With all the disruptions in the supply chain, have they destroyed the efficiencies that JIT and VMI processes provided to manage inventory levels?

The concept of Just In Time (JIT) was aimed to improve manufacturing efficiency by producing only what was needed, when it was needed, and in the quantities required. It sought to reduce waste, optimize resources, and align production closely with customer demand.

Vendor-Managed Inventory (VMI) was first introduced and implemented in the 1980s, with its roots tied to major advancements in supply chain management and collaboration between suppliers and retailers. This collaboration aimed to streamline inventory management, reduce stockouts, and optimize replenishment processes.

Challenges of JIT and VMI
The disruptions in the supply chain over the past few years have tested both processes. JIT and VMI are not dead, they are evolving. However, both inventory processes have challenges.

• Data Integration Issues – Data sharing must be seamless between the supplier and the customer.
• Demand Volatility – Rapid and unexpected changes in consumers’ demands.
• Supply Chain Disruptions –Unpredictable disruptions due to the pandemic, weather, geopolitical tensions, and others.

Addressing the Challenges
To overcome the challenges, rather than abandoning JIT or VMI, companies are adapting to new business models.

• Localization – Moving suppliers closer to the production facilities (reshoring or nearshoring) to reduce lead times and risks.
• Diversified Supply Chain – Expanding supplier networks to avoid reliance on a single source or region.
• Focus on Resilience –Building buffers and incorporating safety stock or dual-sourcing strategies to mitigate risks.
• Collaboration and Communication –Working more closely to align goals between the supplier and customer, ensuring efficient replenishment by providing timely and accurate information while replacing manual processes with automation.
• Trust –VMI and JIT requires a high level of trust, as suppliers are given control over inventory levels. Accurate and timely information is critical to ensure trust between the customer and supplier.

The common denominator with VMI and JIT is collaboration and timely accurate information. The customer and the supplier must work together to provide the information needed to support these inventory management processes.

Data is often shared through automated systems like Electronic Data Interchange (EDI). EDI provides a method of sharing information electronically, avoiding delays in sending and receiving the necessary data needed to manage the inventory for the customer and the supplier.

Summary

There will always be disruptions in the supply chain and unexpected changes in consumer demands. To continue to gain the efficiencies and cost savings of JIT and VMI, companies are adapting their approach. They are combining safety stock strategies to provide a buffer against disruptions, expanding supplier networks to avoid reliance on a single source or region, moving suppliers closer (reshoring or nearshoring) to production facilities and store locations and leveraging automation to provide timely and accurate information.

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