January 13, 2022
According to recent research, the main internal barrier to a more efficient supply chain is the use of supply chain metrics that focus too much on efficiency at the expense of flexibility.
The result of a retail survey from Blue Yonder and Retail Systems Research (RSR) talks about pandemic-related supply chain disruptions, which have exposed the shortcomings of “just-in-time” models focused on lean inventory management.
“What companies love to do is optimize working capital. So many manufacturers have moved to just-in-time inventory, and before the pandemic it worked pretty well,” UPS CEO Carol Tomé said at a recent industry event, according to the FinancialTimes. “But when the pandemic hit and everything was shut down, including manufacturing, and then the economy started to open up and demand … jumped, well, that just-in-time inventory didn’t work anymore. Businesses are thinking now, I need “just in case” inventory.
Speaking recently at SFIA (Sports & Fitness Industry Association) Trends & Insights conference, Jason Kra, president of Li & Fung, said that “just in time” boosts efficiency but reduces diversification.
“That tension has really come back to haunt some of our customers,” Mr. Kra said, “because you had all your eggs in one basket and the world went from just-in-time to this inability to get things done. for a multitude of reasons.”
The supply chain crisis, according to Mr. Kra, underscores the importance of ensuring redundancies, such as holding additional inventory, not relying too much on flexible short-term contracts and having sources of supply. alternatives, to add agility as “just in case”. “depreciate.
Other lessons include the need for “reliable supply” as well as strong visibility which will also help when oversupply and limited warehouse space inevitably becomes an issue. He said: “When things go wrong, having access to raw data at different levels is really essential to be able to manage and make good decisions.”
Regardless, a the wall street journal A November article noted that many businesses expect to return to pre-COVID inventory levels once business conditions normalize, as holding buffer inventory ties up capital and requires storage space. warehousing, monitoring and insurance. Keeping keeping inventories to a minimum also helps reduce fashion risk and manage items with a sell-by date.
DISCUSSION QUESTIONS: Has the supply chain crisis exposed the underlying risks of just-in-time inventory management? Should just-in-time approaches in retail be retired, adjusted, or reinstated once supply chain bottlenecks are resolved?
“Modern supply chain technology is really helping retailers understand what is required and how to maintain efficiency and the right inventory.”