Your Forecast sucks ... and there goes your Lean Supply-Chain model.
I get it and even though a broken clock is still correct twice per day the ability for you to forecast these days is worse than thinking you can pick the winning Lottery numbers.
For more than two years now, rising costs, logistics delays and labor shortfalls have all but become the norm for supply chains. Organizations, in some cases, have responded to this adversity with innovation, altering their logistics networks, sourcing and demand planning processes in the process.
Just-in-time supply chains took a lot of heat during the pandemic after empty shelves laid bare the pitfalls of ordering as little inventory as possible in the name of efficiency.
But, with many organizations now struggling with inventory glut and overstocked warehouses, could the lean operating model be making a comeback?
Experts are mixed: While some believe that just-in-time has no place in the supply chains of the future, others say a modified version of the strategy will still be necessary to maintain resilience while keeping costs down.
The just-in-time system worked so well in the past thanks to dependable and stable conditions. But the pandemic blew a fuse, revealing flaws to just-in-time. Just-in-time promotes efficiency and product quality, but sometimes at the expense of resilience, and therefore isn’t always equipped to manage the turbulence of global events, like COVID-19, weather disasters and the Russia-Ukraine conflict. That’s one of the reasons why we saw disorder and disruptions begin to take over supply chains in 2020 and why we’ve been working to catch up ever since.
Now, around 64% of companies are transitioning from just-in-time (JIT) to just-in-case (JIC) to circumvent liability after being burned with too-darn-late (TDL). Just-in-case is a system which depends on extra stock and buffers for high-demand products to maintain business continuity. This is another outcome of lockdowns and the ensuing changes in consumers’ shopping behaviors.
While just-in-case has value, that’s not to say that companies should completely abandon just-in-time as inventory levels remain elevated. A modified version of just-in-time can be beneficial where companies only stockpile certain vulnerable items to avoid fallout from potential disruptions. Clearly consumers still have an expectation of high variety, rapid delivery and reasonable cost that defined just-in-time supply chains.
As Supply-Chains wean themselves away from the Pandemic Hangover many of the maladies are still rumbling within our Supply Chains namely:
Many Asian Factories are finally back in business after long Covid Lock-Downs
Our Ports of Entry are opening up and getting current
This has resulted in eliminating a shortage of sea containers
Resulting in crowed receiving docks and warehouses.
But Wait ... now we have some new ones ...
Did you know that on average 30% of all on-line orders are returned to the supplier?
Inflation has dented consumer spending
Interest Rate hikes are significantly increasing household expense
We continue to see a labour shift
Lay-offs are happening spooking our labour pool
Overall Anxiety has set into our forecasts where we are imagining the worst is still to come and reducing our Window of Tolerance. So what to do?
Do not only look at historical data to build your forecast.
Discard a significant portion of your demand history you witnessed through the Pandemic
Place more orders with smaller quantities (so you have a steady trickle of inventory arriving).
Use some common sense ... no, use a lot of common sense.
On-Shore your Production
Create a High-Bred sourcing solution combining an import and local source option.
Redesign your product to make it more conducive and cost effective for air freight.
Most import is that you should only be making very small adjustments not irrational significant course corrections. They will ultimately bite you, trust me. Our economy is still swinging like a pendulum out of control with significant extremes at both ends. But the amplitude of the pendulum swings are getting smaller and hence our world slowly becomes more predictable ... and then what worked well in the past will work well for us again. But of course we should also then factor in some contingency planning.
Overall, just-in-time improves processes, raises standards and increases the quality of goods, resulting in stronger relationships between companies and consumers. Therefore, when applied strategically, a flexible just-in-time system should promote the resiliency and agility needed to navigate shifts in supply demands. The pandemic taught us many lessons and moving forward we can expect companies to reconsider how they implement just-in-time.