The Chartered Institute of Procurement & Supply’s (CIPS) Procurement Futures conference brought together the most influential procurement professionals to figure out how to make supply chains more resilient, as buyers consider returning to just-in-time strategies, as port congestion eases.
The disruption of the past two years shifted supply chain operations to’ just-in-case’ (JIC) procurement strategies, but this focus is changing as port congestion and supply chain disruption has cleared and buying teams now consider how to deal with inventory levels.
Speaking at the conference, the CIPS chief economist confirmed that supply chains are increasingly moving back to ‘just-in-time’ (JIT) from ‘just-in-case’, but with significant overstocking in the UK, Europe and North America, many distribution centre’s are full.
In the worst case, merchants still hold inventory across their supply chain, with stocks at ports, or 3rd party storage facilities, although CIPS expect those stocks will work through the system by quarter one, or quarter two, after which supply chains will be fluid again.
With China opening up, the manufacturing capability for ‘just in time’ is returning but, while COVID19 turbulence and uncertainty has diminished, climate-related disruptions, tensions between the United States and China, and the war between Russia and Ukraine raise another question mark over how buyers might manage risk.
These disruptions are tempting some to still maintain lots of inventory, to ensure business continuity, but that would be a mistake, as JIT remains the most efficient system. With interest rates rising, returning to JIC and adding inventory, harms performance and raises costs without necessarily improving resilience.
For businesses struggling with excess inventory and overstocked warehouses, the lean JIT operating model makes sense, and on many key routes and modes the concept of ordering inventory to arrive ‘just in time’ is viable again.
The supply chain is a system of deadlines, actions, processes and participants and no one can control the end-to-end supply chain, without visibility and the means to manage those four critical elements.
Instead of living on hope, traders can use our supply chain management platform, MVT, to remove supply chain risk, by evaluating their supply chain and determining where to locate and manage strategic capacity and inventory, to support changing demand patterns.
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To learn more or to arrange a demo EMAIL Elliot Carlile.