SumSam
April 2nd, 2008, 01:12 AM
A post in this thread (http://www.rr-bb.com/showthread.php?t=40279) about American stores getting by with 3 days of inventory had me thinking about the possible downsides to the famous Just In Time system.
JIT and its related cousing Lean Manufacturing, are used by most companies in retail, logistics and manufacturing.JIT/Lean calls for zero or mimimal inventories. They regard inventories as a waste, and something to be eliminated or minimized where possible throughout the "supply chain", right from the parts vendors, manufacturers, shippers, importers down to the retail outlets. The benefits claimed are:
- Inventory carrying costs minimized (warehousing, interest costs)
- costs of obsolescence minimzed (you won't get stuck with a lot of unsold product if models and fashions change quickly)
- quality costs minimized (if a batch of product is of bad quality, you won't get stuck with a lot of inventory to downgrade, rework or scrap).
Most business gurus and companies rarely talk about the very real downsides to JIT.
- Increased vulnerability in uncertain times of strife - social (riots, strikes, etc) international (embargoes, conflicts, terror strikes, etc.) natural disasters. It could take weeks to restore a broken supply chain. Inventories could run out in days.
- Greatly increased dependence on transportation. You now have tens of times more shipments of smaller and smaller batches of product being shipped. This means more trucks out on the highways doing more trips, consuming more fuel.
Perhaps companies should take a second look at JIT? Maybe like the prudent man in Proverbs, they should set aside some inventories as buffers for a rainy day. Maybe also reduce the number of trips their truckers need to make.
JIT taken to its logical extreme means a flow of one unit at a time through the supply chain. Time to take a big step back from jittery JIT?
JIT and its related cousing Lean Manufacturing, are used by most companies in retail, logistics and manufacturing.JIT/Lean calls for zero or mimimal inventories. They regard inventories as a waste, and something to be eliminated or minimized where possible throughout the "supply chain", right from the parts vendors, manufacturers, shippers, importers down to the retail outlets. The benefits claimed are:
- Inventory carrying costs minimized (warehousing, interest costs)
- costs of obsolescence minimzed (you won't get stuck with a lot of unsold product if models and fashions change quickly)
- quality costs minimized (if a batch of product is of bad quality, you won't get stuck with a lot of inventory to downgrade, rework or scrap).
Most business gurus and companies rarely talk about the very real downsides to JIT.
- Increased vulnerability in uncertain times of strife - social (riots, strikes, etc) international (embargoes, conflicts, terror strikes, etc.) natural disasters. It could take weeks to restore a broken supply chain. Inventories could run out in days.
- Greatly increased dependence on transportation. You now have tens of times more shipments of smaller and smaller batches of product being shipped. This means more trucks out on the highways doing more trips, consuming more fuel.
Perhaps companies should take a second look at JIT? Maybe like the prudent man in Proverbs, they should set aside some inventories as buffers for a rainy day. Maybe also reduce the number of trips their truckers need to make.
JIT taken to its logical extreme means a flow of one unit at a time through the supply chain. Time to take a big step back from jittery JIT?