How companies store things – level 3

03-03-2022 07:00

Traditionally, companies stored enough products to meet customer demand, and they also kept an extra amount for a problem or a sudden increase in demand for their product.

In the 1970s, Toyota executive Taiichi Ohno realized that storing excess parts cost the company money. He invented a system where the company only ordered what was needed, and parts arrived only when they were required. Today, this system is everywhere from supermarkets to airplanes; however, it is quite fragile. If a problem occurs anywhere in the supply chain, then production stops. If there’s a sudden increase in demand, the business can’t respond.

The pandemic showed the fragility of this system where businesses around the world saw unusual problems in both supply and demand. Companies are starting to slightly increase their inventories again, and they’re using technologies to manage problems in the supply chain.

Difficult words: excess (an amount that’s more than necessary or usual), fragile (weak), inventory (material, parts, and finished products that a company owns).

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