Just-in-time: (adj.) a manufacturing workflow methodology aimed at reducing flow times and costs within production systems and the distribution of materials (Source: CIPS)
At face value, just-in-time (JIT) manufacturing is incredibly beneficial. It eliminates the need for excess inventory if inventory is needed at all. A JIT manufacturing system can be used for both internal or external processes, but the idea is to follow lean manufacturing principles, and well, keep the system lean and efficient.
If a manufacturer is embracing just-in-time manufacturing, they’re only making product when it’s needed and not a moment before. Product is not made ahead of time to avoid building up excess inventory….. This is why it’s called “just in time”. Manufacturers aren’t wasting time, money, or raw materials building products that downstream processes won’t need or consumers won’t buy. Basically, it eliminates creating a surplus of unneeded products. On paper, it’s a great system, and it tends to save manufacturers a LOT of money.
The automotive industry is an example of an industry that relies heavily on just-in-time manufacturing, and not only has embraced this system for many, many years but has practiced it successfully. Nearly all processes in automotive manufacturing are based on JIT. These manufacturers were essentially the pioneers of JIT, and since then, other industries have learned to use JIT systems in their plants, too.
When it works right, just-in-time manufacturing is absolutely fantastic for all of the reasons I mentioned above. But, when it doesn’t work, it’s all messed up and creates stress on the manufacturers, their supply chains, and inevitably, the consumers who want to buy the products.
That’s exactly where manufacturing stands right now…. All messed up because of significant problems, delays, and frustrations, that have caused JIT to frankly, fall apart. Unless you’ve been living under a rock, you know exactly what I’m talking about. You’re likely well aware of the disruptions that have plagued manufacturing and supply chains these past few years.
But, who is to say, had it not been for a once-in-a-lifetime pandemic, would JIT have failed? If I’m being honest, I think just-in-time is a fantastic manufacturing system, one that has enabled efficiency and lean manufacturing to excel. It’s not a bad system by any means, but rather, it’s been caught in a whirlwind of supply chain issues and product shortages that have caused it to fail.
This blog isn’t so much explaining what just-in-time manufacturing is or how it works because there are plenty of very well documented resources explaining that, but here, we focus on the system as a whole and if it’s well-suited for the future of manufacturing. I’ll look at the effects a global pandemic has caused on JIT and how manufacturers can move forward.
The Ripple Effects of Disruptions in the Supply Chain
The biggest downside to JIT, as we’ve learned, is when there are disruptions in the supply chain. Disruptions aren’t a new concept to the manufacturing industry; they’ve been happening since the Industrial Revolution first took hold, but a disruption of this magnitude has significantly altered the mindsets of manufacturing professionals, creating confusion and questioning of the role just-in-time manufacturing will play in the industry moving forward.
Think about the struggles the automotive industry has faced, particularly in regards to the chip shortage. If a manufacturer is missing a critical part from a supplier, the whole production line stops because there is no more work to be done without that part. Now, car production is at a standstill, demand increases because of short supply, and it all costs an absolute fortune for the manufacturer. Truly, it’s a manufacturing nightmare that keeps many, many people up at night.
As with any industry, depending on how long a shortage or disruption lasts, it can cause ripple effects throughout the entire supply chain. If a manufacturer has stopped their production line, they are no longer going to need parts from their suppliers, those suppliers will no longer need parts for their products, and the effect continues to be felt all the way up the chain. It’s a ripple effect that turns into a full-blown tidal wave, stopping demand and production at every step of the way.
Balancing Advantages and Disadvantages of Just-in-Time Manufacturing
At this point, I’ve probably made it sound like JIT is the worst manufacturing system and provides absolutely no benefit. In fact, that couldn’t be further from the truth. I firmly believe just-in-time manufacturing is the most efficient system for manufacturers. Had it not been for a ‘bring everything to a standstill, tumultuous, massive disruption’ like the pandemic, not one person would be questioning the effectiveness of JIT.
JIT sounds like a perfect world concept, but it works. It works very, very well.
I know I already said this, but the money, time, and resource-saving benefits of JIT are huge. Eliminating excess inventory is a huge win because it sets up both the manufacturer and supplier to work efficiently together, creating processes that perform seamlessly.
