Quick note: Despite some similarities inherent to the supply chain function across various industry verticals, each business is relatively unique (geographic presence, product mix, operational capabilities, strategic goals, industry partnerships, et al.) and as such their hybrid JIT/JIC inventory strategies, supply chain solutions & CX programs will be reflective of their individual goals & capabilities
Why develop hybrid JIT/JIC inventory strategy?
Generally speaking; the 3 key reasons why businesses or even entire industries may seek to develop a hybrid JIT/JIC inventory strategy would be to –
- Build a more resilient inventory management strategy for the future
- Develop the capability to fulfill unpredictable & asymmetric demand spikes across an omni-channel footprint
- Prevent customer churn & improve/maintain competitive positioning in market
For a JIT-aligned value chain players, even a single unforeseen yet high-impact adverse event may be enough to significantly cause disruption to their upstream (raw materials/parts) and downstream (finished goods) supply chain operations…
…which; in a low-loyalty, hyper-competitive &/or price-sensitive market could even lead to negative customer sentiment and potentially even loss of business to competitors (read: customer churn)
Add to that, occurrence of multiple adverse events (think: extreme weather conditions) – either in quick succession or concurrently – could have the potential to cause traditional JIT-aligned supply chains to buckle under pressure
For the most part; each business would seek to develop their own unique version of hybrid JIT/JIC inventory model that best suits their goals, needs & capabilities
For the purposes of this simplified example; let’s assume that a manufacturer –
- Runs an ideal 100% efficient manufacturing process i.e. zero wastage
- Diversifies their parts sourcing across local, regional & global suppliers
- Maintains a JIT contingency plan; albeit one that isn’t very tolerant of sudden &/or extended supply interruptions
- Doesn’t maintain large storage facilities
High level view of key JIT inventory model risks: Manufacturer scenario
Whilst JIT-aligned manufacturers enjoy a range of benefits from holding minimal-zero inventory on hand, they aren’t entirely immune to some of the (JIT) inventory model’s inherent risks [discussed in Part 2]
For one; a sudden &/or excessive interruption in regular supply of crucial raw materials / parts could pose a significant risk; particularly if the manufacturer’s existing JIT contingency plans aren’t flexible enough to sustain/offset their inventory supply gap for extended periods of time
The following example takes a simplified high level view of outlining some of the key inventory risks a JIT-aligned manufacturer (in this case vehicle manufacturer) may face; including any correlating impacts on production and fulfillment schedules
Actual inventory risks, mitigation strategies, modeling and management principles are typically far more complex in nature and would likely be unique to each business; based on a range of factors (industry type, geography, operational capabilities, product mix, risk appetite, supplier relationships/VMI, digital capabilities, consumer demand, et al.)
Highlighting key JIT inventory risks

Virtually zero inventory risk for parts A & B
This also translates to minimal risk (if any) of potential production slowdowns, shutdowns and/or order fulfillment disruptions (as long as the vehicle doesn’t require parts that are under supply constraint)
As part of their ongoing JIT operational excellence protocol, these relatively ‘safe’ suppliers & distributors too would be subjected to continuous assessment & improvement; particularly as it relates to proactively developing inventory risk control plans
Potential inventory risks for part C due to issues in upstream distribution network
This would likely translate to the manufacturer also facing risk of production shutdown &/or fulfillment disruption due to reduced inventory for part C
Though the manufacturer may have built some form of JIT contingency plans (think: diversified supplier base and distribution networks) to ensure un-interrupted supply for part C; it may not be tolerant enough to counter select unpredictable high-impact events such global shipping delays (e.g. key shipping lane backlog, adverse weather conditions, et al.)
