Recent PMI reports and other data releases from various countries suggest that supply chain issues have been reduced and there are now fewer delays in the system. This provides much-needed relief to the supply chain manager that has faced the highest pressure on the job in the last two years.
Before this period, the supply chain though complex in nature allowed some level of innovation and cost-cutting measures that were led by the managers. But the level and frequency of disruptions in the past two years led to major stress situations that leads to the reversal of many changes.
This is the most important innovation that was developed in Japan and used in manufacturing units across the world. This innovative technique is called Just In Time. In this, the part arrived on the factory floor only when it was going to be used immediately. It resulted in the highest efficiency in operations and improved the financial position of the company as it led to a lower inventory burden.
But since lockdowns have been introduced in the global economy this has reversed to the Just In Case technique. In this various external and behaviour factors are considered to anticipate the requirement of a part. This results in exposing operations and financial positions to volatility at many levels.
The last 18 months have been smooth as the demand still exceeds the supply. But as inflation remains highest and the cost of borrowing increase, demand in the medium term might witness a fall soon. Some of this is already started impacting new orders, container prices and new inventory purchases globally.
It might result in cooling off some level of inflation in goods but this impact the financials of the companies as well. This would lead to the next phase of nightmares for the supply chain and financial world as the Just In Case technique shows its negative side.
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