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N00b here. I'm curious about JIT pipelines because the cost seems potentially so high when things go wrong, and JIT surely is fragile. > Tastes change, If you

N00b here. I'm curious about JIT pipelines because the cost seems potentially so high when things go wrong, and JIT surely is fragile. > Tastes change, If you have a moderate inventory, surely they don't change that fast that you're stuck with much. > there's shrinkage, What's that? > some things degrade over time, But many don't > rents are high, are they (I really don't know)? How much to rent a warehouse out of town? > and you have to finance buying/holding things you aren't selling. But you are, they're not worthless inventory, just a buffer and you're still using them. If you're JITting then those costs you claim will not go away, they're just passed on to your suppliers (who have to handle their pipeline/stocks) who will pass them back to you as higher prices. I don't get it.

yodon 6y ago
> If you're JITting then those costs you claim will not go away, they're just passed on to your suppliers Except your suppliers are JIT'ing, too, just as you are, for all the same reasons. The savings may seem small to you, but if you are in a price competitive market (as is the case for most physical goods) your percentage markups are typically very small compared to what software developers are accustomed to. The grocery industry, for example, is famous for making about 2% profit margin. That means if you can shave 1% off your costs, you increase your profits by 50% in that industry. Very small optimizations can have phenomenal impacts on the risk and profitability of physical product and supply chains. > What's [shrinkage] Shrinkage is an industry term for items that get lost in physical supply chains. It's often hard to know what is theft and what is loss of products due to other processes like things getting misplaced, lost in shipping, accidentally shipped to the wrong customers, discarded by mistake, etc. If you run a large enough physical logistics system, you will inevitably have some amount of unexplained loss in the system. That unexplained loss is known as shrinkage, and it's a real and measurable cost in all physical industries (in the grocery industry shrinkage is about 1%, some fraction of which is theft and some fraction of which is other processes).
- throwaway_pdp09 6y ago
  Good answer, thanks
- Joker_vD 6y ago
  Ah, shrinkage. Once upon a time, in the army of a country that no longer exists, each soldier was supposed to have been provided with two waffle towels, each 96 cm long. Since such a towel can be easily made from a 1m long cut of fabric by tucking and sewing small margins on all four sides, the supply departments simply distributed [headcount] * metre-long rolls of fabric to the units. Then one day an inspection arrives, grabs the nearest towel (used and washed many times) and measures its length. Naturally, it's shorter than 96cm since there has been shrinkage (heh), but try explaining that to the inspecting commission! Thankfully, since it's the waffle fabric, it could be done: take a fresh new towel, count its squares, then take the used towel, count its squares, and compare the numbers.

yodon 6y ago

> If you're JITting then those costs you claim will not go away, they're just passed on to your suppliers Except your suppliers are JIT'ing, too, just as you are, for all the same reasons. The savings may seem small to you, but if you are in a price competitive market (as is the case for most physical goods) your percentage markups are typically very small compared to what software developers are accustomed to. The grocery industry, for example, is famous for making about 2% profit margin. That means if you can shave 1% off your costs, you increase your profits by 50% in that industry. Very small optimizations can have phenomenal impacts on the risk and profitability of physical product and supply chains. > What's [shrinkage] Shrinkage is an industry term for items that get lost in physical supply chains. It's often hard to know what is theft and what is loss of products due to other processes like things getting misplaced, lost in shipping, accidentally shipped to the wrong customers, discarded by mistake, etc. If you run a large enough physical logistics system, you will inevitably have some amount of unexplained loss in the system. That unexplained loss is known as shrinkage, and it's a real and measurable cost in all physical industries (in the grocery industry shrinkage is about 1%, some fraction of which is theft and some fraction of which is other processes).

throwaway_pdp09 6y ago
Good answer, thanks
Joker_vD 6y ago
Ah, shrinkage. Once upon a time, in the army of a country that no longer exists, each soldier was supposed to have been provided with two waffle towels, each 96 cm long. Since such a towel can be easily made from a 1m long cut of fabric by tucking and sewing small margins on all four sides, the supply departments simply distributed [headcount] * metre-long rolls of fabric to the units. Then one day an inspection arrives, grabs the nearest towel (used and washed many times) and measures its length. Naturally, it's shorter than 96cm since there has been shrinkage (heh), but try explaining that to the inspecting commission! Thankfully, since it's the waffle fabric, it could be done: take a fresh new towel, count its squares, then take the used towel, count its squares, and compare the numbers.