Shipping bottlenecks, price hikes and materials and labour shortages have caused widespread disruption in the wake of Brexit and the pandemic, prompting manufacturers to reconsider the integrity of traditional supply chain models.
The outbreak of COVID-19 revealed just how unprepared global supply networks were for a crisis, with devastating consequences for almost every industry. And unfortunately, even as coronavirus restrictions abate and organisations begin returning to business-as-usual, delays and shortages have rolled over into 2022.
For the engineering and manufacturing sectors, which have endured the brunt of unprecedented levels of disruption, this begs the question: should we abandon ‘just-in-time’ logistics and procurement to future-proof supply chains?
The problem with ‘just-in-time’ procurement
After World War Two, the ‘just-in-time’ model — also known as ‘lean manufacturing’ — was first developed in Japan to solve consequent shortages of cash, labour and natural resources.
Toyota, now one of the largest car companies in the world, was one of the first businesses to embrace this new concept, and the wider automotive industry has relied on lean manufacturing since the 1950s. By 1980, most developed countries had successfully implemented some version of the just-in-time model, and it has been a popular supply chain strategy ever since.
The purpose of the just-in-time model is to generate enough supply for demand, boost capital efficiency and minimise financial risk and overproduction. It reduces the amount of on-hand and in-transit inventory, relying on highly accurate demand forecasting, dependable suppliers and predictable sales cycles.
However, as manufacturers employing the just-in-time model will only keep smaller quantities of materials in their inventory, they are only equipped for short-term production. Limited stock means that any unexpected fluctuation in demand will cause disruption — something that became a painful reality during the pandemic and demonstrated how quickly backlogs could develop.
For example, the world continues to face a critical shortage of microchips, as semiconductor factories in China and Taiwan struggle to catch up with the growing demand for electronics amid lockdowns, labour and material shortages. The unavailability of semiconductors has caused serious issues for the automotive industry, which uses microchips for several critical functions and applications in modern cars — from parking assistance tools to digital speedometers.
As a result, recent events have forced manufacturers to reconsider their existing supply chain management strategy and make long-term changes to mitigate the future impact of another unforeseen disaster.
‘Just-in-time’ vs ‘just-in-case’ logistics
The need for resilient supply chains is driving the resurgence of the ‘just-in-case’ model: another procurement philosophy that involves suppliers keeping excess inventory to prevent stockouts and ride out periods of uncertainty.
There are some drawbacks to a just-in-case model, such as the cost of storing extra stock, maintaining unused inventory and potentially generating more waste. However, having a constant supply of available materials and products is one of the safest ways to secure supply chains in the event of a sudden change in demand.
Healthcare is an example of an industry that uses just-in-case supply management, stockpiling resources to ensure critical supplies are always available. In a crisis, waiting for suppliers to increase production would lead to service delays and appointment backlogs, making a just-in-time approach unsuitable for hospitals and medical settings.
As digital devices and electronics become increasingly integral to everyday life, electronics manufacturing services must urgently ensure supply reliability. Therefore, during the current supply chain turmoil facing businesses worldwide, implementing a just-in-case approach to inventory management will help electronics manufacturers and suppliers to maintain steady production and meet customer expectations for fast, affordable product delivery.
Future-proofing supply chains
Experts predict that the consequences of recent events will continue to impact global supply chains in 2022. As such, EC Electronics is dedicated to reinforcing robust, sustainable and flexible supply chains throughout our business operations across Europe.
We believe the key to future-proofing supply chains lies in a bespoke approach to stock management and ensuring we remain adaptable in the face of change. Our teams work with trusted global suppliers and partners to source materials as locally as possible and identify any factors that might impact the supply chain at any stage. By doing so, we can continue setting realistic expectations and reduce the impact of price hikes and delays on our customers.
EC Electronics is a contract manufacturer producing printed circuit board assemblies, cable assemblies and electronics box builds for multiple markets. To speak to our team about your next project, contact us at +44 (0)1256 461894 or email sales@ecelectronics.com.
