Just-in-time or maybe just-in-case?

The unstable situation in many countries and the effects of the COVID-19 pandemic have contributed to many companies taking an in-depth look at the inventory management strategies they have adopted. Is stockpiling inventory the antidote to supply chain disruption problems?

Just-in-time: Efficiency and inventory reduction

Companies are concerned with satisfying customer needs while reducing costs. A popular and effective method is just-in-time, which has been a mainstay of many companies’ production management operations for years. It involves delivering the right goods, at the right time, in the right quantity. The goal of the concept is to ensure a continuous flow, while reducing unnecessary inventory. By far the biggest advantage of this model is the efficient use of resources. However, by adopting this concept, the company is unable to respond in a timely manner to a spike in demand. A very important element in this method is the stability of partners, virtually unchanging market conditions and, if possible, the use of local suppliers.

Just-in-case: hedging against unforeseen situations

The complete opposite of the just-in-time method is just-in-case. It is based on stockpiling enough goods, semi-finished products or raw materials for unforeseen circumstances. Using this strategy, the company is able to avoid problems arising from supplier delays. They have a better chance of meeting a sudden increase in demand, as well as protecting themselves from the consequences of sudden spikes in material costs. The biggest disadvantage of this method is the relatively high costs associated with storage, and it is necessary to specially prepare the warehouse for such a strategy.

Just-in-time or maybe just-in-case?

Pandemic and supply strategies – adjusting strategies

Before the COVID-19 pandemic, it was the just-in-time method that prevailed in manufacturing companies. Is it still so effective? When the supply chain was disrupted, there was a huge problem in many companies. Companies were unable to respond to market needs. It turned out that only those who had inventory could maintain production and thus respond to customer needs.

Each method has both advantages and disadvantages, depending on the industry in which the company operates and the capabilities at its disposal, it can develop an appropriate plan of action, taking into account the highly volatile and unpredictable situation in the market. The events of the past, as well as those we are currently dealing with, definitely provide food for thought and many companies are questioning their existing strategies.