Editor’s Note: Today’s post is from Dick Locke, Sourcing Innovation’s resident expert on International Sourcing and Procurement. (His previous guest posts are still archived.)
For a blog post, I don’t often get off on international issues but this one has been making me crazy for years.
From an op-ed in last Wednesday’s New York Times:
from A Green Detroit? No, a Guzzling One by Edward Niedermeyer |
The auto companies’ manufacturing people love to brag about low in-plant inventory. But can you think of a more expensive way to hold inventory than in the form of finished goods?
Between inflexible supply contracts and labor contracts that required paying laid-off employees, the car companies had really no short-term variable costs, so it paid to continue to run factories when there were no sales. However, the labor contracts should have gone away, and I hope they negotiated more flexible supply contracts. Maybe this is just habit?
Thanks, Dick!