JIT (just-in-time) inventory policies are being blamed for shortages of medical equipment and toilet paper. My comment is: don’t take us back to the bad old days when buyers waited for quarter-end price reductions to stock up for the following quarter. This drove over-sized warehouses, stale product, and a lethargic response to changing markets. How about buying a 3-month supply of yo-yos at the height of the craze? Or a year’s worth of laptops when computing power doubles every year? “Organizations that rely on large inventories won’t be able to compete with facilities that remain lean, and that is true for hospitals [ too.]” – Yossi Sheffi of MIT
What is missing: strategic stock. Yossi Sheffi of MIT is suggesting this as a possible solution for medical equipment. Strategic stock is not safety stock. The best example is the strategic petroleum reserve: Oil owned by the US Government bought in case the US couldn’t get any imports. The goal is to never touch it! But how far do you go? A strategic reserve of ventilators that will be obsolete in a few years? Thousands of surgical gowns that will decay over time? My take: the better approach is a small reserve with a lot of excess manufacturing capacity. It is cheaper to have capacity than inventory. Many companies have already worked out that the cost of an additional line is far less than trying to run 24-7 to meet varying demand.