Just in Time Meets Global Supply Chain Issues

Principles Associated with Just In Time

What is Just in Time

Just In Time (JIT) is a management strategy designed for competitive advantage.  It is structured around values that are rooted in Lean (Click here for more information on Lean) principles:

  • Continuous Improvement
  • Waste Reduction
  • Increased Efficiency  

The idea of increasing profits through operational cost reductions is not new but has evolved in complexity since Henry Ford popularized automotive mass production.

Modern Just In Time concepts refer to the movement of through the production chain only when they are needed.  While the ideas are manufacturing focused, they also serve to address so much more:

  • Overproduction (Manufacturing)
  • Dead stock (Inventory) 
  • Time waiting on materials to arrive (Labor)
  • Time spent on unnecessary transportation or movement (Logistics)
  • Waste associated with defects (Quality Control)
In this way, JIT has spread from the factory floor to the corporate boardroom. And in doing so, it has become a blueprint for businesses to fashion their culture and operational principles.  

The Just in Time Half-Measure

Most companies ignore Lean principles when implementing Just In Time strategies.  This has become apparent during the ongoing supply chain crises, as shelves empty of toilet paper, gas and meat prices rise, and chip supplies evaporate.    

The benefits of JIT processes are well documented and appeal to companies intent on improving their bottom line.  But the costs and disciplines associated with a well-managed JIT strategy are somewhat less appealing and seem easy to ignore; for example, there is little appetite for:

  • Securing multi-skilled workforces 
  • Forming collaborative partnerships with base suppliers
  • Training and monitoring supplier networks to assure product quality and on-demand delivery
Companies that resist symbiotic supplier relationships are ill-prepared for the exposures that come with JIT (Click here for information on Channel Balancing).  For JIT to succeed, it requires buy-in from the entire supply chain instead of a top-down contract.  This demands a level of supply chain engagement most companies are unwilling to sponsor, even when it threatens business continuity. 
 
So, while the idea of JIT has widespread appeal, most companies lack the discipline or cultural alignment to properly support it.  As a result, JIT is often implemented as a half-measure or a fleeting fad and lacks the ability to adapt when conditions become difficult.

Putting Just in Time in the Crosshairs

Just In Time strategies work; they generate efficiencies and lower costs.  But they also require the entire Lean package in order to ensure business continuity . The tsunami that struck Japan in 2011 revealed this in no uncertain terms. 

Toyota, a global leader in JIT, struggled to recover its supply chain in the wake of the 2011 disaster.  Many of Toyota’s supply chain disruptions surprisingly came from tier 2 and tier 3 suppliers, companies with whom Toyota had little or no relations or interactions.  The situation was so unexpected and severe it triggered a massive, inter-company supply chain evaluation.  This study was designed to identify hidden vulnerabilities and prescribe preventative actions.

As a result of this study, Toyota: 

  • Introduced a complex early-warning system aimed at maintaining supply chain integrity
  • Established close, ongoing communications with its extended supplier base
  • Bolstered the inventories of at-risk parts

Fast forward to 2022 and the current supply chain crisis.  Widespread manufacturing and supply disruptions across the economy are strangling JIT production, generating shortages, and inflation.  In the automotive sector, the crisis is made worse by a persistent, debilitating chip shortage, which is constraining vehicle production and costing tens of billions of dollars.  

The chip crisis appeared out of nowhere for most automakers, forcing them to idle factories and cut production.  Interestingly, one automaker has avoided much of this pain.  The Toyota early-warning system altered the company to the impending shortage, causing it to increase its chip inventory to four months.  This action has insulated Toyota from some of the harshest realties of the chip crisis. 

Doing Just In Time Right

Just In Time is not a flawed idea.  It holds real merit, both for short-term profit and for long-term sustainability.  It is a true marvel of modern thought and ingenuity. But it also comes with obligations to:

  • Seek input from your workers and suppliers
  • Identify existing problems and implement smart solutions
  • Look for future problems and implement preventative measures
  • Engage in continuous improvement efforts
  • Distinguish between good costs and bad costs

Companies that are able to do these things will be well-positioned for current success and future growth.  Companies that fail in these areas are destined to repeat the mistakes of the past.

Doug Stein

Doug Stein

Doug Stein is the Chief Operating Officer of 3NG Consulting and specializes in automotive parts and service, product management, program design and management and marketing.

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