How a Modified, Just-in-Time Manufacturing Approach Evolved for Supply Chains
Remember the news coverage awhile back showing all of those cargo and container ships near the ports of Los Angeles and Long Beach? Some were at dock loading or unloading cargo, and others were anchored off the coast.
As a supply chain manager, that image haunts me. Happily, supply conditions have markedly improved, but memories of that flotilla remain as a stunning reminder of how world markets can be disrupted or even shutdown by turbulent events such as the COVID-19 pandemic.
These disruptions are ironic, given that most of us who work in supply sourcing have always pushed to support a just-in-time (JIT) manufacturing and inventory management approach, a system created to solve exactly these supply chain pains.
Is it time to reevaluate the JIT concept? Let’s take a brief look back at: the original model; what system actually emerged over the years; and, finally, how a modified JIT system can improve supply streams—especially when combined with the available technology of rapid, on-demand, digital manufacturing.
Just-in-Time Manufacturing: Driven by Toyota
JIT has been around for decades, and its adoption by Toyota and its Toyota Production System (TPS) has been well documented. The carmaker may not have been the first out of the gates with such a system, but it was one of the earliest companies to successfully apply the approach to manufacturing, creating a production system based on the philosophy of achieving the complete elimination of all waste in pursuit of the most efficient methods.
The chief goal of such a system was to streamline operations, including supplier activities, and reduce inventories, maintaining just enough inventory onsite to keep a company’s manufacturing supply chain operating for a predetermined period of time. When a company would need more supplies, it would order what was needed from a local or regional supplier nearby. This shortens the time it takes to get parts, reduces the cost of shipping, and lessens the need to warehouse inventory onsite. Plus, closer supplier proximity allows better oversight of those suppliers.
Eventually, however, the promise of dramatically cheaper supplies from overseas sources—led by China’s lower labor costs—steered industry to globalized manufacturing. Companies could order massive quantities of supplies or parts from abroad and then warehouse those goods to ensure they would be available when needed. That seemed to work for a while but was not really a “just-in-time” approach any longer. The system evolved to be sort of an “almost JIT” approach. In addition, as those of us who manage supply chains have experienced, a long list of offshoring costs and challenges surfaced over the years.
Offshoring’s Costs and Challenges
A prime issue when evaluating offshoring supply chains centers on cost. And there are a lot of offshoring costs: Extra inventory and safety-stock costs; overall international shipping and receiving costs; unplanned expediting costs; extra-long travel costs for management, engineers, and others to fix problems; communications and related time-delay costs; lost market share costs; currency volatility and wage inflation costs. And, just to be clear, there are more cost factors—these are just some examples.
Beyond cost hurdles, there are still other offshoring challenges to navigate.
Take product development. Design iteration across an ocean can be painfully slow.
Also, consider geopolitical uncertainty. Tariffs, regulations, imposed duties, growing nationalism and isolationism in various countries, social unrest, and governmental upheaval can all profoundly affect suppliers.
Quality and waste are issues, too. Consider this example: A company’s supply chain manager is waiting for his or her goods to arrive, then, when finally receiving the shipment, something might be missing or broken, or there are different products in the shipment from what was ordered. So, essentially, the manager still doesn’t have the part when it’s needed.
Then there are the black swan events, such as the COVID pandemic and the war in Ukraine.
Bottom line advice? Take a high-level view, keeping in mind not just the purchased price of a part but the landed cost of that part, which is the sum of all expenses associated with the international shipping of that part.
Along with that view, consider the total cost of ownership, the method for quantifying the costs for every activity along the supply stream, including acquisition, transportation, storage, and selling of goods. As Bizmanualz.com reported, companies “may find that lower wage labor costs are not the whole story.”
A Modified JIT Strategy Combined with On-Demand Production
More recently, companies have been rethinking international, offshore strategies and turning to a sort of hybrid or modified version of JIT manufacturing and supply management, merging, when possible, regional and global strategies.
This approach has been enabled by advances made by digital manufacturing suppliers like Protolabs, which can provide rapid turnaround for prototype and end-use parts and products and often don’t require minimum order quantities, thereby saving substantial time and warehousing costs.
Ultimately, using global manufacturers and suppliers, when it works, takes advantage of lower labor costs. At the same time, using regional suppliers—when it makes sense—takes advantage of a supply source that’s closer to the point of production and consumption. The result of using the best of both worlds? JIT manufacturing and inventory management gets reinvented and strengthens a company’s overall supply chain.
|Bernie Henderson is the Director of Global Procurement at Protolabs. She has more than 20 years of supply chain management experience across several industries. Henderson holds a Master of Business Administration degree from Bethel University in St. Paul, Minn.|