The Case for Returning to ‘Just-in-Case’

On Jul 11, 2024

The past several years have wrought systemic changes to the way businesses operate, particularly with regard to their inventory acquisition strategies. We all remember the shipping crunch that plagued the supply chain after the initial stages of the pandemic. That shortage of shipping space – when combined with the consumer spending spree driven by stimulus on top of the Paycheck Protection Program – drove many businesses to double down on stocking up (the “just-in-case” approach). Unfortunately, that left a lot of businesses holding the bag when the economy cooled and spending dialed back.

With warehouses full of products that weren’t being sold rapidly enough, businesses began to pivot once again, rolling over to a different strategy: “just-in-time.” In other words, placing smaller orders for new products, and preferring they arrive and are sold very shortly thereafter. 

However, this type of strategy has a significant vulnerability: It increases the potential points of failure. Just-in-time strategies have a much narrower delivery window; new products must be replaced as they’re sold, at a closely matched pace. The intricacy of that kind of logistical planning shouldn’t be underestimated.

The past several months have highlighted weaknesses in the global supply chain as it is. Two tremendously important canals are essentially blocked for most commercial vessels. The Panama Canal Authority continues to impose surcharges and restrict the number of ships that can pass through, adding delays and cost increases. Meanwhile, the Houthi Rebels out of Yemen persist in their attacks on commercial vessels on the Red Sea, driving carriers to divert their cargo ships around Africa, adding 10 to 14 days to each voyage. The tragic accident in Baltimore has required ports in New Jersey and across the East Coast to handle the rerouted cargo until operations can be restored. Such supply chain disruptions are not expected to stop before businesses need to begin to plan for peak season. 

There’s a very strong case to be made in favor of returning to a “just-in-case” approach. Not only have businesses managed to successfully begin selling down their existing inventory over the past six months, but stocking up in advance will add some much-needed resilience to any business’s operations. 

Businesses – importers, exporters, anyone who does international trade in any capacity – will need to ensure they’re adequately protected from the adverse effects of these disruptions, and a switch to just-in-case might be exactly what’s needed.

By Michel Wouters, OL USA | [email protected]

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