I’ve heard it said (and am inclined to believe) that contemporary firms maintain less slack than their analogs did in the past (more just-in-time purchasing, etc.). Under this model, I guess that means they should need to maintain greater reliability, and to need to pay greater “costs of reliability”?
My model here is that new technology has allowed firms to maintain mostly-similar levels of reliability with less slack. Inventory seems like a central example: faster, more decentralized logistics enable low- or even zero-inventory models, while still ensuring that the product is there when the buyer wants it. (Concretely: within seconds of a customer buying X in a store, someone in a warehouse can be alerted to pack one more X in the next truck headed for that store, which makes restocking dramatically faster than it used to be.) There are still reliability costs sometimes, e.g. if the logistics chain falls apart entirely due to a disaster, but the main point is that the whole slack/reliability trade-off curve has shifted.
I’ve heard it said (and am inclined to believe) that contemporary firms maintain less slack than their analogs did in the past (more just-in-time purchasing, etc.). Under this model, I guess that means they should need to maintain greater reliability, and to need to pay greater “costs of reliability”?
My model here is that new technology has allowed firms to maintain mostly-similar levels of reliability with less slack. Inventory seems like a central example: faster, more decentralized logistics enable low- or even zero-inventory models, while still ensuring that the product is there when the buyer wants it. (Concretely: within seconds of a customer buying X in a store, someone in a warehouse can be alerted to pack one more X in the next truck headed for that store, which makes restocking dramatically faster than it used to be.) There are still reliability costs sometimes, e.g. if the logistics chain falls apart entirely due to a disaster, but the main point is that the whole slack/reliability trade-off curve has shifted.