Efficiency Across the Board

In light of recent events, I’ve been thinking a lot more about how we arrived at the current situation. I don’t believe anyone truly has the answers yet so here are a few questions to ask instead. There will be a few posts coming covering certain questions to inspire you to not only think about the world but also to go out, try to understand it and dig deeper than the first answer.

We have all now seen the effects that the current pandemic has had on the world. The topic for this is efficiency and how it has lead to a complacency in every country.

Are We Too Efficient?

The current state of the world is an unusual one and one that many have not have seen in their lifetimes. Supermarkets running out of stock and having bare shelves; ventilators being in short supply; personal protection equipment that can’t meet demand; NHS staff being brought out of retirement to fill gaps in hospitals and a national call for assistance asking us to “help protect the NHS” (which I will cover in a separate post). Why did supermarkets, medical equipment and PPE providers / manufacturers run out of stock. I believe the answer lies in efficiency.

The current global market almost entirely relies on “just in time” manufacturing / delivery and lean processes. This effectively means the minimum amount of stock is held at any one time and is only produced and delivered when the demand is required. Looking back at my previous post “The Cost of Panic Buying” this just in time marketing plays a large part. As I mentioned, the more likely factor of a lot of people shopping more regularly and picking up a few extra items each time is more likely the issue. This is where “just in time” process comes into play. A rapid change in demand across all items from a large population can really change supply lines. If unprepared for such an emergency it is easy to see why shelves are empty and governments, globally, are pushing for ventilators. When systems are running at 95% capacity it doesn’t leave much headroom for error. Tiny changes in shopping habits result in a huge impact as 95% capacity becomes 105% as an example.

However, you might be thinking if they can see or predict an increase in demand why can’t they just change their order to bring in more stock within a few weeks. Enter “lean process”. Lean process is, fundamentally, similar to efficiency and describes the minimum amount of people (a resource) in order to produce a result (in this case products and services). For perishable items such as food or PPE masks (which do have expiry dates) this makes sense to minimise waste and stock counts in order to save money. The limiting factor here is the people. Without the right quantity of people the amount of raw materials is meaningless. This type of business works great in the good times but falls apart rapidly in the bad. In some cases Brexit may have helped in as large medical suppliers began stockpiling goods in the UK, at a cost, in order to protect against worst case trade deals. Depending on the capacity margin this can cause the problems that we have seen over the last few months of different severity. As soon as demand spikes even if there are enough resources to produce the required products there is often a lack of people available in order to produce the final products in time.

As all the products are still available the issue of capacity never seems to be a problem. We all assume we will have enough and this leads to complacency that these safety nets can be scrapped without consequence.

I hope you have found some of this interesting and it has questions you haven’t thought of or maybe inspired you to think of your own questions. So I will leave you with one final one.

Should we reduce efficiency if it means the impact in difficult times can be reduced? Perhaps holding emergency stock that can be sold and replaced before the expiration date is something we can take away from this crisis.

Stay tuned for the next post and sound off in the comments what you think!

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