How the pandemic has upset the ‘Just In Time’ supply chain
Notice anything missing on your store shelves? Maybe paper products or your favorite canned soup? Given that the pandemic has been raging for over nine months, why aren’t the shelves full again? Why isn’t the stuff we want “getting there?”
Well one of the reasons is because a Japanese engineer visited an American supermarket in the 1950s and noticed something he thought was wrong… and we’re still paying for his astute observations.
It was Taiichi Ohno, industrial engineer at Toyota, who noticed the American stores had weeks of inventory in a back room, waiting for customers purchases to allow quick restocking. That was great for supply as long as demand remained steady… but very costly to the store.
Unsold inventory is expensive, so Ohno suggested that needed parts (or in our case, store products) could better be delivered JIT, Just In Time. That way the production could flow smoothly with the added cost of inventory being carried by the manufacturer, not the store or, in Toyota’s case, production plant.
Sounds great as long as production, demand and the transportation network continue running smoothly. Change one of those and things go bad, quickly.
Of course, that’s what happened in March when there was a sudden run on stores as worried shoppers loaded up on canned foods and, yes, toilet paper. The producers of those goods couldn’t gear up production fast enough to fill the supply chain and many of the trucking companies that delivered them had their drivers go AWOL.
Pre-pandemic, Wal-Mart would tell suppliers they had a two-day window for their trucks to deliver to their distribution warehouses or they’d face financial penalties. But when the panic buying began, the trucks would off-load their goods and opt for return-jobs on the “spot market” instead of going back to the factories empty, on “dead heads,” to get the next load. That meant the supply chain was broken.
When the trucks did deliver, traffic could switch from a trickle to tsunami. At one typical Costco mega-warehouse in Utah where they’d usually handle 350 trucks, the volume doubled. They didn’t have enough loading docks or personnel to handle them all.
Now all the big-box stores and companies that supply them with goods are rethinking their lean-and-mean JIT philosophy. Warehouses may be expanded to accommodate more inventory as automated robots load and off-load trucks faster (and cheaper) than humans.
But even adding a 5% buffer of “safety stock” to warehouses will mean building 750 million square feet of industrial space. Guess who’ll be paying for that.
And that doesn’t even include Amazon which is so hungry to expand they’re buying up old shopping malls to turn them into warehouses… repurposing the old retail space they already killed off with their home-delivery model.
Manufacturing of essentials (think pharmaceutical base-chemicals, PPE, etc.) may be “re-shored” to U.S. soil if companies like China can’t be depended upon to deliver in time — or if the production plants just move to Vietnam where labor is 20 – 30% cheaper than in the People’s Republic.
So if you’re looking for a career with a future, consider logistics: the science of managing supply to demand and delivering on time at a profitable price. It’s estimated there will be 600,000 new jobs in logistics created by 2026.
According to Stamford-based job placement company Indeed.com, there are hundreds of logistics-related jobs available in Connecticut right now, some paying up to $80,000.
Posted with permission of Hearst CT Media. Jim Cameron is founder of The Commuter Action Group, and a member of the Darien Representative Town Meeting.
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