Firms to move away from just-in-time supply chains

Companies are making a long-term move away from just-in-time (JIT) supply chains as they look to combat the disruption experienced over the last couple of years.

Panellists at the Multimodal conference and exhibition in the UK said that the last few years had seen companies move away from transporting shipments to arrive just as they are needed in favour of holding buffer stock at local warehouses, known as just-in-case (JIC).

“If you look at warehouse occupancy rates, customers are holding a lot of product locally, and I don’t see that changing until there is more resilience,” said Nick Winder, group managing director for WIN Logistics Group.

HMM Europe managing director for Great Britain, Peter Livey, added that there have been so many ‘black swan’ events in the last few years that some previously dominant supply chain models such as ‘Lean JIT’ were no longer seen as reliable.

“I think people have been burnt in the last two years, by the disruptions to logistics supply chains,” said Samantha Brocklehurst, customer experience director for the UK & Ireland, Maersk.

“We have seen a swing from JIT to JIC,  and I don’t think we can go back to JIT, but I think there is a middle ground.”

Another trend that many have suggested could impact supply chains is re-shoring as companies move production closer to the final market to minimise the likelihood of disruption.

However, the panel said companies were more likely to implement multi-sourcing, where production is based in several countries, in particular in Asia, in case of disruption in one country.

This was also the view recently expressed by the heads of DHL Global Forwarding and Kuehne+Nagel.

DHL Global Forwarding, Freight chief executive Tim Scharwath said: “I do not see that global trade will go away and everything will be nearshored.

“I think there might be some movements [of production centres] outside of China, but staying in the Asian market.

“There might also be some movements closer to certain markets be it in North America or Europe, but for us in forwarding that means we will still need to move goods because we will still need to truck goods.

“So I do see there is some movement there, but it won’t be the end of global trade, that’s for sure.”

Speaking earlier this year, Kuehne+Nagel chief executive Detlef Trefzger also said it would be too difficult to turn the clock back on globalisation.

“We live in a globalised world and you can’t rewind that,” he said.

However, Trefzger said that he expected multi-sourcing to increase in some cases.

“We see that for certain industries and certain customers in these industries, not in general, but for specific companies, second-sourcing, so not one supplier for at least three suppliers [in different countries].”

Trefzger added that companies may also look to increase stock levels from two to five days’ worth in order to guard against disruption.