The Wall Street Journal reports a notable shift among retailers back towards the Just-In-Time (JIT) inventory management model, signaling a return to strategies that prioritize efficiency in operations.1
The main idea of JIT is that you push the inventory replenishment as close to the demand window as possible. For those of us passionate about inventory management, the appeal of JIT is clear: it allows for maintaining minimum stock levels, thereby reducing the capital tied up in inventory and minimizing the risk of being left with obsolete stock should demand patterns shift unexpectedly.
Yet, the success of JIT hinges on the ability to forecast demand accurately, often months in advance. Without precise predictions, businesses face the challenge of not having sufficient lead time to meet customer needs.
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The pandemic tested the limits of the JIT model, as ecommerce demand soared and supply chains struggled to keep pace. Retailers were forced to abandon JIT in favor of stocking up on whatever was available, leading to a temporary shift away from lean inventories.
Now, as supply chains stabilize and retailers regain confidence in their demand forecasting capabilities, there’s a renewed movement towards adopting JIT strategies once again. This shift underscores a belief in the resilience and adaptability of supply chains and a commitment to efficiency and optimization in inventory management.
About the Author
Jagath Narayan is the CEO and co-founder of Ordoro, the #1 ecommerce platform for retailers growing from 10 to 10,000 orders/day. Follow him on LinkedIn to learn more about entrepreneurship and ecommerce.
