Fuel highlights vulnerable

The recent petrol crisis in Europe provided fascinating insight into how easy it is to disrupt today’s economy.
As more companies run on just in time delivery systems, designed to tie up as little capital as possible in inventory – and according to some theories, lower stock levels would lead to less severe recessions.
But the JIT system has built in vulnerability. It depends on fresh supplies being quickly available when needed, and also on demand for supplies behaving in relatively predictable way.
According to the Financial Times, the recent crisis showed what can happen when neither of those assumptions holds good. An initially small disruption in petrol supply caused demand to soar, and retailers did not have enough stock to cope.
“The greater efficiency of the corporate sector is one of the reasons why economic output has risen over time. But this perfection is fragile, just as tightened guitar string is more likely to break.”

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