Let’s think about inventory for a moment. It’s not like manufacturers don’t have any inventory; there is some for emergencies, but the stock is typically close to zero. Automotive manufacturers aren’t keeping stock and stock of parts. They make the parts that are needed, and suppliers are constantly delivering other parts all day long. It goes to the assembly line to build, and the process continues. It’s very similar to the Kanban system in this way.
JIT works because manufacturers rely not only on their internal processes to be completed, but have formed excellent customer-supplier relationships to keep external processes efficient and healthy, too. They have to work very tightly together. They have to trust one another. That’s the beauty of just-in-time manufacturing. It creates the framework for maintaining those relationships, the communication, and the trust.
In reality, JIT can be compared to Kanban, as I mentioned. Manufacturers are producing products when needed and planning ahead for future work.
The major downside to JIT is when there are significant supply chain issues. On a small scale, what would happen if the delivery driver quit? The manufacturer would hire someone to take his spot and get the product delivered. This is a simple example, but when it happens on a mass scale, it creates significant disruptions to the supply chain. We’ve seen this with the pandemic and product shortages and now, labor shortages. In these cases of massive disruption, JIT begins to fall apart.
If manufacturers can’t get parts to make a critical component, then they can’t deliver. It’s not terrible when it’s just one disruption, but when it’s many, it’s a significant problem.
Disruptions Will Always Happen… So, How do Manufacturers Keep Moving Forward?
All of that to say, disruptions cannot really be controlled. Not really. They happen. But, things will always happen, and that’s nothing new. There will be events that cause disruptions, both big and small. So, how do manufacturers work to overcome these disruptions, and does that involve JIT moving forward?
The key is communication and visibility.
Major disruptions aside, there are famous stories of automotive companies fining their supplier’s large amounts of money for every minute of downtime on the production line. Why? They didn’t communicate delays which is not only frustrating to the automotive company but costs them lots of money and time. It also creates that ripple effect I mentioned earlier. Had the supplier communicated and provided visibility into a potential delay, the situation could have been avoided or at the very least minimized.
Manufacturing requires communication and visibility to figure out how to work around any problems because as I’ve mentioned, problems will always happen.
A Clear Line of Communication is Necessary
Establishing communication and visibility between the customer and suppliers will provide the foundation to understand things like:
- What are the average lead times?
- What should the time frame be for planning?
- Are there price increases?
All of this information tells a greater story of how manufacturers need to proceed in the wake of disruption, not only for their own production but to pass along the expectations and information to customers.
That is how we combat disruptions like the manufacturing industry is facing now. Communication is everything in working towards a solution. Not only communication but visibility. It’s important to know where you’re at. With visibility, transparency, and communication, everyone can plan.
Another advantage is having visibility into the supply chain, including manufacturing processes. We have a customer who knows when containers of a product are going to be delivered so they hold spots on the line to finish the product that has been sitting, waiting for missing pieces. It’s a true end-to-end process.
Let’s circle back to the automotive example. If you’re a car builder waiting on one chip to finish an order of mostly completed cars, you are going to want to know when those chips are going to be delivered. Then, you can hold time in the schedule to complete the cars and ship them out to customers around the world. It’s absolutely imperative in not only delivery but maintaining customer satisfaction.
Visibility into manufacturing is the same as visibility into the supply chain simply because the two must work together at all times. When these are joined, manufacturers can give their customers good lead times and better manage expectations.
It doesn’t work if you don’t have that visibility.
The Future of JIT
So, what does the future hold for the industry and particularly JIT? Will product shortages and supply chain disruptions be treated as a “once in a lifetime” event? Will they create a long-lasting shock that will transform manufacturing as we know it? It’s hard to predict the future, but my guess is that it will only create short-term changes. I firmly believe things will shift back to a pre-disruption state. I think manufacturers will build up buffers for a little while until they’re comfortable with the progress. Then, manufacturing will go back to the way it was before – lean manufacturing with an efficient JIT system in place.
It’s hard to know when this will happen, but until then, I’ll continue to stress the importance of “rolling with the punches”, creating clear lines of communication within the supply chain, and establishing visibility at every step of the way.
Just-in-time should, by all definitions, work. It worked well for a very long time.
People will mitigate these problems caused by disruptions for a while, but as time goes on, the inventory buffers will go down, the hoarding will stop, and manufacturing will drift back to a just-in-time system.