Likely parts inventory risks for part D due to one or more supplier issues
The severe shortage of part D may also lead to production shutdowns & even fulfillment disruptions; particularly for vehicle models that absolutely rely on part D
In this case too, the manufacturer’s existing JIT contingency plans may not even be relevant as the issue is prevalent across their entire supplier network; who in turn maybe facing supply chain disruptions &/or demand/supply issues of their own
Fulfillment inventory risk caused by sudden demand spike for vehicles relying on part D
Put another way; the manufacturer already facing supply shortages for key vehicle component (say part D)…
…may concurrently see a sudden demand spike for the very vehicle model that that absolutely rely on Part D (e.g. smart vehicle model requiring latest semiconductor chips or 5G connectivity module)…
…leading to a very high likelihood of fulfillment disruptions (prematurely closing new order books & delaying existing orders); which could in turn have various adverse impacts on their brand, competitive positioning, customer churn, et al.
To mitigate some/all of these inventory risks; the traditionally JIT-aligned manufacturer may seek to integrate aspects of JIC (Just-In-Case) inventory principles – notably stockpiling / cushion inventory – as part of developing a more resilient hybrid JIT/JIC inventory strategy
Addressing risks with hybrid JIT/JIC inventory strategy: Manufacturer scenario
The manufacturer may consider developing a hybrid JIT/JIC inventory model when the sum of all risks (think: brand name, competitive positioning, customer satisfaction / retention, et al.) associated with not meeting market demand (current, pent-up, forecasted)… significantly outweighs the costs associated with holding the cushion inventory for raw materials / parts
This hybrid JIT/JIC inventory model could then be continually improved to aptly mitigate any unforeseen inventory risks arising due to instability within their supplier and/or distribution networks as well as to optimally fulfill any sudden demand spikes across their product portfolio
What a hybrid JIT/JIC inventory strategy scenario could look like

Continue solely applying JIT modeling for parts A, B & partially part C
As with any other operational excellence protocol; this process too would be continuously monitored & improved to prepare for any potential eventualities
Apply mix of JIT & JIC modeling partially for part C & all of part D
In this scenario the manufacturer is essentially stockpiling part C (cushion inventory) to mitigate potential risks arising from the distributor of supplier #C2 in the future
Similarly; to counter any potential supply constrains of part D; the manufacturer may apply the same JIC principle in the form of bulk ordering to create a cushion inventory for the entire category
Put another way; when the manufacturer faces (or predicts with high probability) a shortage of crucial parts across their supplier &/or distribution networks (due to internal production, financial issues, et al.); they may actually see a value in creating a cushion inventory that could help offset any risks associated with production & demand fulfillment
Draw on cushion inventory (parts C & D) as needed
Additionally; maintaining this cushion inventory – either on-premise or through a 3rd party managed storage provider – could also enable the manufacturer to effectively address any sudden spike in demand across their entire portfolio
Thus in this case; the manufacturer may actually see a net benefit in developing a hybrid JIT/JIC inventory strategy that features a hallmark of JIC practice (stockpiling) – even at the expense of holding the cushion inventory either in-house &/or at a 3rd party storage facility
In the above scenario, although parts C & D were identified as ‘ideal candidates’ where hybrid JIT/JIC inventory strategy could be implemented, the manufacturer may also apply the strategy to other parts categories; in line with their demand/forecast risk modeling
So…
The aforementioned scenario is a simplified representation of some of the key JIT inventory risks as well as a corresponding hybrid JIT/JIC inventory strategy that the manufacturer could develop in addressing those risks
For JIT-aligned manufacturers; who have been perfecting their minimal-zero inventory; any disruption (beyond forecast levels) in securing key parts could mean a host of potentially risks (existing order cancellations, revenue loss, weakened competitive position, et al.)
Thus JIT-aligned manufactures may benefit from integrating a hallmark feature of JIC practice – stockpiling of critical parts & components; even at the cost holding inventory to help offset these risks
For some manufacturers; integrating JIC inventory practices may just be a short term strategy until the ongoing adverse conditions (pandemic, et al.) subsides…
…whilst for some others building a robust hybrid JIT/JIC inventory model may actually be a part of their long term strategy to be adequately prepared for any potential high-impact unpredictable scenarios in the future
A myriad of digital, cloud & IoT technologies are supporting businesses build more intelligent & resilient inventory management strategy
Forthcoming topics will aim to explore these key supporting tech enablers in further detail; including various opportunities & challenges presented within
Stay tuned!