JIT or illegit?

With the bounce-back from the pandemic, many countries have experienced supply-chain problems. For example, the shortage of lorry drivers in the UK and elsewhere (see the blog Why is there a driver shortage in the UK?) has led to empty shelves, fuel shortages and rising prices. The problem has been exacerbated by a lack of stock holding. Holding minimum stocks has been part of the modern system of ‘just-in-time’ (JIT) supply-chain management.

JIT involves involves highly integrated and sophisticated supply chains. Goods are delivered to factories, warehouses and shops as they are needed – just in time. Provided firms can be sure that they will get their deliveries on time, they can hold minimum stocks. This enables them to cut down on warehousing and its associated costs. The just-in-time approach to supply-chain management was developed in the 1950s in Japan and since the 1980s has been increasingly adopted around the world, helped more recently by sophisticated ordering and tracking software.

If supply chains become unreliable, however, JIT can lead to serious disruptions. A hold-up in one part of the chain will have a ripple effect along the whole chain because there is little or no slack in the system. When the large container ship, the Ever Given, en route from Malaysia to Felixtowe, was wedged in the Suez canal for six days in March this year, the blockage caused shipping to be backed up. By day six, 367 container ships were waiting to transit the canal. The disruption to supply cost some £730m.

JIT works well when sources of supply and logistics are reliable and when demand is predictable. The pandemic is causing many logistics and warehousing managers to consider building a degree of slack into their systems. This might involve companies having alternative suppliers they can call on, building in more spare capacity and having their own fleet of lorries or warehousing facilities that can be hired out when not needed but can be relied on at times of high demand.

When the ‘bounce back’ subsides, so may the current supply chain bottlenecks. But the rethinking that has been generated by the current problems may see new patterns emerge that make supply chains more flexible without becoming more expensive.

Articles

• What Is a Just-in-Time Supply Chain?

The Balance Small Business, Martin Murray (12/10/20)

• Why it’s high time to move on from ‘just-in-time’ supply chains

The Guardian, Kim Moody (11/10/21)

• Logistics Study Reveals Three Potential Cures To Global Supply Chain Problems

Forbes, Garth Friesen (20/9/21)

• Just-in-Time Manufacturing Needs Better Data

Supply & Demand Chain Executive, Paul Lachance (8/10/21)

• Just-in-time supply chains after the Covid-19 crisis

Vox^EU, Frank Pisch (30/6/20)

• Plastics industry moves away from just-in-time logistics amid increased volatility

S&P Global, Miguel Cambeiro, Baoying Ng and George Griffiths (8/10/21)

• Just-in-time supply chains have left us dependent and with just-not-enough

CityAM, Tom Tugendhat MP (1/10/21)

• Supply chain havoc is getting worse — just in time for holiday shopping

Vox, Rebecca Heilweil (7/10/21)

• Ever Given and the Suez Canal: A list of affected ships and what delays mean for shippers

Supply Chain Dive, Matt Leonard (25/3/21)

Questions