on its core competency (R&D, Engineering, Manufacturing, Procurement, Etc.) while Spearpoint manages the supply network. Let us know if we can be of service.

Leave a Reply

Your email address will not be published.