![]() Toyota suppliers could not get components they needed (predominantly semiconductors) and were left rethinking their JIT strategy. In 2011, a devastating earthquake rocked Fukushima to its core. What does the future hold for just-in-time manufacturing with all that in mind? Is it time to rethink how global business is conducted? Or can we adjust a system that’s worked relatively well thus far to meet a new reality? Toyota, the founder of JIT manufacturing, may have the answer. The complexity of the supply chain is the exact opposite of what JIT is meant to do. The odds of something going awry are good enough to bet on. From the raw material stage to completing your order on Amazon, an item moves through a vast network of mines, factories, manufacturers, ports, fulfillment centers, roadways, and delivery drivers. Thus, some believe the complexity of the supply chain in general is to blame for current shortages. Natural disasters, power outages, and global pandemics are JIT’s worst enemy. ![]() However, the faster the machine runs, the more prone to risk it is. Airports build more runways, highways add extra lanes, and seaports expand for bigger ships. We’ve grown accustomed to quick delivery, made possible by a dedication to infrastructure. Just-in-time manufacturing principles also apply to the supply chain itself. Without stockpiles of computer chips to tap into, the automobile industry slowed to a crawl. These factories anticipated the decline in demand from foreign auto factories, but what they didn’t see coming was the sudden spike in demand for new cars. When the pandemic hit, the factories shut down, thus halting production. Most of the world’s semiconductor supply comes from foundries in Taiwan. Cars rely on computer chips and semiconductors that have been in increasingly short supply. One of the best examples of JIT’s rippling impact on the consumer market is the automobile industry. Some blame JIT’s undeniable link to higher profits others fault the complexity of the supply chain as a whole. Here we arrive at the key question: is just-in-time manufacturing entirely to blame for the shipping crisis and ongoing supply chain issues? Experts seem torn on the matter. ![]() Just-In-Time Manufacturing: The Cause of The Shipping Crisis? If one raw material factory in China can’t get their hands on a particular paint chemical, a hardware store in rural Wisconsin can’t get the products they need. In this model, manufacturers rely on specific suppliers, who are dependent on their own specific suppliers, and so on. When one cog in the global machine jams, the whole system comes to a standstill. First and foremost-and one of the cruxes of the supply chain crisis-JIT risks running out of stock. However, JIT is not all sunshine and roses. Just-in-time manufacturing ensures that you’re not sitting on a stockpile of depreciating assets. In the fast-evolving tech world, items can be groundbreaking in 2021 and obsolete by 2022. Furthermore, fewer labor hours (if any) go towards producing non-profitable items. A company that only orders what they need reduces the amount of raw material wasted at the end of production. Just-in-time manufacturing also saves money by way of labor and raw materials. If you have a stockpile of extra goods and parts that aren’t selling, you’re not getting much of a return on those assets. Lowering your inventory also boosts your return on total assets (ROTA) ratio. Since inventory remains at a minimum, the higher turnover ratio-the cost of goods sold (COGS) divided by average inventory-means a company is efficient. The strategy cuts down on stock, ensuring that there’s always a buyer for the product on hand. Products are made and shipped to order, arriving just in time to their next destination. Just-in-time manufacturing is a strategy in which manufacturers produce what is needed rather than stockpiling an inventory. How appropriate is it to blame JIT, and how might the model adapt once as life returns to a semblance of stability? Now, in the wake of another highly contagious phenomenon, just-in-time manufacturing is taking the blame for the ongoing supply chain crisis. Then, Toyota pioneered the first iteration of just-in-time (JIT) manufacturing: the practice of making products to order, instead of managing an unwieldy inventory.Īlso sometimes referred to as a “lean” manufacturing system, JIT was highly contagious, becoming the crux of global production for the next fifty years. For the next 30 years, they experimented with different ways to utilize cash flow, real estate, labor, and resources to maximize profits. Is just-in-time manufacturing entirely to blame for the shipping crisis and ongoing supply chain issues? Experts seem torn on the matter.Īiling after World War II, Japan set its sights on rebuilding its industry sector with some help from its friends in the West.
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