Like the years preceding it, 2022 was a year of immense disruption and change. The war in Ukraine, the energy crisis, a looming global recession, and a lingering pandemic in some parts of the world, create turbulence in logistics and supply chain management felt by many industries and most consumers.
Inflation and higher energy prices have squeezed consumers' wallets, leaving them with little appetite for luxury goods. The reduction in purchasing power (and receiving purchasing power) has had a serious impact on businesses—leaving them with greater inventory as consumers aren't buying as many goods or are delaying their purchasing. All of this compounded by the fact that this change came fast on the heels of several economically healthy years where consumers were buying freely and turning from travel and entertainment to consumer goods during covid years.
These challenges have led many businesses to rethink what resilience in their supply chain should look like to combat the dramatic disruptions and unpredictability.
From just-in-time logistics to just-in-case to something else
Building resilience into supply chains, however, has become more and more difficult. The traditional models used to predict consumer behavior aren't as reliable as they once were, due to unprecedented events like the pandemic. The cycle time from one disruption to the next has also become shorter, which has created consumer behavior that's directly and indirectly influenced by an ever-evolving web of global events.
Prior to the pandemic, supply chains were relatively stable due to steady global trade conditions. Delivering goods was largely predictable, which allowed for Just-In-Time (JIT) supply chain management. JIT reduces delays and waste through the goldilocks method: having just the right amount of goods on hand—no more and no less.
JIC systems build in buffers throughout the supply chain by maintaining extra inventory at specific stages. This ensures business continuity when peaks in demand are exacerbated by global conditions—as seen in recent years when consumer spending far exceeded expectations. While JIC is not ideal, it has recently been a viable model that allows businesses to meet end customer needs. However, the pandemic, worsening climate change and global conflicts have meant that JIT didn't fulfill consumer expectations for when they wanted to receive their goods, causing many businesses to revert to a just-in-case system (JIC). But now that rising interest rates and worsening economic conditions are stretching businesses, JIC models are becoming less attractive and even unrealistic, since adding extra inventory at every stage of the supply chain comes chain with additional costs—some of which will be passed on to consumers, further fueling inflation.
