The Greta Tohoku Earthquake and Tsunami had caused disruption on infrastructure and production capacity of Japan. This shock led to the following chain of events:-

• An abrupt drop on Japanese exports of both cars and spare parts to the USA
• Import of cars and spares from competitor markets like Mexico and Canada
• Non-availability of Japanese cars and spares in the US Market
• Overtime in production facilities of competitor companies and in Japanese plants outside Japan
• Questions for also raised on Just-in time production philosophy of Japanese to minimise inventory

A summary of the changes are elaborated in the sketch below.

Now, what are the steps that need to be taken to stabilize supply chain worldwide:-

1. Diversification of supply chain sources: The first and most important step towards stabilizing the supply chain is to diversify the same. The idea is to diversify the sourcing of spare parts from different geographical location.
2. Another important step towards stabilization of supply chain is to standardize the items as Dell did and keep an inventory of these standardized items. The Just-in time manufacturing can then be done for the inventory of standardised products to the final item.
3. Another important step towards standardization is the development of digital supply chain. This means that the sourcing, inventory, stock ordering and demand is all linked in a system. This will bring about greater coordination in the supply chain.

The chapter provided a number of reasons for holding inventory.  Pick two of these reasons that you believe can cause organizations the greatest amount of damage. Please use real-world examples if possible.

Ans. The chapter provides a number of reasons for holding inventory. However, this can lead to damage to organizations too. Some of the examples are as below:

1. Beauty Industry

Overstocking in the beauty industry leads to expired products in unrecyclable plastic packaging, causing both economic and environmental issues.

This has been studied specifically in the American Beauty Industry, which is the largest in the world. It is worth USD 80 million a year.

The American Beauty Industry works on the principle of building a community with their clients. In order to achieve this, beauty brands work on the concept of building a community particularly working on the right products, new launches and customised products that are readily available for purchase. To satisfy the demand, it is normal to have a high level of inventory in the stores and in the warehouses. This leads to excessive inventory on the shelf that need to be discarded at times as cosmetic products have a shelf life of 3 years or lesser. A relatively short shelf life combined with excess inventory can lead to warehouses full of expired makeup items in biodegradable case. This leads to loss of financial investment and also creation of non-biodegradable waste