Is Just-in-Time Inventory Still Working for Manufacturers?
Originally published on November 2, 2026
“If you got a lot of obsolete inventory or you’re constantly throwing things out, there’s something wrong with your inventory strategy.” Mike Sibley, James Moore
Is just-in-time inventory still the right approach for manufacturers? In this Moore on Manufacturing episode, host Faith sits down with Mike Sibley to talk through how manufacturers should think about inventory levels today. They cover safety stock, supplier relationships, carrying costs and the financial metrics that show whether an inventory strategy is working.
Mike’s starting point may surprise some readers. Plenty of smaller manufacturers never ran a true just-in-time system, and the more common problem he sees is too much inventory rather than too little. For companies that did go lean, tariffs, COVID fallout and conflicts overseas have pushed them to run risk analyses on their suppliers, lead times and quality.
From there, the conversation moves into practical territory: how to set safety stock based on supplier risk, why carrying costs can reach 20 to 30% of inventory value, when to split business between suppliers and how to start budgeting for 2027 now.
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Full Episode Transcript
[00:02] Faith: Hi everyone, and welcome to the James Moore channel. Today I am here with Mike Sibley. Hi Mike, how are you?
[00:02] Mike Sibley: Good. How are you?
[00:02] Faith: Good. I can’t believe it’s already Thursday. This week’s gone by pretty fast.
[00:02] Mike Sibley: I know. It’s almost the weekend. Time to play. Go get through a frustrating round of golf again this weekend.
[00:22] Faith: The sport that we love to hate.
[00:22] Mike Sibley: I know. I was actually thinking about the great debate my wife and I are having right now. We played out in Vegas a few months ago and it was 105 degrees, but it’s “dry heat.” Then you come here and it’s 90 degrees and it’s as thick as soup out there with humidity. Which one’s worse, and which one would you rather play in? Hot is hot, but at least when you’re in the dry heat, you’re not drenched in sweat. On the other hand, there’s something to be said for humidity. [laughter]
[00:46] Faith: I know. It’s so funny. We got paired with this guy and, God bless him, his shorts were so wet they were sticking to his body and he was wringing them out. And then another debate we could always have is when is the sweet spot to go during the summer? Is it the 6:20 tee times or is it twilight golf? Because it doesn’t get dark until 8 o’clock, 8:30.
[01:11] Mike Sibley: Right. We try to get out at 7:30 in the morning before the heat, but when the ground’s all wet and the sun comes out, that dew just turns it into a steam room. So I don’t know.
[01:35] Faith: Not a good time in the summer. [laughter]
[01:35] Mike Sibley: We keep doing it.
[01:35] Faith: Oh yeah, of course.
[01:35] Mike Sibley: For punishment.
[01:35] Faith: Exactly. So today we’re going to talk about “Is Just-in-Time Dead? Rethinking Manufacturing Inventory.” The first question: for years manufacturers embraced just in time. Are we now seeing a shift back toward carrying more inventory?
[01:35] Mike Sibley: I think with this idea of just in time, there are a lot of manufacturers, particularly when you think about the smaller ones, who never really had just in time. There are definitely manufacturers out there that are just in time. They really tried. They set up the system so their suppliers had insight into it and their forecasts, and they were able to keep those levels. But then you had a whole lot of manufacturers who don’t have that kind of sophisticated system. And a lot of times we’re coming in and you’ve got too much inventory. You’re just carrying too much. So to some degree, there are still always the companies out there that are trying to keep their inventories as lean as possible and keep that just in time as much as they can.
But I do think with the disruptions we’ve had over the last years (obviously coming out of COVID it was a different thing, and then you’ve got some of the geopolitical stuff going on these days and wars and everything else), companies that are just in time are doing their risk analysis. They’re saying, “Okay, what do we need to make sure we have so we don’t run out? What are our lead times? What’s our supplier quality? How many suppliers do we have?” And they’re looking at those kinds of things to make sure they’re not going to run out of inventory. Other companies have never really moved to just-in-time inventory, and we’re still trying to work with better systems to have the right amount of inventory but not have eight months’ worth of inventory when you don’t need that much. So there are a lot of different shifts going on here.
[03:34] Faith: Absolutely. How can manufacturers determine the right balance between reducing inventory costs and protecting themselves from future disruptions?
