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Just in Time Inventory is Dead. Welcome to the New World.

Starbucks, with more customer demand than ever before, is running out of major inventory components. Home Depot, overrun by the work-from-home force wanting to fill their time with D-I-Y projects, is running out of major inventory components. Automakers, with customers clamoring for new cars, have been crippled by a shortage of computer chips predominantly produced in Asia. Nike and other apparel brands struggle to stock retail outlets with their wares. They are running out of major inventory and have been forced to halt assembly lines. Unthinkable, right?

Global shortages of critical supply goods reflect the deep disruption of the pandemic combined with decades of companies limiting their inventories through efficient (but risky) Just-In-Time (JIT) inventory levels.

The depth and breadth of these shortages show the extent to which JIT has come to dominate commercial life. This helps explain why it is one of the reasons construction builds are having trouble purchasing supplies. In a stroke of negative irony, it was a principal contributor to the tragic shortages of personal protective equipment early in the pandemic, which left frontline medical workers lethally exposed without adequate gear.

JIT was a supply chain revolution in the business world created within the Toyota manufacturing plants by Taiichi Ohno as a means of meeting consumer demands with minimum delays. By keeping inventories thin, major retailers have been able to use more of their space to display a wider array of goods. And lean production has significantly cut costs while allowing companies to pivot quickly to new products.

Across all major industries, companies have historically embraced JIT to stay nimble, allowing them to adapt to changing market demands, while cutting costs. But the tumultuous events of the past year have revived (legitimate) concerns that some industries have taken inventory minimization too far, leaving them incredibly vulnerable to disruption while chasing the thinnest of CapEx and OpEx. As the pandemic has hampered factory operations and sown chaos in global shipping, many economies around the world have been crippled by shortages of a vast range of raw product. JIT works when everything (internal and external) is running near perfect. In a time of global pandemic, increased natural disasters and severe weather, economic upheavals, and supply chain interruptions, Just-In-Time is officially dead – and might kill you too.

Introducing Just-In-Case

It is being replaced by Just-In-Case (JIC) inventory strategies where companies keep larger inventories on hand. This type of inventory management strategy aims to minimize the probability that a product will experience a Stockout. No product, no revenue, right?

Supply chain experts all agree that JIC is helpful because it prepares the company for unexpected jumps in demand or declines in the supply of raw materials and components. The downside is that companies that use a JIC strategy must pay more for warehousing and the storage of idle materials – but given recent circumstances, that is a price most companies are now willing to pay for.

But JIC is a framework for rough inventory levels. This only gets you partway to optimizing your inventories in a turbulent world. Beyond the framework is the optimization of inventory, to protect against theft, hoarding, excess, and lost assets while giving all areas of the company visibility, insight, and control of their critical assets.

To optimize inventory min-max levels in JIC, companies need a robust Field Data Collection solution as part of their Asset Tracking and Management efforts. This can be applied to warehouses, offices, field & site locations, and anywhere else your valuable assets exists. Track anything, track everything… and have actionable data at the fingertips of every connected department.

For companies converting to JIC from JIT, who want to optimize their inventory to offset the additional CapEx, Fulcrum Technologies and their Sitehound is here to help make the transition.

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