In the trucking industry we are all very familiar with the just in time principle. Unfortunately for us, the public of Australia are not quite as au fait with the whole idea as we are. The distribution of freight was revolutionised when manufacturers and retail outlets introduced JIT into their supply chains.
The idea was simple. Take a car assembly plant for example. When the morning shift commenced, there were enough components on the floor to keep the line running for an hour or two. By the time those supplies were running down, more would have arrived by truck, been unloaded and made their way to the assembly line.
The principle can be seen at work in the big retail distribution centres. Trucks are booked to deliver the next B-double full of tins of baked beans from the manufacturer as the last few pallets of beans in the centre are being picked for a semi running out to the individual supermarkets.
This is lean business. It also demonstrates the power dynamic between different parts of the supply chain. The car manufacturer and the supermarkets hold all of the cards. For them, large warehouses bulging with stock are an unnecessary drain on resources. Much better to hone a JIT system to the point where a pallet of baked beans arrives on the loading dock at 8am and gets loaded into another truck at 9am.
Now, as many in the trucking industry actually know, the JIT system doesn’t decrease the need for warehousing and storage much, it just moves it. It moves warehouses full of baked beans from supermarket DCs to baked bean manufacturer or transport company owned warehouses.
Similarly, at the car assembly plant, the surrounding area becomes filled with small warehouses full of air filters, exhaust systems etc. In a former life I worked for a trucking company bringing car radios into the UK from Germany. Each week a full trailer of radios was parked around the back of an air filter warehouse, next door to a car assembly plant. Every hour a van pulled up to the trailer, loaded on a batch of radios and ran them into the car plant.
The same level of warehousing was taking place, it was simply the location which changed and the part of the supply chain which paid for the storage was the supplier and not the end user.
Now, in this latest crisis we are learning a lot more about JIT in the retail supply chain. Those warehouses full of baked beans are no longer full. The canning line can only just keep up with the orders coming in and the beans are immediately whisked off either to the DC or direct to the supermarket. This is the just in time principle at work.
But is it? What has caused this rush in orders? Are we eating more baked beans every week than we were two months ago? The answer is no. We have moved the storage yet again. All of those baked beans are now being stored in overstuffed pantries and under the stairs in the houses of the panic buyers and hoarders.