"Just In Time" And Today's Global Uncertainty

"Just In Time" And Today's Global Uncertainty

It was only a decade ago when a firm protected itself against uncertainty by maintaining a reserve inventory both with their production and stocking points (warehouse) for "just in case". This philosophy of inventory management led to unnecessarily high levels of inventory, and was only possible if you had adequate space and the capital to support it.

In contrast, many Canadian organizations use the "just in time" concept. This is an inventory supply system that operates with very low inventories requiring less resources, but requires fast, on time delivery. When supplies are needed, they arrive from suppliers just in time, which means less product on a more frequent basis.

As an example, Toyota, like many automobile companies, engages in a just in time inventory system that keeps inventories of automobile components to a minimum because the company only orders them from suppliers to arrive just in time to be used. But even the best just in time systems can face unforeseen situations.

Toyota experienced a just in time inventory system challenge when, early one morning, a factory that supplied brake fluid proportioning valves to Toyota's 20 automobile plants in Japan, became engulfed in flames. Scheduled to produce 14,000 cars per day with a just in time inventory system (a window of about four hours), Toyota faced a crippling dilemma that could have potentially shut production down for weeks.

Unpredictable global tragic events increase the fragility of global supply chains. Supply chains will likely need to be made more resilient, which could occur in one of two ways:

  • Identify more than one source of supply for key inventory that may come from locations that are geographically separated; or
  • Re-think the use of "just in case"

There will always be periods when the supply chain is disrupted, but do those periods justify keeping extra inventory? Although you may lose when the disaster occurs, organizations are in business for the long term and "just in case" is something of the past. We should learn from the waste setbacks and continue to find ways to improve our supply chain systems.

Unforeseen events, such as the disaster in Japan, are bound to put pressure on our business processes. However, "just in time" helps reduce waste and it would be taking backward steps if we reverted back to the "just in case" concept.

How To Kick Trade Anxiety Out Of Your Business In 4 Steps
speak to trade advisor
Disclaimer: While reading, kindly note the date of this blog. At PCB we do our due diligence to write on the most relevant topic every week and naturally content may become dated as developments in a certain program/topic occur. For this reason, we greatly appreciate your readership and hope you continue reading with the posting date in mind. For the latest information on this topic please use our website's search function, or better yet, subscribe to our "Trading Post" newsletter to receive these updates directly to your inbox.
Share this post
About the Author
Taryn Hannah

Taryn Hannah is General Manager for PCB Canadian Operations, directly overseeing the Release, Trade Compliance, and Office Administration teams. Taryn has been a trade professional since 2005, specializing in strategic and operational process building and management. She began her career with PCB in release operations, which built a strong foundation in many entry modes. In 2010 Taryn became the Supervisor of our Trade Compliance Group, working with staff and clients to understand regulatory documentation, labeling, data, and timing requirements for all imports into Canada. Over the years, she has become an expert in Participating in Government Agency dealings and has been called upon to speak at events such as Vancouver Fashion Week and various customized courses for industry and associations. Taryn has been recognized for her expert knowledge by receiving the designations of Customs Compliance Specialist (CCS) and Certified Trade Compliance Specialist (CTCS) from the Canadian Society of Customs Brokers.

While we strive for accuracy in all our communications, as the Importer of Record it is incumbent upon your company to ensure that you are aware of the requirements under the new regulations so that you maintain compliance as always.