Going against conventional wisdom

Today, I took a tour of the the Mi-Jack facilities in Homewood, IL where they make the gantry cranes which load and unload containers on to intermodal rail cars.

To be competitive the company needs to make a gantry crane relatively quickly for the railroad. But the parts and machines used in assembly take many months to produce. So the company has elected to go against the standard logistics principle of limited just in time inventory. It orders the required supplies and machinery based on its guess on business levels.  It would be impossible to meet customer demands given the long lead time if they did not do this. Importantly the price paid by the customers covers the cost of the inventory as a cost of doing business.

When you go against the textbook, there has to be a good business reason for it. It has to be feasible and profitable. That does not mean the conventional wisdom is wrong rather that is not all inclusive.

 

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