For many years, the Just-in-Time model has been considered a success driver. In the crises of recent years, however, it became apparent that the method also has disadvantages. Thus, the just-in-case method, which had previously been considered inefficient, suddenly had a comeback. But what does that entail? What are the advantages and disadvantages? Which method is suitable for whom – and do companies really have to decide? We want to provide fundamental answers to these questions.
Just-in-Time (JiT): Demand-synchronized production
The Just-in-Time model combines lean production with a demand-synchronized inventory strategy. As a demand-based pull system, the JiT strategy aligns delivery timing and quantity with the actual demand. Inventories are kept to a minimum to avoid surpluses. Japanese production manager Taiichi Ono developed the method in the first half of the 20th century as part of the “Toyota Production System,” which was aimed at high profitability with low wastage.
What are the advantages of the Just-in-Time model?
1. Minimization of transport and inventory costs: Cost-intensive storage is eliminated and necessary transport capacities are reduced.
2. Reduction of surplus production: Goods that are no longer saleable or in demand are an organizational and economic challenge – just think of surplus seasonal fashion that has to be destroyed or disposed of in an economically and ecologically costly manner.
3. Targeted use of resources: Through precise coordination, working time, means of production and raw materials can be used efficiently and with little wastage.
What are the disadvantages of the JiT model?
1. Vulnerability to disruptions and crises: If the process is disrupted, the gapless cycle entails risks, as production facilities that are shut down while fixed costs are being incurred result in financial losses.
2. Supply bottlenecks or failures: A disrupted flow of goods and delivery bottlenecks not only mean high losses, but also jeopardize customer trust. Dissatisfied customers turn to competitors with better product availability.
3. Planning uncertainty during peak in demand: An unexpected increase in demand can lead to bottlenecks. Logistical planning errors then become immediately noticeable.
The success of trading and manufacturing companies is strongly tied to the fact that the quality and reliability of supply of …
Collaboration and data exchange within the supply chain is a decisive factor for German companies that aim to increase the efficiency …
The global pandemic, severe weather events or new legislations such as the Supply Chain Act – in the face of continuing …
When is the Just-in-Time method suitable?
Well-coordinated communication, precise demand forecasts and traceability in the supply chain are essential to ensure the reliability of replenishment and to avoid stock shortages. Functionality depends on reliable suppliers, who should be available in sufficient numbers and in as many different regions as possible. The just-in-time model is suitable, for example, for quickly perishable products or those for which a complete sale cannot be guaranteed due to rapidly changing trends.<
What should supply chain and inventory managers look out for?
– The diversification of the supply chain reduces dependencies on geographical regions and suppliers.
– Supply chain transparency enables a fast response to changes.
– Optimized buffer capacities serve the most urgent needs.
– Digital tools increase supply chain visibility and enable forecasting.
– Local suppliers provide security: the longer the distances, the more likely disruptions are to occur.
Just-in-Case (JiC): Being able to act in the event of disruptions and crises
With the Just-in-Case model, on the other hand, goods are produced and stored in advance so that they are ready for delivery at any time. While this push method was the standard inventory management approach during the 1980s, it soon came to be seen as an obstacle to profit in an increasingly globalized economy. In the event of disruptions, crises and fluctuations in demand, however, companies have a competitive advantage: JiC-based inventory management cushions the volatility of the supply chain, can bridge interruptions with safety stocks and maintain delivery capability.
What are the advantages of the Just-in-Case model?
1. Disruption tolerance and crisis resilience: In the event of supply chain disruptions or production downtime, the ability to deliver is maintained.: In the event of supply chain disruptions or production downtime, the ability to deliver is maintained.
2. Delivery reliability and customer confidence: B2B customers and end consumers can continue to be served, which strengthens reputation and trust.
3. Better cost planning: by purchasing higher quantities in advance, production costs are usually scalable and cost planning is facilitated.
4. More efficient service of peak demand: Higher inventory levels ensure that unforeseen changes in demand can be responded to.
What are the disadvantages of the JiC model?
1. Increased storage requirements: Maintaining safety stock requires larger storage areas, ties up capital and increases operating costs.
2. Surplus production: If there is no sales guarantee for products, excess inventories lead to increased expenses for storage and redistribution.
3. Sustainability: Surpluses lead to a higher level of resource consumption and – in the case of destruction or disposal of the goods – they cause a high ecological impact.
When is the Just-in-Case method suitable?
The model is advantageous when unexpected peaks in demand occur with some frequency or the regional distribution of suppliers means that disruptions are expected to increase. The JiC model is also ideal for goods that must always be in stock and where a shortage would have serious consequences – these include pharmaceutical and medical products. Further, JiC is perfect for all goods for which acceptance is permanently assured.
What should supply chain and inventory managers pay attention to?
– Efficient intralogistics with a high degree of digitalization and automation reduces costs
– An orderly warehouse provides a better overview and facilitates inventory management
– Digital forecasts and precise demand analyses prevent surplus production
– Strategies for distributing surplus goods make overhangs economically usable and avoid ecological damage
Blended approach: How can the advantages be combined in the best way?
The design of production and storage systems is influenced by a large number of factors – thus, there cannot be one perfect standard solution. Rather, the benefits and risks must be weighed against each other and the individual requirements of the respective sector in terms of storage needs, procurement region and fluctuations in raw material availability must be taken into account. For this to succeed, the supply chain should be designed accordingly and readjusted continuously. A blended strategy combines the benefits of both methods – increasing inventory management efficiency while improving responsiveness. In both cases, finely tuned demand forecasting and analyses are needed to make the most of the advantages and balance out the cons.
Successful companies are already increasingly relying on digital coordination for forecasting, real-time monitoring and demand analysis. With the help of strategic supply chain management complemented by tools such as supply chain software, inventory managers can react promptly to changes in Just-in-Time market segments and achieve cost reductions in Just-in-Case segments.