Global supply chains are changing their inventory models, shifting from “just-in-time” (JIT) to “just-in-case” (JIC) models amid supply disruptions and uncertainties, according to SAP UK.
Since the COVID-19 pandemic, 66 percent of UK businesses have experienced delays in the production and delivery of goods and services. While 64 percent experienced loss of revenue, 58 percent witnessed a loss of customers. Under these circumstances, 84 percent of businesses are now planning to move from a JIT model to a JIC supply chain.
Under the JIT model, businesses only receive inventories when it is needed for production. In contrast, JIC stocks up inventories much ahead of time.
While JIT models reduce waste in manufacturing as much as possible, the goal of JIC is to ensure there are minimal chances of low stocks so as to avoid any delay in production schedules. Almost a quarter of businesses are expecting supply chain issues to last until summer 2023, according to SAP.
“With the end of JIT models, businesses have to start putting the same expectations on their supply chain as they do on their wider business, structuring themselves to be JIC, so that when disaster occurs, they can adapt. Those who don’t make this change are in for a very tough 18 months,” Verhoeven said.
In the United States, the White House had recently announced the appointment of Retired General Stephen R. Lyons as the new Port and Supply Chain Envoy to the Biden-Harris Administration Supply Chain Disruptions Task Force. The task force was established in June last year to address supply and demand imbalances.
“The diversification of our supply chains is critical to our economic prosperity and national security,” Daniels said. “I think you will see substantial revisions to just-in-time delivery models, leading to better warehouse management and longer stockpiles that mitigate the risk of material shortages.”