Day in and day out, the global flow of goods routinely adapts to all kinds of glitches and setbacks. A supply breakdown in one factory in one country, for example, is quickly replaced by added shipments from suppliers elsewhere in the network. Sometimes, the problems span whole regions and require emergency action for days or weeks. When a volcano erupted in Iceland last spring, spewing ash across northern Europe and grounding air travel, supply-chain wizards were put to a test, juggling production and shipments worldwide to keep supplies flowing.
But the disaster in Japan, experts say, presents a first-of-its-kind challenge, even if much remains uncertain.
Japan is the world’s third-largest economy, and a vital supplier of parts and equipment for major industries like computers, electronics and automobiles. The worst of the damage was northeast of Tokyo, near the quake’s epicenter, though Japan’s manufacturing heartland is farther south. But greater problems will emerge if rolling electrical blackouts and transportation disruptions across the country continue for long.
Now we see the glaring flaw in the “just in time” supply concept. It isn’t really “just in time”. Any significant disruption of the supply chain can become critical very quickly because the margin of safety that used to be provided by having spares in inventory is no longer there. It is typical of the short sighted “profit taking” in industry now. CEOs now take charge and maximize short term profits (reducing inventories and staffing levels to a bare bones minimum and even dismantling profitable ventures because they aren’t “profitable enough”) at the expense of any strategic or long term planning. Then the CEO moves on, taking his personal golden handshake proceeds with him, and then is easily hired by the next board of directors because he made XYZ Company have record profits while he was there, so ABC Company will pay top dollar to get him. The devastation left at XYZ and possible bankruptcy will happen on a different fellow’s watch, so the first CEO’s reputation remains spotless.
This stupidity is bad enough when it results in companies folding, laying off workers, and defaulting on their debts. It is downright dangerous when defense agencies and critical government services have transitioned to be run “like a business”. There, the lack of critical parts at crucial times leads to needless compromises in safety and security and potentially to the foolishly wasteful loss of life. I saw this in DoD when we exhausted our ready parts and I have seen it in other government work. The shock to the system can be reduced in the short term by cannibalization (taking good bits from 2 broken things to fix the 3rd broken thing – but leaving the two other broken things even worse off and harder to fix later), but it only works for a short while, overall mission capability is reduced, and long term restoration is harder and more expensive.
NAFTA and GATT and the change in US policy allowing critical components to be manufactured overseas rather than requiring domestic manufacture for them have compounded this stupidity. Last time I heard, the United States has exactly one domestic manufacturer of cannon barrels…just one. Every cannon in the US inventory (naval, air, and ground) not imported is manufactured at that one site. Talk about a strategic choke point! Ah, but not to worry, our “friends” the Chinese (of whatever other nation you want to insert) will always supply us and do it “cheaper” than we can domestically.
We have had a generation of lazy business and government thinking that focused on “where can we get this cheaper or better” rather than “how can WE make this cheaper or better”. (Thanks Boomers.) In essence, they have been cheating on their life test, looking over the shoulders of others for the answers, and now they are in the essay portion of the exam and they don’t really know the answers themselves.
So, hostile takeovers, corporate raiding and dismantling, off-shoring, downsizing, and “just in time” supply have been the fashion. Everything “looked good†but was really deeply flawed. But so long as things looked good, even when there were deep and critical problems, we were willing to go on with the “just in time” concept. “Perception is reality”, was the mantra. Evidently, the suffering for fashion is starting to become really painful. Behold the paper tiger!