The limits of Just-in-Time
In the old days, inventories represented a physical solution to the problems of imperfect information and supply disruption. We’re only a few generations from the days of canning extra food and storing extra potatoes for a longer winter. It’s been about a century since Henry Ford invented the assembly line, and ingeniously reduced both inventory and waste (for example, by using the shipping crates he received as floorboards for tin lizzies). Basic kanban techniques have been used for decades, and in recent times elegant (and not so elegant) supply chain management solutions have wrung most excess inventory out of the system.
Wretchard and VDH discussed some of the implications of disruptions in complex societies in recent days, in reflecting on Japan. Despite the positive effects of JIT in eliminating waste and lowering capital costs, it too has some serious downsides. Supply chains get thinned out, and retail stores can run out of supplies fast in the case of panics. In the US we have seen some of this in the wake of the idiotic recommendation by the surgeon general to go buy certain unnecessary pills. Just-in-time has been a societal boon, but if it breaks down over a large geographic area, the results could easily be devastating.