[03:34] Mike Sibley: Well, it’s kind of what I just alluded to with the risk analysis. We’ve talked about this in the past with supply chain. What’s the risk with the current supplier? Do you have multiple suppliers? Is there one supplier? What are the lead times on that? Are they domestic? Are they coming from international? So really evaluating all of those, and trying to get into a good forecasting mode and understand what your inventory needs are going to be. What are your highest risk inventories versus your easier-to-get inventories, and then balance those out. We’ve talked about data and we’ve talked about AI. Use this stuff to help predict a little bit better and help get your right balance there, so you’re not running the risk of running out of product and you can’t ship anything or you can’t produce anything.
[04:33] Faith: Absolutely. I was actually just talking to our CEO and saying how interesting it is that with our LinkedIn Lives together, I can have talked to you maybe two weeks ago and the stats you’re giving me are completely different. It’s ever changing and so fast.
[04:33] Mike Sibley: Well, think about this. Just look at what happened. We’re going to have 50% tariffs on goods coming out of Canada, and then okay, we reached a deal, no we’re not. So one week you’re thinking, “Okay, do I have to plan for this?” And then it gets here and, “Nope, we’re not going to do this.” So you’re just on a roller coaster on some of these things. And then you could have one of these straits over in the Middle East locked down one week and open the next week. So are you going to have issues getting resin? There are all sorts of complexities, and I feel like every day I open the paper it’s a different challenge or an undoing of a challenge, and so then your thought process has changed.
So then what do you do? Well, you go back and you say, “Okay, I’m going to straight-line this out a little bit. I’m going to take into consideration a baseline, and then here’s a risk level, and make sure that I’ve got risks with these kinds of suppliers for this kind of inventory covered, so that way I don’t have to be reactive to every single thing that happens out there.” And I think that’s the best way to plan this out. Which means then you’ve got to plan out: what does that mean for my working capital? What does that mean for the carrying cost of this inventory? All these different pieces that I now have to take into consideration so I can level this out a little bit.
[06:16] Faith: Absolutely. So many companies are rebuilding safety stock. Is that always the right move, or can it create new financial challenges?
[06:16] Mike Sibley: It could be both. As we’ve been talking about, having some safety stock is prudent. But I come back to the risk analysis. If I’ve got a key supplier who’s right down the street from me, I know how their supply chain works, because if they’re a key supplier, I’m working with them to understand what their risks are. Your risks translate to my risks. So if their lead time is a few days and I can get that really easily and their downstream supply chain works really well, I can take that into consideration in terms of what my safety stock needs to be.
On the other hand, if you’ve got something really risky (and I was actually just talking to a manufacturer yesterday about this), if you’re importing something, importing even with tariffs may be cheaper than going domestic, and a lot of manufacturers are still doing that. But you possibly have these additional risks you have to deal with: logistical risk, time risk and lead time risk versus domestic. Now, you may work with somebody domestically as a backup to that, as a just in case. So you’ve got to go through all these things to make sure you’ve got those covered and then have the safety stock.
On the other hand, we talked about this earlier, if you’ve got too much inventory, carrying costs on inventory can be 20 to 30% of the inventory. So if you’re a million dollars too much, now you got all these carrying costs. You got people moving this inventory around. You got extra warehouse space. There’s a lot that comes with it. So it can really create working capital challenges.
[08:13] Faith: Absolutely. So how should manufacturers evaluate supplier relationships today? Is supplier diversification becoming more important than cost alone?
[08:13] Mike Sibley: Yeah, I think a lot of companies are going through that and still trying to say, “Hey, I’ve got a good relationship with the supplier. They’ve got good quality. We want to stick with them.” But like I was talking about earlier, who are your key suppliers? Do you have a good relationship with them? And do you understand what their risks are so you can understand your risk? Then it may be necessary to have some alternate suppliers out there. Maybe there are a couple of equal ones, so you split the business 50/50 or 75/25 just to keep somebody else on in case you need that. So when you’re evaluating, you’re evaluating risk. You’re evaluating quality. Let’s not forget about quality, right? If every time they ship you something you’ve got to turn around and send 30% of it back, that’s problematic. So you’re looking at risk, you’re looking at quality, then what kind of terms they’re willing to work with you on, what their risks are, lead times, all those kinds of things. There are a lot of pieces to the evaluation that you go through.
