Aditya Goud
Supply Chain Engineering
Final Project
Report: Just-in-time inventory management under scrutiny in the wake of supply chain disruptions
The COVID-19 pandemic has exposed vulnerabilities in supply chains, and there has been a growing
concern over the practice of lean inventory management, or just-in-time inventory planning, as it is
commonly known. For decades, industries have worked to reduce costs by lowering inventory levels,
but it requires a careful balance. The pandemic led to empty shelves in grocery stores and bare car
dealerships, which many blamed on lean inventory or just-in-time supply chain management.
While there is some interest among supply chain professionals in increasing safety stock, the benefits
of just-in-time are seen as too good for companies to give up on the practice. Some companies, such
as Walmart, have managed to increase inventory levels while still keeping inventory as a percentage
of sales back to where it was in 2019. However, every company has been affected differently.
Hasbro, for instance, has had a hard time keeping its inventory afloat amid high demand. Sales surged
more than 34% compared to 2019, but inventory is down 11% compared to the same period, which
has led to its inventory as a percentage of sales dropping 20 percentage points.
The idea behind just-in-time is simple: Businesses want to try and match their level of inventory to
consumer demand as closely as possible. In a well-oiled supply chain, manufacturers can meet
fluctuations in demand and theoretically sell more while reducing inventory carrying costs. Lean
inventory management or just-in-time inventory planning has been a way of thinking within the
supply chain management world for decades, with Toyota often credited with pioneering the method.
The automaker famously redesigned its supply chain after it experienced issues following a 2011
earthquake.
As the pandemic swept around the globe, bare shelves had people questioning the practice of justin-time. A 250-page report released in June by the Biden administration outlines some of the findings
and points a finger at just-in-time. The report said just-in-time supply chain management increased
risk in industries from auto manufacturing to drug making, as it reduced safety stock and companies’
ability to quickly adapt to upticks demand.
However, companies still seem interested in adopting the practice. Paul Lord, a senior director
analyst at Gartner, said he’s fielded almost 10 calls over two to three months about companies that
want to work toward a just-in-time supply chain. Dan Hearsch, a managing director in the automotive
and industrial practice at AlixPartners, agreed that the interest in lean inventory has not waned among
corporate supply chain planners.
Experts predict changes to supply chains going forward. While companies may still be interested in
adopting just-in-time, the changes will largely be represented in the safety stock calculation. This
will mean keeping more inventory of what manufacturers consider critical components. Figuring out
what exactly will be considered critical is the key challenge, experts said. It could take time to build
that up, and it will require additional resources to manage the inventory.
In conclusion, Just-In-Time (JIT) is a production strategy that aims to minimize waste and improve
efficiency by producng only what is needed, when it is needed, and in the quantity required.
However, implementing JIT can also pose challenges, especially for companies with complex supply
chains or limited resources. It requires a cultural shift in the organization, and effective
communication and collaboration with suppliers and customers are essential.
Overall, Just-In-Time is a proven production strategy that has been successfully implemented in
many manufacturing companies worldwide. It provides a powerful framework for reducing waste
and increasing efficiency, and can help businesses stay competitive in today's fast-paced market.