A modern capitalistic society has a number of companies which supply the populace with staple goods. These companies, like all others of significant size, are listed on stock exchanges, and require "shareholder value". This means being as efficient as possible, not wasting money, you understand. Which sounds reasonable, particularly if you own some stock of said company.
There is a problem though. A chain of supermarkets has warehousing costs that they want to keep at a minimum. When you get down to the nuts and bolts of this problem, you end up with the "just in time" philosophy. In essence, it means that they store only enough stock of goods to supply their stores "just in time" for them to run out, and keep a minimum buffer of goods. How skinny is this supply? Well, it is measured in days. Honestly, I work in retail, and I know this for a fact. In Australia, Woolworths (one of the biggest chains) keeps about a week of inventory. Of course, slow moving lines might go for longer (eg blank DVDs), and fast ones (like bread) are almost measured in hours.
You may be struggling to see a problem with this, and I don't blame you so far. Lets look a little further down the supply chain. The companies that supply the supermarkets warehouses work in a similar fashion - just in time - more of less, on aggregate to the entire market. It is not in their interest to be out of stock, but at the same time (and depending on the product) it is also not in their interest to have a large oversupply warehoused as well. It's a balancing act. So anyway, there is perhaps another week or so of supply in the next tier down, perhaps a little more, depending on the product. Could be a few weeks more, but probably not months.
OK, big deal, two+ weeks of stored supply before you reach the manufacturers. What's the point here? Well, the point is what might happen in a crisis. And by that, I mean any crisis, but there are several big ones potentially looming. I'm a bit of a "doomer" and what I have in mind is a currency collapse (Euro, US Dollar you name it), coupled with a stock market collapse. This may lead to a collapse in international trade and banking, even local banking. What happens then?
Well, people panic, and they buy food. And it will all be gone overnight. I mean it, overnight. Because the JIT philosophy works only under normal trade environments. In a panic, the shelves will not be refilled in time, and as soon as they are refilled (which mostly happens at night, by the way) they will be emptied. Even seasonal times, such as Christmas, throw this out of whack, and is a preview of what I am talking about.
I thought about all this today as I happened to go shopping, and at the checkout register I chose the credit card reader was not working - I had to go to another area to have my card processed. But I started thinking about what would happen if all the cards readers were not working. In a banking crisis, this would be the case. Credit would be frozen, and even access to a positive balance would probably be frozen. It would be cash only, and that would be a problem for a lot of people past the first few days. Do you have more than one weeks shopping cash on hand right now?
Assuming you could even pay for the food, the supply of staples is likely to be sold out anyway. There are a lot of lists online that people have compiled showing what is likely to run out first. These lists are not just made up (although some are), but are based on observations during recent crisis times such as Katrina, or during the collapse of the Russian empire. Some things are what you would expect - Fuels, Generators etc. Other things are perhaps a little odd-ball, and may not be front of mind, such as the gloriously politically correct "feminine products". How long can your household go without buying more of these?
What I am trying to get at here, and probably failing dismally, is the link between the JIT and the buffer society has against a panic during crisis. They really are at opposite sides. Now, one could reasonably argue that the times that JIT seriously fails us are "once-in-century", or less often even. The trouble here is that we have had stability since WWII, and that seriously looks like it could end any time to me. It is possible that I am either paranoid or delusional, but it is also possible that I am seeing things just a bit before everyone else. I keep a close eye on international finance and the story is very complicated, but in general we have gone from a lending crisis to a company/banking solvency crisis to a sovereign solvency crisis. There is no next tier up from here, except perhaps a global solvency crisis, and that is where the buck stops. We are well into uncharted waters in this arena. World wars have started on less than the conditions that we currently are under. The level of volatility is likely to rise dramatically in the near future which will cause extreme government policy action.
As a young boy I rode my skateboard down a lot of hills, much to my mothers disdain as this also meant quickly worn out sneakers that I used as brakes. There is a condition on a skateboard which was called by my friends and I - the "death wobbles". This starts out slowly, but the amplitude of the wobble grows despite your efforts to correct it, and culminates in you being thrown off the board at full speed. These events often ended in a minimum of war wound like skin scrapes, and at most broken bones. In the very final moments, when you know for sure you are doomed, your mind seeks in panic a place to fall to as a soft landing, to minimize the certain damage. Heaven in these circumstances is a patch of soft grass. It's also notable how the panic comes late in the game - up until that moment things are "under control" - until they aren't.
The analogy here is that with JIT in place, it's like getting the economic death wobbles and being surrounded by rough tarmac, and having no shoes on. There is just no escaping the damage. Food supply, along with personal security (and liberties), will become the primary concern when this thing gets out of control. The global banking system is in a death wobble right now, with the amplitude of the problems are growing. This is how I see it all anyway....