Tags

, , ,

Modern society provides inexpensive goods and services by doing things in the cheapest possible way . The most efficient place in the world, that can be serviced by good transportation, will be where any given product  can be made will be, in a stable situation, where it is manufactured. Thus, the cost of every item is driven toward the its lowest possible cost, factoring in manufacture, plus shipping, distribution costs, and the other costs which are soon added on. The local sales tax, in El Cerrito, California of 10¼% will drive creation of goods away from there and toward areas without these confiscatory taxes. As these processes, which have innumerable subtleties, balance themselves out over the world they tend to concentrate things into various types of localities where they are cheapest. Some of these are geographic concentrations, where the sum of factors forced the concentration of creation of value. In an open market this process makes for a very efficient way of creating value at the least possible price to the final consumer. But the system has a problem—it’s fragile.

The manufacture of complex items such as cars, airplanes, computers and many other things require supplies of subcomponents to come from all over this form of efficient world. The most efficient way to do obtain the various items, is to order them, just in time, so there is nothing sitting in storage which costs money, and depreciates the items value. When technology is moving quickly some item in storage may be superseded by a new and better and more desirable one, and the stored item becomes undesirable and worthless. Then it is costing money to store the item it is worse than worthless, it consumes money just by existing. Thus, just in time products become the only ones that can be sold and the only way to make money.

In a complex item there may be hundreds of components, and many of those components have components which may come from afar. If the manufacture of a single one of the hundreds of critical components cannot be delivered on time then the whole system comes to a halt because then the final product cannot be delivered. Great efforts must be made to assure on-time delivery of acceptable products. That can now be done, because of the highly standardized quality of manufactured goods, a reliable transportation system and digital tracking via the internet to keep things synchronized. The new products are available to everyone in the world, with the money to buy them, and everyone is happy in this best of all possible worlds.

Oh, oh. A 9.0 earthquake and a great tsunami strikes off the coast of Japan! That is really bad, but as horrible as it was, the tsunami didn’t strike Tokyo and the quake itself was far enough away not to cause devastation to the major technology centers of Japan. All the same there will be delivery problems for months to come of many things. First to be seen will be a shortage of new Japanese cars, but there are alternatives to that problem, like repairing the ones already being driven, or buying alternate brand cars from other countries. There are probably some sub-component items that may impede complete recovery which we will not see for months. This earthquake should be a clear warning to everyone dependent upon a really tight just in time delivery of vital components. Of course if the electrical power grid has major shortages, from the shut down of the reactors, the situation may go into crisis mode. And, it their is a melt down—well things will get really bad in so many ways.

I shop at Trader Joe’s grocery store, which has a just-in-time policy, with very little on site storage. They practically offload directly from their supply trucks to the customer accessed shelves. Perhaps, this is okay for their type of products, because with most food items we just chose among those present. What we see is what we get. There is a rapid flow from the farm, to the market, and onto the diner table. But, even this distribution system if there is a real problem with a just-in-time policy, then when a serious disruption occurs on the farm or the transportation system, people without home supplies will begin suffering within days.

Just-in-time is great, until it fails, so, have an in-house emergency back-up.

Advertisements