Is It the End of “Just-In-Time”?

Colorful plastic alphabet in word JIT (Abbreviation of just in time) on wood background

“Just-In-Time,” also known as J.I.T., is a manufacturing or supply system whose goal is to maintain inventories as close to zero as possible. Here is how Investopedia defines the term:

Companies employ this inventory strategy to increase efficiency and decrease waste by receiving goods only as they need them for the production process, which reduces inventory costs.

Developed by Toyota in the 1970s, “just-in-time” has become the mantra of every entity in the supply chain from manufacturer to retailer. But because the system is based upon maintaining lean inventories, the current chaos in the world’s supply chain has hit companies and retailers hard. They simply do not have sufficient inventory to tide themselves over until shipping begins flowing again. The result has been unprecedented out-of-stocks.

Bethan Moorcraft, in his article for Insurance Business Magazine, quotes Andrew Yeoman as putting the problem as follows:

We have changed our supply chains to be as lean and just-in-time as possible, [which means] that a disruption in one part of the world can have an [almost immediate] impact on the availability of goods in another. The COVID-19 pandemic has shown us that we have a very finely tuned global supply chain.”

“Just-in-time” has proven to be an excellent means of maintaining lean inventories and increasing profitability. It is certainly here to stay. Still, the recent disruption due to the pandemic will undoubtedly cause some managers to consider whether their inventory levels have become anorexic. Going forward, my bet is that companies are going to keep just a bit more inventory on hand.

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