Just-in-time (JIT) is a management philosophy that Toyota developed in the 1970s to meet consumer demands with minimum delays. It needed close coordination with suppliers to ensure that production components arrived in time for production to begin, but no earlier. But is it right for today?
The aim was to maintain the minimum of inventory needed to meet demand. This would help organisations cut costs and increase their agile response to ever-changing customer needs and market fluctuations.
Then in 2020 came the COVID pandemic. As a result of supply shortages, 82 percent of mid-market manufacturers surveyed by BDO had to reduce production or shut it down completely at some point. This meant lost revenue from orders they couldn’t fulfil during shutdown, and lost customers to suppliers that could deliver. Furthermore, BDO found that a similar proportion that shut down temporarily or slowed down production expect their business will take at least a year to recover.
The just-in-time cost to businesses and the supply chain
To make matters worse, massive disruptions to the supply chain followed. This led to chaos for the manufacturers and distributors of goods who could not produce or supply at pre-pandemic levels. The main reasons being worker shortages and pinch points due to lack of key components and raw materials.
The breakdown of the global supply chain was worse for companies operating under a JIT mindset. “When the production of £40,000 cars is held up by lack of a $0.5 chip, that’s the idea of just-in-time manufacturing being carried too far.” Said Randeep Rathindran, Vice President of Research of Gartner Finance, in a Supply Chain Dive article.
The message for manufacturers is clear. Sudden short-term events can have long-term effects. Having agility to minimise disruption and respond quickly to it is critical.
Balance Risk and Resilience with Technology
Experts in manufacturing have long debated the trade-off between risk and resilience in lean inventory management versus safety stock. For specific items the resilience gained by a safety stock (just-in-case) enables continued production despite supply chain shortages. Perhaps it needs an easing of the ultra-lean JIT approach and finding a balance that provides flexibility for unexpected events.
No one is saying that JIT is obsolete. Yet, like BDO, many experts are making recommendations to find the balance between risk and resilience.
With tools like automation technology and robotics, organisations can gather a vast amount of data. They help companies identify the pinch points that are holding up their operations and provide insights on addressing them. By working more efficiently and increasing throughput, organisations can gather a vast amount of data and increase production.
How Mitsubishi Electric can help
Mitsubishi Electric provides advanced technology solutions designed to deliver data and insights to manufacturers to help them improve operations. Identifying pinch points is key to understanding how to address them. Manufacturers should also stay prepared for the unexpected and these tools help them prepare for getting products to their customers.
In this way, Mitsubishi Electric can serve as a valuable resource to manufacturers as they find the right balance between just-in-time and just-in-case inventory strategies. The ideal stance for their unique needs, that minimises risk and increases resilience against future unexpected events.
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