"Just-in-Time" service has made the economy more volatile and less predictable, according to a report in The Wall Street Journal.
The JIT delivery approach has made many companies more efficient by keeping inventories low to avoid tying up cash where it isn't productive, the Journal said. But it currently is also slowing a general recovery by making the economy as a whole more volatile and less predictable.
The Journal reported "lingering economic anxiety is pushing just-in-time delivery to the brink. Companies are holding onto their cash as long as they can," waiting until the last possible moment to order. "By the time they finally pull the trigger, they need goods at once. This stop-and-start pattern is rattling the supply chain."
The phenomenon helps explain why economic indicators, such as capital-goods orders, have been swinging wildly this year, the newspaper reported. Excluding defense, orders rose 4.6 percent in February, fell 3.1 percent in March and rose 1.9 percent in April.
Meanwhile, the article said companies' projected sales and profits are increasingly foggy. The lack of clarity dampens investor enthusiasm, producing a compounding effect. Suppliers receiving unsteady, unpredictable orders have difficulty themselves justifying large equipment purchases.