Chapter 12 Discussion Forum Topic
The Post-Pandemic Inventory Dilemma
Budweiser
ewer AB InBev shared the cost of undrunk
eer with its distributors during lockdowns.
From undrunk beer to unfinished forestry equipment,
usinesses deliberate just-in-time or just-in-case
inventories, reports The Wall Street Journal (Nov. 8, 2021).
Companies are wrestling with how big their inventories
should be, since the pandemic highlighted the dangers of
having both too much and too little stored away.
When the pandemic first struck, and demand for many
goods dived, some companies were left holding large,
costly inventories. But closed borders, strained supply chains and rebounding demand meant bigger stock buffers
can prove positive. Now, the question of whether to maintain costly extra stockpiles or risk getting caught out again
y disruption has emerged among the host of dilemmas businesses face, from whether to re-shore production to
how to best transport goods.
Businesses from Nissan to PepsiCo say the decades-long trend of hyper-efficient supply chains, called JIT
manufacturing, could be ending. But many companies say they will likely return inventories to pre-Covid levels when
trading conditions normalize. As noted in Chapter 12, holding large inventories ties up capital, requires extra space
and people to manage it and needs to be insured. It is also a problem for companies selling products with a sell-by
date. “Cost is still the driver for companies,” said a PwC executive.
Inventories can be problematic going into a demand shock like a pandemic. Companies like car makers and luxury-
goods
ands were left sitting on stockpiles they couldn’t use when demand collapsed last year. Drinks companies
including Guinness maker Diageo and Anheuser-Busch InBev shared the cost of undrunk beer with their distributors
to spare bars and restaurants from picking up the tab during lockdowns.
Other companies say they will likely go back to normalized inventory levels but will change how they manage them.
For instance, some multinational companies plan to decentralize stocks to place them closer to customers, giving
them localized stockpiles to dip into during supply-chain strain. Swiss drug giant Novartis is working to ensure each
country it sells to has a second supply point for key products. “One thing we learned last year was to have strategic
inventory in more places…decreasing the dependency on single locations,” said Novartis’ OM head.
Classroom discussion questions:
1. What are the strengths and weaknesses of JIT? (Hint: review Chapter 16)
2. What is your company’s inventory policy and how has it (or has not) changed due to Covid?
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