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Jennifer Blackhurst, Ph.D., is associate dean for graduate programs and the Leonard A. Hadley Professor of Business Analytics in the Tippie College of Business at the University of Iowa. Andrew Balthrop, Ph.D., is a research associate at the Supply Chain Management Research Center at the University of Arkansas. They can be reached at [email protected] and [email protected].
THE QUEST TO FIND THE HOLY GRAIL OF INVENTORY management has led many companies to settle on one of two approaches-just-in-time or just-in-case-or to bounce back and forth from one to the other.
Both strategies have served supply chain managers well through the years, but the decision typically is driven by a pre-pandemic model that's based on product types and the quest for supply chain efficiency. In today's ever-changing and unpredictable world, neither strategy is enough.
It's time for a new, more agile approach- one that begins with the assumption that everything involved in the supply chain is subject to change as quickly as the waters of a swift-flowing stream. Inventory management that doesn't monitor the currents and conditions and respond accordingly is dead in the water.
We aren't suggesting that just-in-time or just-in-case have become irrelevant, but that neither approach in extreme will produce the consistent results that managers want and customers demand from today's supply chain. What is needed is a strategy that anticipates change and pivots with the circumstances so that inventories are available when needed and never stockpiled when they are not-one that goes with the flow.
We call this strategy risk-adjusted, agile inventory management.
The just-in-time advantage
In the idyllic world of just-in-time inventory management, manufacturers receive materials and retailers get their products just when they are needed-no sooner and no later.
When it's time to make bars of soap, for instance, the raw ingredients arrive just in time to go into the production process. And when consumers are ready for more soap, it's readily available...