‘Just in time’ to ‘Just in case’ 

Japan’s earthquake and tsunami have occupied the news and also spurred a lot of thought. Among other things, it has underscored the fragile and interconnected nature of modern society, and caused some to question the wisdom of “just in time” manufacturing approaches in today’s unsettled world.

Instead, it is suggested, we might want to focus on “just in case” approaches designed to be more resilient under stress.

Japan’s earthquake was in some ways a triumph of preparedness: Thanks to strict building codes, not a single building in Tokyo collapsed. But the earthquake, and the tsunami it produced, have had impacts that go well beyond the immediate.

In particular, the damage is exposing the extent to which modern supply-chain management has produced a system that is so lean it lacks the reserve capacity needed to cope with disasters.



In manufacturing, plants have been idled around the world because Japanese factories — or often, a single Japanese factory — serve as the sole source for a vital component. With the factories sidelined by damage or power outages, the components are unavailable, and production has to stop.

Ford Motor Company idled a plant in Belgium for five days over parts shortages; Toyota warned plants in the United States to be prepared to close for the same reason.  A U.S. plant making car seats had to close because of a shortage of premium vinyl made only in Japan. Ford has suspended orders for some models in red and black because the paints come from a single factory in Japan, now closed. Tales like these abound.

Even the New York subway system is impacted by the parts shortage: As Public Radio’s Marketplace reported: “Steel from the north of Japan can’t get to Suzuki. Suzuki can’t make the parts for Hitachi. And Hitachi can’t send the parts to New York. The global supply chain breaks down with the removal of just one link.”

With managers under pressure to keep costs down, there has been a tendency to cut special deals with single suppliers, and to keep stocks of parts as low as possible. So long as everything goes smoothly, this saves money: Single suppliers give you the best price, and low inventories keep you from tying up working capital.

The problem is that we seem to be in a period where things aren’t going as smoothly as they did for a while. And when things don’t go smoothly, the lean approach means that it doesn’t take much to bring things to a halt.

The problem goes well beyond cars and subways. Lots of more important systems are similarly vulnerable. My wife takes a heart-rhythm drug called Tikosyn; if she misses a dose, she could die.

Walgreen’s doesn’t want to keep it in stock, so they order a bottle by air-freight when her prescription is about to expire. Normally, that’s fine — but if something happened to interrupt shipping, she’d be in trouble.

She keeps a backup supply, but what would Walgreen’s do for others in a similar predicament? A few days of shipping problems and many pharmacies would be out of important drugs.

Likewise, grocery stores now keep only a small supply of food on hand, depending on regular deliveries for restocking. When those deliveries are interrupted, shelves start to empty pretty fast. And government emergency food stockpiles are nothing like they were in the Cold War era.

Power plants used to keep a 60-day supply of coal in stock. Now they typically keep only 30 days’ worth. That saves utilities money but it means that there’s less margin if deliveries get interrupted. In the past, severe blizzards have left some utilities dangerously close to running out. Most cities have only a few days’ worth of gasoline.

A new subdiscipline called “resilience engineering” looks at how systems can be made more resistant to failure, and better able to recover when they do fail. That kind of thinking, it seems to me, is relevant to all of us, not just engineers.

Examiner contributor Glenn Harlan Reynolds is founder and editor of Instapundit.com and a law professor at the University of Tennessee in Knoxville.

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