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So Long, Just-in-Time Inventory

Supply chain complexity and multiple risks demand a new approach. (Ingram Micro's Robert Gifford)

By John Hintze | Updated on October 01, 2011
Large corporations, especially manufacturers, have sought since the 1990s to lower their working capital costs by reducing inventories to the bare minimum, requiring suppliers to deliver parts just in time, with little room for error. Consequently, they’ve outsourced production of parts to long chains of suppliers stretched around the globe. So while 10 years ago inflation in China and Brazil or the tsunami in Japan were important news, today companies are so tightly interwoven that distant events can quickly halt production, battering their bottom lines.  The danger to supply chains has been compounded recently by skyrocketing prices in commodities ranging from oil to metals to cotton.

But perhaps the biggest wake-up call was the financial crisis, which sent stock markets crashing from the fall of 2008 into 2009 and caused a drop in economic activity not seen since the Great Depression.

Indeed, supply-chain resilience has reportedly become the topic du jour at company board meetings. “I’ve heard this four times in the last week from potential clients … that the board of directors is very concerned about supply chains,” says Michael Chagares, executive director of risk management at Accenture. “They’re concerned the company will not be able to get its product to market in a timely fashion, and they want to know what the company is doing about it.”

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