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The business world is in the process of adopting a revolutionary new philosophy — or perhaps having a new philosophy thrust upon it: just-in-case management. In the great age of globalisation that started in the 1980s and entered its triumphant phase in the 1990s and 2000s, the twin watchwords of business were speed and efficiency. Today speed and efficiency must compete with security and resilience.
This new belt-and-braces world has been coming for some time. The climate crisis put a question mark next to efficiency. What is the point of creating the world’s most cost-effective machine if you torch the planet in the process? Donald Trump’s ill-tempered repudiation of the postwar consensus in favor of America First isolationism forced businesses to rethink their assumptions about tariffs, regulations and relations between the US and European Union. Then the global pandemic forced them to rethink even more basic assumptions about office life. Now Vladimir Putin’s invasion of Ukraine is completing the uncertainty revolution. Suddenly everything that business had taken for granted has been torn to shreds and replaced by a series of just-in-case questions.
The problems of war and pandemic reinforce each other. The war is sending markets gyrating while raising the long-term cost of inputs. It also raises the possibility of much worse to come if China sides with Russia and America imposes sanctions. Chinese authorities recently imposed a lockdown on Shenzhen, a port city of 17.5 million people and one of the hubs of the high-tech economy, to contain the spread of the highly infectious Omicron strain of Covid-19. Foxconn Technology Group, the Taiwanese electronics firm that is Apple Inc’s primary iPhone assembler, was among dozens of manufacturers forced to suspend operations for a while.
The most obvious change is from just-in-time to just-in-case manufacturing. JIT manufacturing was introduced in Japan after World War II, most notably by Toyota Motor Corp, to reduce the amount of capital tied up in idle capacity. The innovation replaced “push†manufacturing, whereby you had large stores of parts sitting next to the plant, with “pull†manufacturing, whereby you kept minimum inventories on hand and then replenished them with new deliveries from suppliers whenever you needed to.
—Bloomberg