The Baader-Meinhof phenomenon of Just-In-Case supply chains
It’s everywhere… Companies should shift from ‘just in time’ to ‘just in case’.. and here..Moving from Just in Time to Just in Case and here Suez blockage will accelerate global supply chain shift, says Maersk chief…
Why am I just hearing about this? 🤷🏽♂️. We have all heard about Just in Time (JIT) inventory management, but somehow I completely missed JIC.
Just in case (JIC) is an inventory strategy where companies keep extensive inventories on hand.
This strategy minimizes the probability that a product will sell out of stock.
A company that uses this strategy typically has difficulty predicting consumer demand or experiences large surges in demand at unpredictable times.
The main disadvantage of this strategy is higher storage costs and wasted inventory if all stock does not sell.
I think we hear more about this because JIC is the ideal strategy when there is a crisis or a natural disaster. Take the Suez Canal blockage disaster; it will have ripple effects for months to come.
The Suez Canal: Looking Beyond the Surface to Access the Full Economic Impact
According to industry data, it is estimated that 12 percent of the world’s seaborn trade and 30 percent of global container traffic passes through the Suez Canal annually, with approximately 50 container ships passing through every day, accounting for an estimated $400M in cargo flowing through each hour.
While companies can follow JIC to alleviate some of the supply constraints to meet customer demand, it has the side effect of inflationary prices, increased working capital needs to support higher inventory, and increased “slack” in the supply chain network. But with natural disasters on the rise, we will most likely be hearing about Just-In-Case a lot more.
