A Little Luck
That demand prompted Sidel to make changes that unwittingly prepared the company to avoid an inventory crisis. One week after catastrophe struck Japan, a 40-foot container housing 2,000 cases of sake arrived via ocean freight. “Usually I do 20-foot containers, but our business has been doing well, and it’s been growing, so I ordered big,” he says. Even so, that shipment was barely big enough to supply the stores and restaurants Joto serves, which were in the midst of panic buying because of the situation in Japan.
The cases the firm imports now also carry twice the number of bottles. Faced with margins tightened by stiff dollar-yen exchange rates, Sidel decided to switch from 6-packs to 12-packs. That’s because much of Joto’s shipping and warehousing expense is charged to it on a per-case basis, regardless of the number of bottles per case.
By boosting inventory even as it cuts costs, Joto appears to have addressed two horns of a dilemma. On one hand, as a small business with high foreign-exchange costs, Joto doesn’t have enough free cash-flow to boost its safety stock substantially. On the other hand, Sidel feels he must try to increase his stock because of what he sees as ongoing uncertainty about supply-chain risks in Japan.
Although Joto has thus far experienced only two-to-three-day shipment delays, such occurrences could stretch out. As a result, “I’m erring on the side of being more aggressive in terms of increasing our inventory,” he says.
Will Toyota and other much-lauded embracers of just-in-time practices follow suit?
David M. Katz is senior editor for accounting and New York bureau chief at CFO.