In season 1 of Cargo Shorts, a podcast brought to you by Old Dominion Freight Line, American Trucking Associations’ Chief Economist Bob Costello introduced a concept called “Just-In-Time Plus.” Manufacturers are adding some cushion to their inventory levels at all points in the supply chain to ensure safety stock, while maintaining the JIT model from which it has reaped benefits over the last two decades.
“Manufacturing across the board has been operating on some pretty lean inventories, and the pandemic exacerbated something that was percolating under the surface. Many companies realized that one little hiccup in the supply chain and the whole thing will get thrown off.” Costello said.
The current JIT model drove costs out of the supply chain for a very long time. Consumers realized the benefits, and much of today’s manufacturing supply chain is modeled around product arriving precisely at the time and in the needed amount. That’s not changing any time soon, Costello said. The process may have its vulnerabilities, highlighted during the depths of the pandemic, but it’s still the most cost-efficient process for manufacturers.
JIT is a hallmark of global manufacturing, starting in the auto industry in the 1970s and became widely adopted during the 1990s. Manufacturers, retailers, and businesses likely are looking at strengthening the process rather than departing from it.
“Now that we’re getting a little bit of a breather, we are reassessing. Companies are looking at their supply chains, some of which span the entire globe, and realizing we need to keep a little more in stock,” Costello said. For example, stocking key components of a higher value that wouldn’t require a factory shutdown if supply runs out.
Holding more inventory still remains unattractive as carrying costs continue to rise in North America. Striking a balance of just-in-time versus a just-in-case supply is where manufacturers will need to plan – what Costello coins as “just-in-time plus.”