Scarcity and the Problems of Just In Time Systems
Back in 2018 I did an extended series of chapter-by-chapter posts on Sendhil Mullainathan and Eldar Shafir's Scarcity: Why Having Too Little Means So Much. Many of their chapters are opened with a story that illustrates the point they will be making in the chapter. One of them that really stuck with me was the one for Chapter 9, focusing on how the science of scarcity could be applied to problems faced by organizations. This story dealt with a hospital that was perpetually having trouble with its surgical schedule. Elective surgeries were continually having to be postponed or rescheduled to make room for emergency patients. As a result, surgeons were often treating their elective patients late in the evening, after a long day dealing with emergencies, increasing the likelihood of medical errors.
They finally brought in an outside consultant, which suggested that they should set aside one operating room entirely for emergencies. Needless to say, that suggestion got some pretty strong pushback from the surgical staff. They were already strained to the limit, and this guy was trying to take something away from them.
However, once they had those resources set back for emergencies, they discovered that their elective procedure schedule went much more smoothly. Emergencies no longer intruded upon their elective procedures unless something catastrophic happened to require multiple operating rooms at once. And they even found some surprising inefficiencies that could be corrected, but had been obscured by the ongoing problem of schedules being upended by emergency patients.
For the last century and change, there has been a relentless pressure toward ever-increasing efficiency. Remove waste, cut the fat, make the organization lean and mean. Just In Time supply lines have been touted as a way to reduce overhead by removing all those warehouses full of goods waiting to be utilized, whether they be parts for a manufacturer or produce for a restaurant.
However, in the process of slimming down organizations, many of these experts have mistaken slack for fat, leaving the organization with no capacity to absorb shocks. Right now we're seeing it most obviously in the medical field, where there was such a concern that a spike in COVID-19 patients could overwhelm the capacity of hospitals to treat them, leading to enormous numbers of deaths. As a result we have whole countries on lockdown, businesses shuttered, people told to stay at home -- and serious questions about whether we will end up losing more people from the myriad negative affects of effectively shutting down a national economy. But we're also seeing it in the sudden shortages of essential items, from toilet paper and cleaning supplies to various food items. In earlier eras, companies would have had huge warehouses full of these things and would restock from them. But with Just In Time supplying, they rely on regular shipments from their wholesalers -- and when those shipments fail to arrive, or demand overwhelms supply, the result is barren shelves.
It's very probable that we'll see a re-evaluation of the Just In Time philosophy of business operations, at least for a while. We'll see whether the lesson lasts, or whether the siren song of cutting overhead will take us straight back to a situation where even a relatively small hiccup could result in the wheels coming off.