I'd like to politely debate Paul's underlying premise when he suggests "as a result, the practice of safety stock and holding inventory against commodity price fluctuation and supply chain disruption will provide relief from the fragility of the supply chain." One VP of Global Sourcing I spoke with last week told me he wished that he could inventory greater levels of raw materials/commodities at the moment (either in his facilities or those of his suppliers, depending on circumstance), but was unable to do so because of markets that are approaching allocation level. At this stage of the global sourcing game, "contracts are not worth the paper they're printed on," he told me. Hold a supplier's feet to the fire in Asia right now based on the letter of the agreement and they'll come back and "$crew you" because of commodity price increases and the fallout out Japan.
Yet Paul does raise a good point. I've long believed that the very practices we've pursued on the strategic sourcing and supply chain front around supplier rationalization and the leaning out of inventories can come back to hurt us in major ways when any type of disruption hits the supply chain. Yet building inventory alone and raw material safety stock is not the panacea. Holding excess inventory, especially in raw materials, is a form of speculation unless you're honestly concerned about material availability -- in which case it's not. And despite all the risks associated with moving to more just-in-time environments, I would not argue for a minute that procurement and supply chain teams should be in the business of speculation or fully backtracking on the strategies that have saved us billions of dollars in recent years -- not to mention unlocking similar numbers from a working capital standpoint. Perhaps having a few more suppliers and building greater redundancy is a better answer. Spread the love -- at least a bit. Don't hoard it, or concentrate it entirely.
Jason Busch
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