Data points that indicate current customer demand trends, typically used to optimize inventory and production planning, or trigger automated delivery orders.
To further reduce risk, companies are increasingly sourcing their products and materials from Canada and Mexico. This gives them shorter, more reliable overland routes to avoid long overseas journeys, global instability and port bottlenecks.
A new set of best practices are emerging in logistics. They include smaller individual shipments, happening more frequently, over shorter distances, all powered by advances in digitization, automation, and analytics. We call it Just-In-Time 2.0, and the time to take advantage of it is now.
This shift didn’t happen out of the blue. The technologies that power it have all been available for several years. The impetus to put them all together was the rollercoaster of overstock and understock that followed the 2020 supply chain disruptions. In 2024, inventory levels finally returned to 2019 levels. But don’t mistake this for the industry “going back to normal.” It’s not. And that is a very good thing.
The breakdowns in the supply chain in the early 2020s made it abundantly clear to retailers and manufacturers that their shipping systems had become dangerously fragile. The past three years has seen the entire industry rethink everything from the ground up. Now, the Just-In-Time 2.0 paradigm is becoming clear, arriving just in time to foster better and more resilient supply lines to carry us into the future. Its hallmarks are:
● Increased use of technology for visibility and improved reaction times.
● Use of simulation and prediction algorithms for route and shipment optimization.
● Shipments over shorter routes, moving more often, with greater redundancy.
This shift did not surprise veterans of the industry. Continual evolution is woven into the fabric of shipping and logistics, and the last 80 years has seen a steady procession of innovations which remade the industry, but that we now take for granted—from the invention of cargo containers, to GPS, to automated warehouse management systems.
In the early 2000s, two of these innovations combined to create a time bomb. The trend toward offshoring combined with the rise of sophisticated shipping systems to allow companies to build far longer and more intricate supply chains. Unfortunately, these practices also reduced the overall fault tolerance of the system. The world remained blind to how brittle these systems had become until COVID hit in 2020, and the reality became all too clear.
Consumer demand shot up sharply as people stocked up and hunkered down, leading to shortages, and pushing the supply chain to the breaking point. As spooked retailers switched from Just-In-Time to Just-In-Case inventory strategies, inventory levels climbed and inventory management costs skyrocketed. As the world opened back up, retailers’ high inventory strategies backfired as they were left with large amounts of the wrong goods. Consumers were unhappy, businesses foundered, prices for materials, transportation, and storage were all over the map. In the end, it took almost three years for things to come back to what feels like “normal.” But in this industry, there is no such thing as normal.
What is emerging now is a new paradigm we call Just-In-Time 2.0. Its hallmarks include the return to lower inventory levels, but with an emphasis on cautionary sourcing. This caution is made possible by digital systems that closely tie inventories, shipments, sales, and manufacturing. To further reduce risk, companies are increasingly sourcing their products and materials from Canada and Mexico. This gives them shorter, more reliable overland routes to avoid long overseas journeys, global instability and port bottlenecks. At the extreme end of the spectrum, some companies are even experimenting with zero-inventory systems, where all stock is on store shelves.
At Old Dominion, we’ve seen our share of market shifts. We know that this is not an industry that reverts to the mean, it’s one that is constantly growing, changing and evolving in response to new needs, new expectations, new situations and new technology. The supply chain disruptions of 2020-2023 were tough for our industry, but they happened for a reason. And they were necessary to provide the will to forge a newer, stronger paradigm.
Overstretching supply chains without building in appropriate redundancy was a collective strategic error that can now be corrected. It is giving way to a new world of logistics where individual shipments are smaller, and happening more frequently, over shorter distances. While these changes can increase operational complexity, that rise is balanced by rapid advancements in automation, analytics, and AI, ultimately giving shippers far more control. So far, Just-In Time 2.0 appears to offer similar gains in productivity and efficiency, but with a far more stable and tenable paradigm that is far better able to withstand unexpected disruptions.
If you have questions about how to implement Just-In-Time 2.0 strategies in your business, our dedicated team members are here to help, backed by Old Dominion’s state-of-the-art technology and services. Call an OD Solution Specialist today at 800-235-5569 or email us at email us at [email protected] for a response within 24 hours.
Key Terms to Know
A logistics strategy that aligns order deliveries with production schedules and customer demand to minimize inventory levels.
A logistics methodology that corrects for the “drift” of the concept of Just-In-Time (JIT) shipping over the last several decades. Originally, JIT shipping was designed to reduce inventory carrying costs by delivering smaller shipments precisely when they were needed, based on demand signals, either from a retailer or a manufacturer. As supply chains lengthened and stretched across oceans, the definition of Just-In-Time became fuzzier. In many cases suppliers and receivers operated on the principle of Just-In-Time, but over distances that took weeks or months to travel. The system functioned adequately, until the COVID-19 pandemic revealed the fragility that had crept into the system over time. JIT2.0 allows retailers and manufacturers to return to the low inventory levels they prefer, but shortens supply chains, increasing flexibility and resilience.