It is no revelation that the economic crisis drastically impacted the exchange of goods in the United States and across the globe. The overnight pause to productivity for any labor-intensive manufacturers, led way for companies to assess how well they were prepared to deal with a crisis, and ultimately to identify issues or gaps in areas like supply chain. Now more than ever is the perfect time for companies to transform their strategies, to be able to react quickly and efficiently through future disruptions, and to become more agile and resilient.
Through a previous program titled ADAPT (Analyze, Decide, Act, Protect, and Triumph), 3Cloud (formerly CCG) has been eliciting cross-industrial feedback from our networks to gather insights into how the new economic environment has affected their organizations. There was an overwhelming response of companies whose primary focus was crisis planning: both for the now and for the future. In this blog, we will review how the Just-In-Time strategy may be the future of supply chain.
Ship to Stock to Just In Time
For many companies prior to the economic crisis, ship to stock was the norm. In this method of supply-chain management, the company purchases the inventory and stores it in the warehouse, only shipping when they receive an order from the customer. The problem with that is when a disruption occurs, whether its large scale like a pandemic, or a smaller change in the market, there is a greater risk for the organization. This typically means having too much product, not enough product, or not the right product, which causes an array of issues for a company.
The Just In Time (JIT) method of supply chain management means that the company aims to supply the goods as close to possible to when they are actually needed. For a company that re-sells goods, that would mean hitting the shelves just before they are needed, or for a manufacturing company the parts and materials would arrive just before they’re added to the final product. The major advantage to JIT being that keeping less inventory on hand means a company has more available cash in their pockets during times when they may need it, such as the current economic crisis.
Just In Time to be Data-Driven
Utilizing the JIT method successfully requires that the company be extremely data-driven, especially for organizations with complex supply chains. Being able to react quickly to changes in the cycle is crucial to business continuity and requires that there’s constant and accurate monitoring of demand. This is typically done through a lean production technique called KANBAN, which is used to help facilitate the main objectives of JIT, which are streamlining, efficiency, and enhancing quality. In order for that to work, all of a company’s systems need to be able to talk to each other, all of their data needs to be clean and reliable, and all of the insights they receive from their reporting should be accurate and allow for quick decision making and alterations.
Getting started with implementing a JIT method may seem overwhelming, and many organizations struggle with where to start. The simple answer is that every supply chain is unique. Organizations need to first analyze their supply chain and look at gaps for improvement. There are some questions that your organization can begin to ask themselves to self-analyze their current supply chain strategy:
- Vendor Reliability/Dependability – Do you have a diversified vendor list? Can my vendor(s) get me what I need on time?
- Keep production runs short- Is your strategy aiming to produce only what you need in order to save capital?
- Move on or adapt quickly – Is our strategy agile? Can we adjust quickly to changes in environment and demand?
- Replenishment – How are we working with our vendors to ensure timely replenishment of stock/product?
Don’t let breaks in the supply chain slow down your business from performing. Better predict changes to planning logistics, product development, sales forecast, customer demand, and distribution support through analytics solutions. To learn more about 3Cloud’s approach to the new economic environment, you can click here.