Reverse Bullwhip Effect:
Pandemic Prompts JIT Rethink
What first looked like hiccups in maritime trade in 2020 soon turned into a chronic coughing fit. Then it was walking pneumonia as once-healthy supply chains staggered under mounting delays. Mere days of pandemic-induced delays last year have stretched to weeks, months, perhaps longer.
Consumer product retailers are worried about filling store shelves in time for the holidays, which has spurred new government action. However, besides electronics, toys, and other consumer goods, those shipping containers backed up offshore at Long Beach, Los Angeles, and other ports also carry goods for further manufacturing — including key ingredients for animal feed and pet food.
Bloomberg reports that many cargo vessels, stalled at key Chinese ports because of typhoon weather, are sailing again. So West Coast ports are likely to see another surge of containers before clearing the current backlog. One source notes that port congestion, container availability, and high freight rates are “just the symptoms of a deeper problem that includes trucking shortages and limited warehouse space.”
There’s no silver bullet or quick cure for U.S. manufacturers either, which is good reason for feed and pet food manufacturers to take a close look at their ingredient and intermediate product supply logistics. When it comes to supply chains today, just-in-time (JIT) inventory management strategies are history.
JIT inventory management for manufacturers like animal feed and pet food companies required stability, predictability, and reliability of supply from suppliers who in turn may have sourced across a large array of primary vendors. When it worked well — as it had with relatively few hiccups since pioneered by Toyota in Japan in the 1970s — JIT minimized inventory, cut delivery time, and reduced shrink. It saved a lot on fixed and variable costs.
However, manufacturers of feed, pet food, and other diverse, multi-ingredient, perishable products rely on complex supply networks, not really “chains” but large, interdependent, time-sensitive, demand-supply systems. When links in such networks break — even for short periods — there are cascading, amplified delays and other painful consequences.
From the retail perspective, economists liken the effect to the motion of a bullwhip, where a small flip of the wrist in retail demand generates a big snap at the supplier’s end.
However, the bullwhip works going both ways, as for example when ports cannot quickly offload containers of vitamins or trace minerals and get them moving across the country. Then delivery delays can amplify throughout the supply network, hitting JIT inventories especially hard.
Keep in mind that today most vitamins and trace minerals originate from sources outside the U.S., with a large proportion coming from China. U.S.-based manufacturing of these supplemental nutrients is virtually non-existent.
So now there is a new normal – trying to mitigate or miss the most painful stings of the “reverse bullwhip effect.”
Buffering the bullwhip
You can reduce the reverse bullwhip effect on your manufacturing inventory management system by partnering with experienced, reliable suppliers and leveraging their logistical advantages.
Be sure your suppliers of ingredients, intermediates, and other products have:
• Adequate and flexible storage, handling, processing capacity to meet your specific needs
• Skilled, committed personnel who understand ingredients, intermediates, and formulas
• Capability and willingness to work to your schedule
• A record of quality performance and reliable delivery
• Partnership ethics and shared core values
By all accounts, we are not going to see current supply network challenges resolved soon. However, primary vendors, ingredient suppliers, and feed and pet food manufacturers are learning a lot from current delays.
On the upside, feed and pet food ingredient customers can be proactive. For example, they can:
• Identify their internal bottlenecks and external supply limitations
• Discuss potential solutions with preferred suppliers
• Give suppliers longer order lead times, especially for products likely to be sourced overseas
Although some feed and pet food ingredient suppliers may be stretching their order lead-times by weeks or more, D&D is still trying to work within our standard lead-time window. Customers know and appreciate our extra effort during this challenging time to supply all our customers all the time.