Sunday, November 16, 2014

Just-In-Case Chocolate?

After reading “New Hubs Arise to Serve ‘Just in Case’ Distribution,” I wanted to learn more about this idea of Just-In-Case supply chain management.  Personally, I am a planner, I like to always be prepared, and I like to avoid risk, so this sounded like my type of supply chain management.  Below is some information I found about this theory.

Chris O’Brien wrote the article “Build Resilience into Your Supply Chain,” where he describes Just-In-Case as a type of proactive crisis management.  He explains that natural disasters and other unforeseen events have shed light on weaknesses in traditional supply chains, and he advocates developing plans to deal with these events before they occur and do irreparable damage to your organization.  He stresses that when companies are separated from their customers or suppliers, it’s easy for competitors to move in and take over.

O’Brien says, “Global companies with high-value, high-demand products coming from multiple locations are the most likely to need a mitigation strategy.”  Specifically, he mentions retailers and name-brand pharmaceuticals because their customers demand a constant supply of goods.  O’Brien suggests creating a supply chain map to identify “chokeholds” related to suppliers, inventories, technology or transportation.  He also advocates asking questions about one’s supply chain to identify where problems could occur and what could be done to mitigate them.  He does concede that “complete redundancy is cost prohibitive,” and that not every step of the supply chain needs to be backed up.

Below is a graphic from O’Brien’s article that indicates the top perceived threats for supply chain managers (as reported by them).
CHR Threats

I appreciated O’Brien’s explanations on how to begin to execute a Just-In-Case strategy, and I began to think of industries that could benefit from this idea – like road salt for winter storms. 

While continuing my search, I found that Edith Simchi-Levi wrote “3 Trade-offs of Just-in-Case and Just-in-Time Supply Chain Strategies” as a response to our class reading mentioned above.  In the article, Simchi-Levi reiterates many of the ideas from our article, but instead of focusing on mitigating risk, she concentrates on rising transportation costs.  These costs make locating distribution centers closer to customers more attractive.  The three key ideas discussed are:

1. Increasing costs of the “final leg” of shipping make regional distribution centers more desirable.
2.  Companies shift from “off-shoring” to “near-shoring” to move sourcing and production closer to customers.
3. As manufacturing moves closer to customers, plants need to become less specialized and more flexible to meet the needs of customers.

I found Simchi-Levi’s ideas interesting, but it seemed like she was overlooking the crisis mitigation aspect of Just-In-Case.  However, her three key ideas make a lot of sense and actually relate to some of our other reading for the week.

While I continued searching for information on Just-In-Case, I found one last article titled, “Should You Stock Up On Chocolate Bars Because Of Ebola?”  The article explains that half the world’s cocoa comes from Ivory Coast and Ghana, which are next to the center of the Ebola outbreak.  Apparently, cocoa prices are slowly rising, and some analysts fear a major spike in the cost of cocoa, which would raise the cost of all chocolate goods.  With this information, should companies like Lindt and Hershey’s begin creating Just-In-Case supply chain plans to mitigate the risks of rising cocoa costs or a major shortage of cocoa?  Or, are the risks too small to warrant major investments in alternate supply chains?

1. If you were in the chocolate business, what would you do with this minor risk looming?

2.  What products or industries do you think would most benefit from a Just-In-Case philosophy?


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