[09:22] Faith: Absolutely. What financial metrics should business leaders be watching to know whether their inventory strategy is actually working?
[09:39] Mike Sibley: Well, I think there are a few things. First, you’re looking at it from a balance sheet standpoint. One of the things we talk about is cash conversion cycle. So you’re measuring your inventory days, your payable days and your AR days, and you come up with a number and you try to track that. That’s a great financial metric. Your working capital is another financial metric on the balance sheet. Now, if we’re talking about the P&L, obviously you’ve got gross margin and contribution margin that we’re looking at. And as it relates to inventory, material costs as a percentage of sales, and where is that going? I always like going down to the product level. I want to see those margins and I want to see all that data by the product level.
Dropping back into inventory, we’re looking at other financial metrics. What’s our old inventory? How much do we have? Do we have to reserve? Do we have costs because we’ve got too much inventory and now it’s going obsolete? If you got a lot of obsolete inventory or you’re constantly throwing things out, there’s something wrong with your inventory strategy. So there are a number of things we would look at in terms of those inventory strategies. Purchase price variance is another one. Here’s what we think our standard cost is, but it’s coming in higher, or maybe lower. That’s good, right? So there are a lot of metrics that could go around on inventory.
[10:54] Faith: Right. So our last question today is looking ahead to 2027, which is crazy to think about, that we’re closer to that than not. What do you believe will separate the manufacturers that thrive from those that continue reacting to disruption? That’s big.
[11:17] Mike Sibley: Yeah. Well, first things first, and we’re doing this now with clients: we’re working on budgets and looking at next year. Where do we think our forecast is bringing us? Let’s get customer data and information, even if the customers can’t tell us exactly. If we can break down how their industries are doing, is their industry growing or not growing? Then we can take that into consideration. One of the things I like doing is taking a baseline and saying, okay, this is our budget. What are our risks and opportunities? What’s our upside and our downside? How do we mitigate that downside risk? What do we need to do? And if there are opportunities, what do we do to go get those opportunities? That’s a starting point.
Then as you build out this budget, you’re looking at your supply chain strategy, since we’re talking about supply chain. All the things we just talked about: supplier terms and pricing. Can we negotiate better prices? Now’s the time to start thinking, can we negotiate anything? What are tariffs going to do, if anything, to our cost? Are we looking at more costs there? Really bringing this back to our pricing strategies. What’s going to happen with our inventory costs? Really looking at those, and then how do we mitigate the risks that are out there. So there are a lot of things that can be started right now toward planning for that. I’m a planning person. I’m a strategic planning person. I like looking at risks and coming up with, okay, how do we mitigate this? But more on the positive side, how do we go get what we need so we can make this happen for us?
[12:44] Faith: Absolutely. So when you golf, are you more of a “let’s just go through the trees” player rather than taking two extra shots around for the safe shot?
[13:02] Mike Sibley: Well, it’s funny you said that. If there’s an opening, yeah. But you’ve heard the thing: I can’t hit a 50-yard-wide fairway, but I think I’m going to get it between these two feet. I remember when my wife and I first started really playing a few years ago, she was in the trees and she said, “I’m going to try and go through.” I said, “Sometimes going backwards is going forwards.” She hits the ball, it hits the tree and comes right back at her, and she had to jump out of the way. And I told her, “Sometimes going backwards is going forward.” So I’m going to plan that one out and say, “Okay, what’s going to get me my lowest score? Is it trying to go through the trees?” Now, the good thing is, if I have enough room, I can go over the trees pretty easily.
[13:50] Faith: Yeah. And it’s always that one lucky shot that makes you believe you can do it again.
[13:50] Mike Sibley: Yeah. Absolutely.
[13:50] Faith: It was so great talking to you today, Mike, and we will chat again soon. Have a great week and a great weekend. On to next week. Who knows what next week will hold in the supply chain world. [laughter]
[14:07] Mike Sibley: Yeah. Who knows? It’s always exciting to keep an eye out, right?
[14:07] Faith: Exactly. All right. Talk to you again soon.
[14:07] Mike Sibley: All right. Thanks. Bye.
Watch the Full Episode
Hearing Mike explain how he weighs supplier risk against carrying costs is worth the 14 minutes. Watch the full episode on YouTube and subscribe to Moore on Manufacturing for new conversations on supply chain, inventory and planning.
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