Reference no: EM131422051

This interesting article in the New York Times proposes that major? storms, like Hurricane? Sandy, and longshoreman strikes are causing companies to rethink the popular JIT business? model, in which only small amounts of inventory are kept on? hand, to fashion? just-in-case inventory management. The shift has led retailers and logistics companies to alter supply chains by adding distribution hubs.? Just-in-case inventory helps retailers keep merchandise on store shelves in the event a supply chain disruption affects one of the major distribution markets.

Since the? 1990s, JIT has made sense for companies looking to reduce the cost of keeping large inventories on hand. Technology enabled retailers and manufacturers to closely track and ship items to replace merchandise sold or components consumed in production. The model also reduced transportation? costs, because goods would be shipped only as necessary.? Now, more companies are trying to strike a balance between? "carrying the minimum inventory? possible, yet never running out of? things."

For? example, Houston's Ranger? Steel, a massive steel plate? distributor, recently expanded its network of distribution centers. Until the late? 1990s, Ranger regularly trucked its products directly from Houston to customers throughout the U.S.? "For a long time that concept worked like a? charm," said the? company's VP.? "Then you started to see the spike in fuel? pricing, and new governmental rules that made truck transportation very? expensive." So like many retailers and wholesale? suppliers, Ranger has added 7 distribution centers to its? network, cutting delivery times to 24 hours by moving its inventory closer to customers.? Multiple, well-placed distribution centers minimize the time and distance spent on the final leg of? delivery, when trucks are often nearly empty while transporting individual items.? "The final mile is the most expensive cost per pound or cost per? piece," writes the

Times.

?"As competition is? growing, companies are seeing the need to have better customer? service," says one executive.? "Five years? ago, one might need two distribution centers to effectively manage the? country; now that number seems to be five to? seven." Or? more, for the largest online retailers. Amazon.com just announced plans to open three fulfillment centers in? Texas, each measuring more than one million square feet. In? 2012, the company introduced the development of fulfillment centers in? Dupont, Wash., and in? Middletown, Del., and made a? half-dozen similar announcements the previous year.

Critical Thinking? Questions:

1. Why is? "just-in-case" being proposed as a JIT alternative at this? time?

A. Ranger Steel can no longer truck directly from Houston.

B. Since? 2000, JIT was the only choice.

C. Strikes and natural disasters are making businesses more concerned about their supply chains.

D. Amazon.com has forced competitors to open more warehouses.

2. The advantages of JIT include

A. never running out of stock.

B. carrying plenty of inventory.

C. reducing inventory holding costs.

D. having multiple warehouses.

3. More distribution centers mean

A. cutting shipping costs.

B. saving money in? "the final? mile."

C. better serving customers.

D. All of the above.

4. The concept of JIT is

A. recognizing? trade-offs between running out of inventory and carrying a minimal amount.

B. disappearing.

C. still as popular as in the 1980s.

D. totally replaced by? "just-in-case" inventory.