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You're still talking about JIT. Their reorder points are just not reliable, because it is JIT turtles all the way down. Their supplier's suppliers are practicin
by kevin_b_er 5y ago
You're still talking about JIT. Their reorder points are just not reliable, because it is JIT turtles all the way down. Their supplier's suppliers are practicing JIT too. Because the entire system is built on JIT, you can't exactly forecast except by risking frontloading of goods.
But you practice JIT and there's no storage calculated anywhere.
Face it, everyone cost cut with JIT and exposed themselves to risk by never having a rainy day fund.
- victorNicollet 5y agoI'm not sure what you mean. Being exposed to risk is a fact of life in supply chains. Every time you order from a supplier, you have the risk of having ordered too much, and you have the risk of having ordered too little, and the quantity (and timing) of your order is just your way to decide how much you want to be exposed to these two risks. Abandoning JIT does not change that. Of course, the financial impact of the two risks is not equal. Many supply chains aim at a service level that is higher than 50%: they reduce their exposure to out-of-stock risks by increasing their exposure to overstock risks, because they consider out-of-stock to be much worse than overstock. But where do you draw the line ? What is the correct ratio ? How large should the rainy day fund be ? Is it worth building warehouses and hiring the workforce to run them ?