Japan’s horrific earthquake in which industry was almost completely shut down. The less powerful but still destructive earthquake in New Zealand a few weeks earlier. Turmoil in the Middle East. Extremely cold winters in the United States and Europe. “Slow steaming” on the world’s shipping lanes. Reductions or elimination of all-freighter flights. A severe shortage of truck drivers.
These are among the formidable obstacles faced today by the $68 billion transportation industry in the L.A. area. And no delivery system is so exposed to these negative developments as the Just-In-Time method of moving goods into and out of Southern California’s ports and airports.
After it was introduced in the early 1980s by (ironically) Toyota to speed up deliveries of components for its auto factories, JIT quickly spread to other industries. It was a shipper’s dream come true.
Under JIT, inventory could be reduced to a bare minimum, saving substantial money in inventory costs while at the same time increasing production efficiency. Little wonder that JIT became the standard logistics system for air and sea transportation at many companies headquartered in the L.A. area.
Global political, economic and social conditions, however, have changed not incrementally but fundamentally in the 25 years since Japanese auto plants began receiving parts under a JIT system. We no longer live in a sane and peaceful world. Who would have thought that the Egyptian government, seemingly as immovable as the Pyramids, would be overthrown in less than two weeks? Or some citizens of oil-rich Libya, with a dictator for life and no history of free expression, embracing democracy almost overnight?
Even nature seems to be conspiring against us. Despite all the talk about global warming, last winter in the Northeast and Midwest as well as in Europe was one of the coldest on record. With a massive volcanic eruption in Iceland adding to transportation’s woes, thousands of flights were canceled with hundreds of thousands of pounds of high-value freight sitting on airport tarmacs.
Rolling the dice
The successful application of JIT demands no break in any link of the supply chain. Ships, airplanes and trucks must arrive with their cargo within a very precise, predetermined period of time – even as little as a few hours before the cargo is needed on assembly lines and at distribution centers. With JIT, a shipper is rolling the dice with his freight, assuming a seven will come up every time. The odds are lengthening that it will not.
With horrific natural and man-made events occurring this past year, questions must arise as to the value of JIT. Thousands of dollars indeed may be saved in lower inventory costs, but millions can vanish with a shutdown of assembly lines or lack of goods to distribute. The extreme claims of JIT proponents must be taken with even greater doses of salt.
At stake are billions of dollars spent annually by shippers, carriers and their agents who transport their merchandise through the ports of Los Angeles and Long Beach, and at the Los Angeles International Airport.
I believe there is a better way for L.A. shippers with global manufacturing and distribution operations to successfully meet the transportation challenges of today’s unstable world. I think of it as a fresh breeze blowing through our world of logistics. Let’s call that fresh breeze Just-In-Case or JIC.
Just-In-Case means moving freight via land, sea or air a number of days earlier than under JIT in order to build up inventory. It means moving 10,000 tons of cargo in one shipment rather than dividing it into many shipments of 1,000 tons each. A single shipment minimizes loss or delays, so often the case with multiple shipments.
The advantage of JIC goes beyond overcoming today’s natural and human upheavals. These advantages replace a number of JIT’s shortcomings. With JIT, enormous stress develops along every link in the supply chain. The get it “fastest with the mostest” mentality produces extreme pressures that can lead to costly mistakes. Documents may contain uncaught errors, leading to unsympathetic customs inspectors turning back the freight. Physical damage to cargo may result by loading or unloading too quickly.
JIC would benefit freight-forwarders like my business, but it would result in a measured decline in stress for everyone involved in the shipping process. With more time, mistakes are more easily avoided.
An indirect, but important benefit in utilizing JIC is the gain in inventory. With added inventory, the U.S. economy should continue to strengthen as manufacturers and distributors spend billions to restock their inventories.
In today’s world, Just-In-Case is a practical, realistic and efficient successor to Just-In-Time – fair to the shipper and fair to the forwarder.
With adequate amounts of inventory sitting securely next to the assembly line or within the distribution warehouse, JIC eliminates almost completely the nightmare of no parts or supplies when they are needed most.
Just-In-Case allows the traffic manager to sleep more soundly at night.
Julian Keeling is chief executive at Consolidators International Inc., a freight-forwarding firm near Los Angeles International Airport.
