Are current supply chain models sustainable?

Filed in archive Market Overview on November 27, 2006

15 years ago, when the book "The Machine that changed the world" was published, JIT went on the top of the hype curve. The concept is still useful but the question is: Is IT SUSTAINABLE?

Lawrence Lapide, research director at the Massachusetts Institute of Technology (MIT), said over the past 20 years, supply chains had been designed around cheap oil.

"We have to recognize that those supply chains are vulnerable to oil price shocks and we can expect volatility in the market," he said.

Lapide gave examples of several solutions and strategies that depended on cheap fuel. "The Just-In-Time model is a great idea from an inventory perspective but it is a trade off between inventory and transport. It is an energy-intensive transport model that is possible only because cheap oil is available."

According to CargoNews Asia, the debate on the effects on the environment is now about whether we have reached a tipping point. It is not the end of the civilized world but we are in unchartered territory. Cheap petroleum energy has been a main driver of the supply chain and that will soon be gone. Expect government intervention because the old models will no longer work