Supply chain 2022 and beyond. Just in time or just in case?

During the year 2021, a growing number of headlines predicted or even called for the demise of “just in time”, the system that evolved from Toyota’s approach in the 1970s with the aim of minimize inventory and increase efficiency. The underlying argument is that companies would have fared much better in recent supply chain disruptions if their supply chains had been less lean. Much of the advice is to increase the “safety” or “buffer” stock, which is now called the “Just-In-Case” approach.

Financial viability

The phrase Just-In-Case is breaking out of the tongue and resonating with businesses and consumers amid unprecedented supply chain challenges. But any interpretation of Just-In-Case as a large increase in buffer stock to reduce the risk of stockouts or production stoppages is likely to create issues of working capital, free cash flow and obsolescence. some products.

“Risk-adjusted” inventory

It’s not that Just-In-Case or Just-In-Time is wrong, but there is a time and place for everyone. The risk of running out of vital medical equipment is very different from having two, not four, choices of shirts to buy. Different products with different margins or different customers with different demands should change the equation. The risk of inbound supply changes, and buffer stocks should therefore change. One size does not fit all. The timing, location and amount of buffer stock must dynamically account for the risk of supply and demand. Companies that can leverage data and analytics to dynamically and predictively “adjust inventory levels” will gain a significant competitive advantage in 2022 and beyond.

Redefining visibility

At the heart of a supply chain’s ability to “adjust risk” is visibility and goes well beyond real-time visibility of assets. It is end-to-end, dynamic and predictive wherever possible, and it includes visibility into strategic, operational and real-time risks. Companies that achieve this visibility will make more full use of assets, labor, and inventory, reducing unnecessary buffer stock and creating the agility needed to respond to changes in supply and demand, becoming more resilient. . This should not require new platforms and new processes, but an adaptation of existing ones. Sales and operations planning is a good example. In mid-2020, Jim Rice of the Center for Transportation and Logistics at MIT described how adaptations to S&OP practices and platforms can be a powerful defense against the effects of extreme fluctuations in supply and demand.

The willingness and ability to extend this visibility to upstream and downstream business partners – transparency – will further increase capacity, agility and resilience.

Data and Analytics

From strategic design to operational planning and execution, data and analytics are the backbone. Companies that can leverage data and analytics to assess strategic and operational risks to design and operate resilient, agile, sustainable and financially viable supply chains will have a huge advantage in 2022 and beyond. This is what we call the “risk-adjusted supply chain”.

Expect board members and executives to read the headlines about the end of just-in-time. So be prepared to deploy data to make sure the pendulum doesn’t tip too far the other way.

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David Shillingford is the Chief Strategy Officer of Everstream Analysis. Everstream Analytics monitors up to 1,500 potential supply chain disruptions daily and provides actionable insights to increase the resilience and agility of its customers’ supply chains, protecting revenue and reputation.

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