When I was sitting through lectures about supply chain management I never thought they'd end up being useful like this. Still business is all around us as they say, so here goes. In a comment below David from Tokyo points to some Japanese figures about the size of their whale meat stockpile. I have a few comments about those but I'd like to start by pointing out that in the year from 1 August 05 to July 31 06, the stockpile grew by 445 tonnes.

Looking at the numbers from 1 September 05 to August 31 06 the growth is 469 tonnes. Or to put it another way, either David's translations are wrong or that stockpile is getting bigger on a year by year basis. If anyone wants to look the original Japanese (which I can't read) is here.

To address his point - that doesn't suggest Iceland will be able to sell them much.

However this movement is pretty minor in the scale of things. For more about the exciting world of supply chain management and all the numbers, read on.

Inventory costs money. The last thing any business wants is more of it. This is the principle on which Toyota's lean production system conquered the world's automotive market. It's the principle on which Dell hammered all comers in the PC market in the late 90's and it gave the world ideas like Just-In-Time production. Inventory is bad because it costs money, it costs you money to store product, it costs you money to store raw materials. When a business looks at it's warehouse it sees only costs.

But sometimes you have to have inventory. You might need inventory because demand is unpredictable, or to build up for a seasonal rush. Inventories of Turkeys, Toys and Mistletoe all surge before Christmas. You might need inventory because your production is unreliable - if your widget making machine breaks you need enough widgets to keep your customers happy till it's fixed.

One of the key measures of how well you're managing your inventory is how many times it turns over in a year. If I have ten widgets in stock, and sell 100 widgets a year my inventory turns over ten times. Dell's inventory turns over more than 100 times in a good year. The Japanese whale industries turns over about one and a half times (7768 tonnes sold, 4671 tonnes on hand).

Exhibit A, stocks of whale meat

MonthStockpile at
previous month endIncoming stockOutgoing stockStockpile at
current month end

Aug '05422613257474804

Sep '0548042104504564

Oct '0545622075514220

Nov '0542201955253890

Dec'0538902476263511

January35122245513185

February31851494362898

March289815398273610

April361029205615969

May59691293575741

June57411634145490

July549090517234672

August467213877855274

The conclusion you should draw from this is that they have far too much inventory. Looking at the numbers you can see that just after the delivery of the meat from the antarctic in March 827 tonnes was sold, presumably to distributors who wanted the fresh catch, not the stuff that had been frozen for years. Meanwhile the inventory never went below 2897 tonnes. So even if no whale meat came in for three months in a row, and those months were all the same as the busiest month of the year for whale meat sales they wouldn't run out.

How much inventory should this business be carrying? Well definately a lot less. Especially if you allow for latency in the supply chain - once the ministry runs out of whale meat there'll still be some in the supply chain for wholesalers, supermarkets and so on. Given the fairly predictable looking demand and the reliable delivery I'd say they should be running with between 500 and 1000 tonnes at most, turning their inventory about eight times a year.

That would be a lot of money in the bank. 3500 tonnes of refrigerator space doesn't come cheap.

Meanwhile where did those extra 400 tonnes come from? Well taking an extra 500 whales at about 1 tonne per whale is probably what did it. It's an insane business decision, especially when the Japanese government has to resort to selling whale meat at wholesale prices to get rid of it, and as we've seen here, still has three to six times more than they need sitting in warehouses.

We can learn even more from historic levels of inventory. In 1980 the business carried about 20 000 tonnes of stock - presumably because they thought they needed it. That suggests that demand for whale meat has crashed in the last 25 years.

No one is denying that whale meat sells in Japan. People bought BetaMax videos and Gauloise cigarettes right up to the end - but it didn't make those viable businesses either.