The supply chain, it seems, is a much more fragile thing than most of us would like to admit. The recent blockage of the Suez Canal demonstrated that to the world, resulting not only in the loss of billions of dollars, but in the looming threat of shortages across the globe. In the aftermath, we are once again compelled to consider the costs and benefits of the just-in-time logistical system. During our discussions here at OrbitMI, we recalled an article featuring Melvin Mathews and written by Paul Gunton, originally featured on this blog in July, 2020. We felt that the subject of this article was both prescient and valuable, and so I've reproduced the original text here. We hope you find the viewpoints expressed here to be interesting and informative, I sure do.
There is a right time for everything. For example, one of our advisors, Adam Riccoboni, said in an April blog posting that now is the time for sharing big data in shipping. He is right, and everything else also has its right time – its deadline – after which an opportunity has been lost, the price has gone up, or the crop spoiled.
Yet Douglas Adams, a ground-breaking humorous UK author – once said “I love deadlines. I like the whooshing sound they make as they fly by.” He must have had a very understanding publisher to get away with that approach to delivery schedules. For the rest of us, our lives are ruled by deadlines that mark the exact watershed between early and late.
We have got so used to working in this way that, if we are sensible, we schedule our lives around them, in one big Gantt chart. Managed properly, we can see what we have to do, when we have to do it and who we need to chase to deliver the metrics and materials we need to keep our own work on track.
Global logistics depends on the same process, with just-in-time (JIT) delivery allowing manufacturers to hold minimal stocks and offer customer-specific products based on a range of optional features. Toyota claims to have originated the concept as a central part of its drive towards zero waste and high quality.
It has since been developed by other sectors that have seen the benefits of JIT deliveries, such as Dell Computers. “We tell our suppliers exactly what our daily production requirements are,” its founder Michael Dell said in this interview. Instead of regular deliveries of components to a warehouse, suppliers might be told “tomorrow morning we need 8,562, and deliver them to door number seven by 7am.”
It worked well for years and then COVID-19 came along, upsetting supply chains and challenging suppliers’ viability almost overnight.
In my previous blog, I quoted Melvin Matthews, senior advisor with OrbitMI, who explored these ideas in a webinar at the end of June that was sponsored by OrbitMI and hosted by Lloyd’s List. As I mentioned in that blog, he believes the pandemic has “turbocharged the digital transformation” by forcing companies to address the challenges it has forced upon them.
But he also spoke about the supply chain itself: is it time to abandon JIT strategies and replace them with just-in-case (JIC) approaches?
That would be a bold step. It would mark a huge about-turn in many industries whose managers may feel that this risks upsetting much of what industry and commerce has been built on for the past few decades.
Yet the time is right for a rethink, Melvin said. “The pandemic has proved that JIT does not necessarily make the supply chain resilient to shocks.” Instead, it makes supply chains “more sensitive to disruptions and a lack of inventory means that there’s no Plan B when disruption actually happens.”
That seems obvious now but would anyone have advocated abandoning JIT, even if we had been warned of the impact of a pandemic? The answer to that is ‘No’, because there were warnings – such as one from Bill Gates in April 2018 and from others before and after that– and nothing changed. Things may now be changing and Melvin has detected a global shift from JIT to JIC. If he’s right, its implications could be seismic.
Rebecca Wayland is founder and managing director of the US-based strategic advisory firm Competitive Paradigms and she told the webinar how difficult it is to assess those implications. When looking at future options, “there’s so much uncertainty, we don’t even know what disruptions are possible,” she said.
She used a term that was new to me: the ‘STEEP’ factors, which stands for society, technology, economics, the environment and politics. I find each of those tricky to assess and it was not made any easier for me when she said that it is not enough to know what is going on in those areas of society, we also have to consider what we don’t know.
She urged us to do what she called scenario planning; not with facts and figures but with imagination and innovation. It involves taking each of those STEEP factors and thinking about how they might change in the next 10 years. “Try to think of structurally different kinds of futures and different kinds of mental models,” she said. “What’s important here is increasing your awareness of what’s possible.”
A lot of shipping industry companies are already doing this, apparently, and I found her approach refreshing. It would mean putting the spreadsheets and analysis to one side and focusing on “things like agility and flexibility … and, above all, experimentation.”
It would make us – both as individuals and as a society – open to the sort of warnings we have ignored in recent years. I may be stretching my analogy a little, but those warnings were our deadlines, yet as they whooshed by, we did not even hear them. Rebecca and Melvin have made us sit up and listen.