Is Just-In-Time To Blame For Slow Recovery?

Just-in-time delivery has become a way of life for the trucking industry over the past decade. But a report in The Wall Street Journal suggests that JIT may be holding back an economic recovery.

The just-in-time system lets manufacturers keep inventories of raw materials and parts to a minimum to avoid tying up cash in warehouses full of materials. Trucks can deliver parts to a factory that morning for the day’s needs. But the Journal’s Clare Ansberry says “lingering economic anxiety is pushing just-in-time delivery to the brink.” Companies are waiting until the last possible moment to order, creating a stop-and-start pattern that is “rattling the supply chain.” U.S. business inventories fell for a 15th straight month in April, to the lowest level in 2-1/2 years.
The phenomenon, Ansberry says, helps explain why economic indicators such as capital-goods orders keep swinging wildly. Suppliers have a hard time justifying large equipment purchases or bringing back laid-off workers when orders are unsteady and unpredictable. Although consumer spending has thus far been keeping the economy going, capital business spending is needed for a sustained recovery.