Health

Just-in-time gives way to “buy everything you can” as US supply disruptions persist

Instead, he told his purchasing manager to
“just buy everything you can,” and they could store the excess, said
Bullock, chief executive of Power Curbers Companies, a maker of heavy equipment
used to build concrete sidewalks and other infrastructure projects.

Roughly two years into a pandemic that has
snarled supply chains across the globe, US companies are scrambling not just to
produce enough to feed current demand – but to also refill inventory shelves.
That buildup was key to the fourth quarter’s hefty 6.9% annualised growth in
gross domestic product, with inventory investment contributing 4.9 percentage
points, according to the US Commerce Department.

Spending shifted during the pandemic from
services to goods, a boom that has strained supply chains and emptied
warehouses. Excluding inventories, GDP grew at a more modest 1.9% rate in the
latest period.

This boom in demand, coupled with shortages,
has fuelled a wave of inflation that increased at a pace last year not seen in
nearly 40 years. This set the stage for the Federal Reserve to now look towards
raising interest rates in March.

Bullock, whose company is based in Salisbury,
North Carolina, said supply chain problems have continued to grow worse in
recent months – not better.

Ditching the “just-in-time”
inventory model in favour of building up supply to buffer stocks only made
sense, he said, referring to a system that aims to buy parts and materials
shortly before they’re needed – to minimise the cost of holding supplies.
Just-in-time has evolved into a standard worldwide in the era of globalised
trade, one embraced across corporate America – until COVID-19’s emergence
upended it. Since the pandemic struck, many businesses found the system left
them stranded when orders that normally took weeks suddenly took months to
arrive.

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Bullock’s goal now is to snap up materials
like steel whenever he can. “We’ve had to get creative in where to put all
of it,” he added. “We’re using all the nooks and crannies to house
those incoming items.”

Supply chain problems are weighing on the
results of some companies. On Thursday, Tesla Inc.’s shares slid after the
electric car maker said it would delay releasing new vehicles until next year
because of supply chain breaks that it said could last through this year.
Earlier in the week, General Electric Co. reported a decline in quarterly
revenue amid supply chain shortages.

Companies have grown creative to deal with the
gaps in supplies.

Rockwell Automation Inc Chief Executive Blake
Moret, said his company has increased amount of “work in progress,”
in order to keep workers assembling goods as they wait for shipments of scarce
computer chips. The chips are added just before the product is sent out the
door.

Rockwell, which has benefited from a push to
automate factories and warehouses during the pandemic, has “slightly”
increased its inventory levels, said Moret, but not enough to have a meaningful
impact on overall inventories.

The Milwaukee-based company on Thursday raised
its earnings forecast for its fiscal year as it reported a 40% jump in orders
in its first quarter, compared to a year ago. “We’re in the early phase of
multi-year economic expansion,” said Moret.

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