Just-in-Time vs Just-in-Case

Just-in-Case (JIC) is an inventory management philosophy that prioritizes risk management, often in the form of larger standing inventories. It is usually contrasted with Just-in-Time (JIT) manufacturing.

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The main difference between Just-in-Time and Just-in-Case is that JIT operations receive inventory only as it’s needed for production, whereas JIC stocks up inventories ahead of time.

JIT aims to optimize the lean method by reducing 7 wastes in manufacturing, while JIC prioritizes minimizing the chances of goods running low in stock or falling behind the production schedule required to fulfill orders on time.

Just-in-Time produces goods upon orders placed, and Just-in-Case literally produces "just in case".

Just-in-Time has become the standard for manufacturing in the past decades. Just googling Just-in-Time gives pages of results detailing why it is the superior manufacturing method over JIC. It is the method favored by big-name companies all across the world.

JIT’s dominance is due to the fact that companies have made cost reduction and the elimination of non-value-add steps the core of their supply chain strategy. It’s helped by the fact that organizations have gotten better at predicting consumer demand and optimizing their supply chain for minimizing holding costs.

Therefore, there is no need for overproduction or over-processing at the cost of their inventory space, labor, and time. The resources once lost to producing ahead of time can now be refinanced to support other initiatives such as quality control, product development, or R&D.

However, the Just-in-Time method has some crucial flaws when it comes to unforeseen challenges.

Just-in-Case is the traditional method of holding a reserve of both raw materials and finished products to be able to respond to a sudden increase in demand.

A company opting for this manufacturing method incurs higher inventory holding costs in exchange for a reduction in the number of sales lost due to sold-out inventory.

The Just-in-Case strategy works best for products that have readily available substitutes. Companies can remain competitive by being able to ship out their products immediately.

In this diagram, the ship represents the company. The water level represents the company’s resources such as buildings, equipment, inventory, managers, and workers. The iceberg represents the Company’s problems such as bottlenecks, low quality, long setups, and lack of training.

To keep the company afloat, there are two ways to approach the problems. One is to maintain a high water level that consistently floats above the problems. The other is to predict when and where the problems will occur and steer the ship away from the problems.

Although predicting where and when the icebergs will appear is a good basis for production planning, that is only when the water is calm. When those icebergs appear out of nowhere and are unavoidable, there is no way around it. In times of crisis, the Just-in-Time method leaves no option but for these companies to hit those icebergs head-on.

We saw this happen during the pandemic.

Due to breakages in the supply chain and increases in demand for certain types of goods, companies that have originally operated under Just-in-Time had problems more complex than manageable.

As reported by the Atlantic, “The Institute for Supply Management, which conducts monthly economic surveys, found that nearly 75 percent of the companies it contacted in late February and early March reported some kind of supply-chain disruption due to the coronavirus. And 44 percent of the companies didn’t have a plan to deal with this kind of disruption.”

The truth of the matter is that supply-chain disruptions happen, and they will continue to do so.

This isn’t the first time a crisis stalled production. “The same thing happened in the car business nine years ago, when the tsunami hit Japan. Now it’s electronics, and the virus from China.”, wrote Scott Tong from Marketplace.

Therefore, the focus should be on proactively outlining a plan to deal with those kinds of disruptions, rather than entirely avoiding them.

One of the potential solutions to preventing supply-chain disruption might be a hybrid model of JIT and JIC. JIC would provide sufficient response times for companies to reconfigure their production processes, while the JIC would allow companies to operate under lean manufacturing practices. However, this hybrid model would vary in its mix across industries, needs, existing production capabilities, and the supply chain.

The preferred solution now is to use digital technologies to build agility and resilience into operations. Tools like application platforms can help manufacturers pivot quickly when necessary. Technologies like additive manufacturing make it possible for teams to print or fabricate parts when supply is disrupted.

Another solution would be to simply diversify where the products are made, spreading out the risks of supply-chain disruption. This may be easier for some than others, depending on the availability of raw materials and the supply chain needed for producing goods in a certain country.

If anything, this pandemic has taught us to consider all options and find the happy middle ground that is between optimal and practical. This global crisis has given us the opportunity to re-learn and reconsider the traditional methods of manufacturing to say the very least.