Just-in-time inventory is the idea that the materials you need arrive just as you need them. This approach cuts down on the cost of storage space and reduces the amount of inventory sitting around doing nothing. A just-in-time approach is very efficient but very fragile.
If the supply chain hiccups and inventory gets delayed, the knock-on effects shudder through the whole supply chain.
Just in time inventory works, until it doesn’t
Toyota discovered this in 1997 when a supplier’s factory burned down. Aisin Seiki was the sole-supplier of a critical part Toyota used in the majority of their vehicles, and the fire left them with just two-three days of inventory because of their just-in-time inventory system. Toyota’s recovery, which amounted to an almost national-mobilization of Japan’s industrial base, was incredible and taught manufactures the world over many valuable lessons.
However, this event also highlighted some potential dangers of just in time inventory, lessons we seem to have forgotten as we watch the supply of pharmaceuticals and PPE from China dry up. But we sometimes apply a just-in-time mentality to more than our supply chains, and the one that concerns me most is when we do just-in-time contingency planning.
Planning is hard, but necessary
I’ve written dozens of contingency plans covering hundreds of different situations. After all, the evaluation plan you have for Libya isn’t going to work in Niger or Nicaragua. Even though the core elements are the same, each one has to be situation-specific, which takes time and effort.
So I understand that contingency planning is time-consuming, particularly in larger, more complex organizations. And worst of all (although maybe best of all too) these plans usually sit unused and are never opened.
Therefore, it’s easy to say ‘let’s not waste time on this now, we can develop a plan when the time comes.’
Essentially, you want to utilize just-in-time planning.
However, the same challenge exists with just-in-time planning as with just-in-time inventory: you aren’t prepared when something goes wrong and you’re left without the resources you need. Planners don’t need raw materials or pre-built components, but they do need information, expertise, and, most importantly, time.
But now that the event has hit, your planning time has gone.
There’s nothing you can do to prepare and all you can do is react. I would go as far as to say that just-in-time planning is a fallacy: you can’t realistically expect to have sufficient time to spot an emerging threat and build a plan ‘just-in-time.’
This would be like an athlete thinking they could practice just-in-time training when there was no set schedule for competition. They’d almost certainly be caught out each time an event was announced and be underprepared when they hit the start line.
Start with a playbook
So it’s best to prepare basic plans for all the critical risks you’ve identified and some effects-based plans to account for any unexpected situations or Black Swans.
However, these don’t need to cover every eventuality in the most minute detail. There is a time and expense associated with trying to dot every ‘i’ and cross every ‘t’ and you will always be balancing your resources.
Instead, you can take a playbook approach and map out the critical actions, owners, and timelines for each scenario and identify decision-points and triggers for the likely course of action. This gives you the bare-bones of each plan, which you can then build on as an event emerges.
Importantly, you’ve already spent some time thinking about the most significant challenges that each course of action might present and how to overcome these. You’ve also had the chance to identify the critical resources and staff you need to line up. Neither of these can be done last-minute.
Going back to the athlete analogy, this is like the athlete maintaining a baseline level of fitness year-round. Then, when the event is announced, they train for that specific event and hone their skills to hit the start line at their peak.
I appreciate that I’m asking a lot when I say you need to add another project to your stack.
But the other harsh truth is that the crisis doesn’t care whether you have a plan or not.
That’s why contingency planning is essential: we only get one chance to be proactive and to get ahead of things.
Just in time is just too late
Taking a just-in-time approach simply doesn’t work. By that stage, you’ve run out of time to put an effective plan together and you’ll be short on critical resources.
Instead, try to put aside a little time to map out the kinds of events that could occur and, more importantly, the effects you might experience for those Black Swan moments. Then, put together some high-level playbooks that outline the critical elements of your plan for each scenario. That’s going to give you a head start when the time comes and, crucially, have those hard to find items already in place, and key staff members prepared.
Overall, it’s actually less work than panic planning at the last minute and remember, if you wait until the time comes, your time’s already run out.