Just-in-time (JIT) supply chains have made the world economy fragile by eliminating redundancies and creating a system where any minor disruption can have a cascading, global impact.

This model, celebrated for its efficiency and cost-cutting, has prioritized minimizing inventory and maximizing speed, but has done so at the expense of resilience and security.

As a result, the global economy now operates on a razor's edge, vulnerable to everything from natural disasters to geopolitical conflicts.

The Allure and Flaw of "Just-in-Time" 

The concept of JIT originated in the Toyota Production System in post-war Japan. Its core principle is to receive goods and materials only as they are needed in the production process, thereby reducing the need for large, costly inventories. For decades, this model was seen as a triumph of modern business logic, offering immense benefits:

• Cost Reduction: By eliminating the need for warehouses and the capital tied up in inventory, companies could drastically reduce overhead.

• Efficiency: It streamlined production, making it faster and more responsive to market demands.

• Waste Minimization: It reduced waste from overproduction and obsolescence, as products were made only when an order was placed.

What they didn't teach you is that these very benefits are the source of the system's greatest vulnerability. By removing all "fat" from the system, it also removed all the buffers that had previously protected it from shocks. The motto became "lean is efficient," but the hidden truth was that "lean is also fragile."

The Domino Effect of Disruption 

The lack of redundancy in JIT supply chains means that a small problem in one part of the world can shut down a multi-billion dollar industry on the other side of the globe.

• Single-Point Failures: The system is often reliant on a few, highly specialized suppliers. If a single factory that makes a critical component—like a specific semiconductor chip—shuts down due to a fire, a natural disaster, or a pandemic lockdown, the entire production chain can grind to a halt. This was a major factor in the semiconductor shortage, which stalled global car manufacturing and electronic production for months.

• Chokepoints and Bottlenecks: The global JIT system is heavily reliant on a few key shipping lanes and chokepoints like the Suez Canal and the Strait of Malacca. When the container ship Ever Given got stuck in the Suez Canal in 2021, it held up over $9 billion in daily trade and revealed how a single, isolated incident could trigger a global economic crisis. The system had no alternative routes or backup capacity to handle the disruption.

• Geopolitical Vulnerability: The heavy reliance on global production and a few specialized suppliers in specific regions, such as China, leaves the world economy exposed to geopolitical risks. Any trade dispute, sanctions, or military conflict could sever a vital link in the supply chain, as seen with recent tensions and their impact on everything from rare-earth metals to consumer goods.

A Race to the Bottom with No Safety Net 

The drive for efficiency under the JIT model has also created a global "race to the bottom" for labor and environmental standards. Companies have been incentivized to move production to countries with the lowest wages and the weakest regulations.

• Erosion of Local Production: Decades of offshoring production to cut costs have led to the loss of manufacturing expertise and infrastructure in many developed nations. This has left them without the ability to produce essential goods locally, making them entirely dependent on the fragile global supply chain for everything from medicines to basic consumer products.

• The "Bullwhip Effect": When a minor fluctuation in demand occurs at the retail level, it can be amplified as it travels up the supply chain. A small increase in consumer demand for a product can trigger a panic-buying spree for parts and materials at the manufacturing level, leading to wild swings in production and inventory. The COVID-19 pandemic provided a perfect example, as an initial surge in demand for goods led to massive overstocking and subsequent price drops.

In conclusion, the just-in-time supply chain model, while a marvel of efficiency, is a fundamentally flawed system. By prioritizing cost savings and speed over resilience and redundancy, it has made the global economy more susceptible to shocks and created a dangerous new kind of fragility. The pandemic, and a series of subsequent disruptions, exposed the hidden truth: a supply chain with no fat is one with no safety net.

By Jo Ikeji-Uju

https://ubuntusafa.com

https://ubuntusafa.com/Ikeji