Toilet rolls, petrol, microchips ...
We've run out of all of them
in the last couple of years but it's not like products aren't being made
and it's not like there's nowhere to store them.
So, why do we seem to be running out of everything?
In the last 50 years, the way we make and store goods to meet demand
has turned on its head.
Largely thanks to this man, Toyota executive, Taiichi Ohno.
Traditionally, companies stored enough stock to meet current demand but also
kept an extra amount in case there was a problem or a sudden increase in demand for their product.
This was called 'Just in Case'.
But in the 1970s Ohno realised that storing excess parts and components
cost Toyota money.
So he devised a system where instead of storing parts, the company only ordered
what was needed, making sure that parts arrived 'Just in Time' the moment they were required.
And so 'Just in Time' was born.
The results were spectacular, Just in time increased
Toyota's profits and freed up enormous amounts of capital that had been tied up in expensive warehousing.
This enabled Toyota to reinvest, expand and stay ahead of the competition.
Today Just in Time systems are everywhere from supermarkets to our health services and from
airplanes to motor vehicles as almost every area of business have gone in search of the spectacular
efficiencies that Just in Time systems promise.
But there are limitations within the system that
make it really quite fragile.
There are two main ways that a Just in Time system can go wrong.
Firstly, if a problem occurs anywhere in the supply chain, such as materials not arriving when
they're needed, then because there's no excess reserve supplies the production simply stops.
And secondly if there is a spike in demand at any time because again, there's no stockpiled goods,
the business cannot respond to the surge.
The covid-19 global pandemic really laid bare the fragility
of the Just in Time system where businesses around the world saw anomalies in both supply and demand.
On a local level, the toilet paper shortage we saw at the start of the outbreak, was a spike in demand
caused simply because toilet paper is a bulky and low profit item that supermarkets don't want to
waste money storing.
So when some people bought just one more pack than usual, or in some cases
a lot more, shelves emptied quickly and they stayed empty until the next scheduled delivery.
On a global level, the online spending sprees that many of us went on during lockdown,
also created a spike in demand for goods and this is continuing to put additional pressure on an
already overstretched shipping industry.
The reason that something as basic as shopping sprees can
have an impact on a global transport network is because the shipping industry is a finely
balanced system that has come to be dominated by Just in Time.
For example, a Just in Time supply chain
might see raw materials leave Australia and get supplied to China for specialist refining
which are then supplied to Germany for manufacturing which are then supplied to
retailers all around the world including back to Australia.
So when a problem occurs anywhere in
that chain, such as multiple Chinese ports closing because of covid, then the entire system quickly backs up.
In nearby Shanghai are also seeing the worst congestion in at least three years.
Just in Time relies on smooth running throughout the supply chain.
So if companies are suddenly faced with changes, like spending time filling out more forms
as has happened with Brexit, then the result is unfulfilled orders and empty shelves.
The global supply chain is struggling.
Just in Time has spread to every aspect of our lives including areas where
it's not suited.
In the armed forces, it led to a lack of flak jackets and machine guns during the
Iraq war and in the NHS, Just in Time supply of PPE failed during the pandemic leaving thousands
of medical staff unprotected.
It's even infiltrated job recruitment which is eroding labour rights.
If Just in Time isn't working out, surely we can go back to the way things were, right?
Well, companies are starting to slightly increase their inventories, spreading risk by having backup suppliers and
using technology to manage bumps in the supply chain.
But it's not easy to make the switch.
Just in Time simply out competes other systems when it comes to efficiency, but there is one thing that
could force companies to return to Just in Case and that's the climate crisis where Just in Time
will likely find itself unable to keep up with the pace of change, making at least a partial return
to a Just in Case system almost unavoidable as companies face up to an uncertain future.