Just-in-time sourcing has been a strategy used by many companies over time to keep on-site inventory levels to a minimum, reducing the cost of holding stock, but this put businesses at risk when a supply chain shock hit such as a storm or strike at key ports which have in the past closed key distribution routes.
Now, according to CoStar Group, a US real-estate research firm and reported by The New York Times, retail and logistics companies are adapting their strategies to what is becoming known as just-in-case sourcing.
In this instance companies are adding distribution hubs to their supply chains, which is helping to keep shelves stocked in the event of a disruption as well as having the added benefits of reducing transportation costs due to the fact that goods are shipped only as necessary and helping to serve and retain customers better in what is becoming an increasingly competitive marketplace.
Rene Circ, CoStar’s director of industrial research, told The New York Times that by combining these two strategies companies are looking to strike a balance between “carrying the minimum inventory possible, yet never running out of things, because inventory equals cost”.
One company to introduce such a system has been Texas based Ranger Steel, the largest steel plate distributor in the US.
Until the late 1990s the company delivered its heavy steel plates directly from a distribution centre at the Port of Houston to customers across the nation.
Jochen Seeba, the company’s vice president and chief operating officer told The New York Times: “For a long time that concept worked like a charm.
“Then you started to see the spike in fuel pricing, and new governmental rules and regulations on insurance coverage for truck drivers that made truck transportation very expensive.”
As a result, Ranger Steel added several distribution centres to its supply network to which suppliers deliver the steel and from which drivers deliver the metal to customers within 24 hours.
