Thursday, February 6, 2014
Just in Time VS Just in Case.
Freight transposition experts said that the significant supply chain disruptions from weather or other disasters promoted to turn just-in-time inventory management into a liability rather than a solution. To minimize supply chain disruptions, a just in case distribution model should utilizes regional distribution to ensure products can be sourced rapidly. In the news article "new hubs arose to be serve just-in-case distribution" described an example which is Hurricane Sandy that affected supply chain management for months.
It was temporary lost but it was too expensive lost. Thus, many companies realized that it is too risky to have multiple distribution centers spread across multiple areas because it is a much more resilient supply chain if you can pull from two or three. Thus, the desire to minimize risk is one of many factors driving toward a regional distribution model. Today’s consumers are demanding and have a wide variety of purchasing options, which adds pressure on shippers to have product available.
Companies used to use Just in Case Distribution. This strategy in which companies keep large inventories on hand. This type of inventory management strategy aims to minimize the probability that a product will sell out of stock. This is in contrast to the practices, in which only small amounts of inventory are kept on hand.
In 1990s, many companies used to use just-in-time strategy because it reduce the cost from large storage and inventories on hand. Currently because of technology, manufactures could track and ship items to replace merchandise sold. This encouraged to change transportation fees. The title named “The Effects of Oil Price Volatility” illustrated how the move to off shore facilities was driven by low oil prices in the mid-90s and how the increase in oil prices is now driving facilities closer to the customer.
1) – the increase in the cost of the “final leg” or the outbound costs from the DC make it important to shorten that distance.
2) – As the cheaper manufacturing costs of “off-shoring” are offset with high transportation costs, companies are more inclined to “near-shore” their manufacturing activities.
3) – Serving demand closer to the customer means that the manufacturing plants need to be less specialized and more capable of producing a variety of products.
With just-in-time management, investors have greater risk; thus, they tried to mitigate the risk by diversifying supply chains into multiple distribution centers. Because of this competitive pressure, major population concentrated on distribution centers. Moreover many companies started to have online retailers to pay sales tax to make difficult to compete with brick and mortar stores on price. For example, during Just In Time for the holiday shopping season, online behemoth Amazon.com has increased its prices to Massachusetts residents by over 6 percent — 6.25 percent, to be precise. The mall or the corner store look ever more attractive. The price hike is not something Amazon wanted.
However, even though this happened, online retailers are increasingly offering rapid shipping. Also, customers are happy to have online shopping as well. This system require to have multiple distribution and this reduce time and decrease distance for deliver to customers.
I think basically online shopping has many advantages. Compared to setting up a store, it is cheaper. Also, it does not require to have too many employees for the light shift or keep the light on. Also, online shopping is great to use just in time strategy. However, still there is problem. Multiple distributions might be hard to manage because distribution centers are all over the states. Moreover, it might increase employees’ payment because many distribution also means many employees require. Thus, operator should ask himself again to solve these problems.