Just-in-time was the mantra in supply chain manufacturing for many years. As the name suggests, it means delivering goods exactly when they are needed. With the increasing export risks that come with deglobalization, companies are now increasingly going back to just-in-case, meaning they stockpile goods to have them when needed.
Just-in-time: advantages and disadvantages
Just-in-time management optimizes the supply chain by preventing overproduction and minimizing transport and storage costs. It’s a more efficient way to manage resources as supplies don’t sit idle. Companies can thus divert resources from that inventory to other areas of their business.
It’s also more environmentally friendly, as there is less waste as businesses only keep the stock they need for production. That’s especially the case for perishable products, such as food products.
The disadvantage is that it makes supply chains more vulnerable. What if there is a sudden surge in demand, or what if there are unexpected supply chain disruptions, such as a storm or a traffic accident?
Just-in-time also needs stable and reliable suppliers. If companies stop delivering goods, that might disrupt the entire supply chain. During the pandemic, manufacturers had to shut down production sitesunexpectedly.
Just in case: advantages and disadvantages
Just-in-case is pretty much the opposite. It’s more expensive as it produces additional storage costs and wasted stock. On the other hand, it’s a more reliable way of organizing supply chains and is less volatile. Companies avoid losing sales and increase their ability to deliver despite an unexpected disruption.
Impact on warehousing
More companies shifting to just-in-case inventory management has implications for warehouse demand. More warehouse space is needed, as more stock sits idle. That increases the storage costs for businesses, but it also increases the earnings for warehousing providers.
The shift to just-in-case also comes when warehouse demand is high anyway because of the e-commerce boom. Thus, warehouse costs will likely increase even more in the future. That’s not good news for most companies, but it is for warehouse investors.
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