Is the Just in Time Model Dying?
The unprecedented supply chain and global trade disruptions caused by the COVID-19 pandemic have led to questions about the viability and sustainability of the Just In Time (JIT) model for businesses.
The pandemic, exacerbated by the lack of a united international approach to fighting it and the resulting supply chain issues, inflation and price increases, has damaged many businesses and made it very clear to many manufacturers and other companies that the Just in Time model needed to be adjusted.
As more critical inventory failed to arrive when manufacturers in many industries required it, shortages and delays became the norm. Consumers reacted by buying whatever was available from any source. This drove demand beyond the capacity of manufacturers to meet it and compelled many to shift back to the older stock inventory model based on the average daily use multipled by the average lead time. Due to lead times increasing because of the pandemic economic conditions, manufacturers rushed to stock up so much that they would not run out any time soon. That cycle of activity remains to this day as the world slowly climbs out of the pandemic hole and economies begin to stabilize.
The common response to questions about the Just in Time model’s viability continues to be, it needs to be tweaked instead of scrapped. There are multiple reasons. One, the JIT model is the global standard for decades across industries. It is very difficult and costly to change back to stock inventory model fully. Companies will work to improve Just in Time where possible, but remain aligned to the global system that uses it despite these recent obstacles. Two, JIT has been adopted by most of thw world due to the significant production and efficiency gains it has generated. It simply works.
One of the biggest champions is Tim Cook, CEO of Apple. In a Forbes interview, he stated inventory was “fundamentally evil”. “Inventory is like dairy products,” he has also said. “And who wants to buy spoiled milk?”
So, what does a business do to stay aligned with the global economic system using Just in Time, but be more responsive and agile in navigating the unstable supply chain reality?
The answers are slowly becoming clear and appear to focus on four adaptations:
1. Reshoring production to their home countries
2. Finding quality partners in their local or national area
3. Focusing more on tapping the potential of and retaining employees
4. Identifying and addressing elements of the 7 classic wastes of lean in operation and production
The first two attempt to limit exposure to the ongoing supply chain and global trade issues. The last two put the spotlight on internal issues that could also be decreasing efficiency or production. If the employees are simply going through the motions at work, the business is losing a significant advantage engaged and motivated employees can provide to improve processes and products. Furthermore, if the business did shift to a stock inventory approach during this period, it is imperative the transition back to the Just in Time model be handled effectively. Resolving inventory, waiting, overproduction and other operational wastes that have emerged during this chaotic period is critical.
So, the Just in Time model is not dying or going away. However, companies do need to evaluate their positions and figure out what needs to be adjusted to emerge out of this pandemic period better than ever. Prosit can help your business with any of these activities. Please contact us to discuss your needs and how we can assist in addressing them now.