It’s without a doubt that every single UK business has been touched by the events of the last year in one way or another. Whether it has been major supermarkets experiencing product demand like never before throughout lockdowns or manufacturers hastily reviewing and implementing new import and export procedures, the COVID-19 pandemic and ongoing Brexit uncertainty has undeniably presented many obstacles.
However, both events have been poignant in the reconsideration of inventory management. Where many industries have been successfully operating a just-in-time supply chain model for many years, given the new way of trading following Britain’s exit from the European Union, will we now see the emergence of the precautionary just-in-case approach? If so, what do businesses need to consider as part of this shift? Let’s take a look.
What is a Just-in-Time Business Model?
The just-in-time (JIT) production model sees businesses operate through smaller yet more frequent supply of raw materials, where little to no stock is held in an inventory. Used successfully within automotive assembly and the hospitality industry, this approach is designed to improve efficiency in production, maintain cash flow and reduce waste, as raw materials aren’t at risk of becoming damaged or obsolete in storage.
The major determining factor with the JIT system is that to remain efficient, it requires strong and transparent relationships within the supply chain from start to finish. The slightest delay in delivery or unprecedented circumstances affecting supply of materials causes friction within this process, thus impacting production capacity.
What is a Just-in-Case Business Model?
A just-in-case (JIC) method sees raw materials brought in and stocked up in an inventory ahead of time. This means that there is no risk of running out of stock, allowing businesses to have enough product to absorb maximum market demand, particularly in industries where consumer demand can’t be easily predicted.
However, being able to allocate or acquire additional storage capacity to house surplus stock is key to successfully accommodating this strategy, which, of course, has its own cost implications. This model also raises limitations regarding flexibility in adapting to changing consumer preferences and requirements.
Through two landmark events over the last year, we’ve seen businesses begin to reassess their current procedures in order to better serve customers amidst the uncertainties that they have brought with them.
The Brexit Effect
Prior to Britain’s exit from the European Customs Union, the country’s participation in the single market allowed for a seamless import and export supply chain system with the rest of the continent and beyond. As we’ve entered 2021 with a new trade deal, that, while limiting taxes on goods, sees new procedures implemented at ports, requires additional checks and lengthy paperwork requirements that can cause delays and disruption if incorrect.
This is where we can see JIT production approaches break down, as any delay within the supply chain has a knock-on effect later down the line, resulting in increased manufacturing costs and the inability to meet consumer demand.
This, paired with initial uncertainty as the country gets to grips with this new trading procedure, has left businesses contemplating whether their existing inventory model is appropriate within a changing Britain.
The COVID Effect
With lockdowns and ‘stay at home’ rules in place over the last year, the pandemic has been a major cause of supply chain breakage thanks to tightened border restrictions, but also a surge in demand for food products. As many consumers completed their own ‘just in case’ stockpiling system (see the infamous toilet roll shortage of Spring 2020), the supermarket and retail sector, conventionally adopters of a JIT distribution model, faced increased pressure and considerable disruptions in making household food items available on the shelves.
The same could be seen as part of the drive for the supply of essential PPE, namely for hospitals, healthcare and retail, where existing manufacturing and distribution models in place just could not cope with such exceptional demand. This further begs the question, would having reserve stock levels of such items eased initial pressures?
Whilst we’ll all be crossing our fingers and toes that we will not see anything similar to the COVID-19 pandemic in our lifetimes, this period has certainly highlighted the need of both readily available medical supplies and food products in times of sudden demand.
Where Are We Heading?
If businesses begin to shift from their favoured JIT models and prioritise risk management, particular attention needs to be paid to how this should be done, with cost efficiency and commercial awareness in mind. A JIC approach does seem a sensible strategy to help prepare for inevitable future shocks, but the allocation and/or manipulation of space to create a reliable storage solution must be considered.
Whether this applies to a new lease warehouse or in optimising redundant areas of an existing facility, a design to divide up the space to suit different types of stock and quantities should be developed to make the very best of what’s available. An efficient way to achieve this with minimal disruption is through modular panel construction, as this leaves plenty of opportunity for future modifications.
Such compartmentalisations may need to be fire-rated, to ensure safety of staff in line with Building Control and fire strategy regulations, where contractors undertaking this work must obtain third-party certifications in order to demonstrate compliance.
Maintaining an inventory of materials or products that have a limited shelf-life, such as food & perishables or certain medicinal supplies, means that additional factors of control must be put in place. This is commonly required through temperature or humidity control, where bespoke cold stores, blast chillers and freezer rooms can be easily constructed using reliable insulated panel systems to meet the requirements of the application.
Stancold’s multi-disciplinary background in the construction of temperature-controlled, hygienic and fire-rated environments for over 75 years puts us in a prime position to understand the requirements of works in order to manage risks associated with the topics discussed. From fire-rated partitioning through to pharmaceutical chilled storage, our specialist teams can provide valuable assistance in the specification, design and build of internal facilities to suit your strategy.
To discuss your upcoming project with our expert team, give us a call on 0117 316 7000 or send an enquiry to us here.
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