Understanding: Just In Time Inventory

In a recent post I made the following statement:

“Remember: If the farmer/rancher can’t trust the packing house checks to clear – they’ll be no food going to market. A disruption of only a week can send a rippling effect many have little understanding of.

If businesses suddenly infer that they can not get paid accordingly or properly – it grinds to an absolute halt, where disruptions of supplies and far more can cause not only panic, but also, a complete breakdown in society

Watch how fast any metropolis or big city morphs into Mad Max styled overtones if the food supply chain that supplies grocery stores breaks down or grinds to a halt. Having spent my early career in the food business I can state with confidence the much touted “3 days supply within any supermarket” is not only accurate, it’s a best case scenario when folded over any potential “normal” emergency many have experienced such as a blizzard or blackout. Then your lucky if essentials last 24hrs.”

This reference had quite a few people I talked with today a little perplexed. So much so, it wasn’t until I could show them a clear example of exactly why that “speed and efficiency” was precisely the reason disruption is far closer at hand today than at any time as opposed to the, “I can get it whenever I want it” far too many take for granted. Many thought I was being “a little hyperbolic” considering the way the supply chains work with such expediency with all the logistics here in the U.S.

When I showed a concrete example only then did they seem to relate. I could sense it truly was an eye-opening moment for a few where they fully comprehended why I was stating what I had. So with that insight I thought I would show that example here for those that may not fully grasp or comprehend all it involved. To wit:

Below is a picture I took of one of the most basic necessities we all take for granted that I purchased just a week ago Friday. Yes, it is a package of toilet paper.

What you need to pay attention to is the code that is stamped on it. The code represents the production date – not a sell or use by date. This date was made as it moved from the production line into the shipping and warehouse channel for distribution. The date? January 30, 2016.

IMG_0247

Why is this relevant? Easy…

As I iterated, I purchased these a week ago Friday. The exact date would be February 5, 2016.

Let’s understand the ramifications of this in its proper perspective. This innocuous package of toilet paper was manufactured and rolled off a production line (and there are no paper mills within radius of hundreds of miles from where I live) a mere 5 days prior. That means within 5 days that package was: warehoused, sorted, shipped to the supermarkets master hub, sorted again, shipped via their own distribution network directly to the store, received, sorted, then stocked onto the shelf where I purchased it for consumption. All within 5 days.

This can not, I repeat; can not happen unless there is nothing in the pipeline prior, as in, cases sitting in some warehouse waiting to be purchased and distributed. i.e., there’s no warehouse, as opposed to, some giant big building holding days worth of production. Let alone weeks.

This is both the beauty, as well as, the Achilles heel of “just in time” inventory systems. They are a thing of beauty to behold when everything is running properly. However, just one hiccup? And things go down hill very, very fast.

When it comes to perishable food (e.g., meat, poultry, fish, etc.) let alone something as durable as a paper product? The time from production to market can be even shorter. I know this because it was my business to know, and plan for, in my earlier career. This was why I made the argument to begin with. Far too many (especially Ivory Tower types) have little understanding on what it is, and what it takes, to get things to the consumer. Whether it be the big box type stores all the way down to the Mom and Pop type operation.

Any disruption in whether or not one business can rely on both collecting, as well as, having those collections clear and deposited into their accounts? It doesn’t take someone with a degree in rocket science to put 2 and 2 together and understand just how fast, as well as, how much chaos can be injected into a well running machine known as “just in time” logistics. And nothing will disrupt that chain quicker than the ability to be paid. Period.

Now maybe for whatever the reason you don’t believe that I bought this when I did and that I’m making the whole example up. It would be a fair point. However, even if you use the date of this post – it’s still only been 14 days and would still need to go through the same process. And even at that pace – it still wouldn’t invalidate my point or argument.

In some ways it’s hard to believe just a few short years ago 14 days was considered a colossal logistical feat worthy of praise. However, today?

It’s considered sloooooooowwwww.

Logistics today is truly a marvel only appreciated when seen up close. We take so much of it for granted. It truly is a stunning achievement.

© 2016 Mark St.Cyr