JIT works extremely well when forward demand is reasonably forecastable and there are no shocks in the supplychain but it (often) has little or no resilience when something goes nastily wrong - like an earthquake that takes out huge swathes of a country's infrastructure
However, don't knock it too much because it's one the major reasons that manufacturers have been able to drive down the cost of many, many things over the years.
There's no denying the benefits of a fully implemented JIT system but as with everything the devil is in the detail. JIT is also haunted by the spectre of "reductionist thinking" beloved of accountants the world over. I have highlighted a few telling phrases from that informative WIKIPEDIA article.
Just-in-time (JIT)
a production strategy that strives to improve an business' return on investment by reducing in-process inventory and associated carrying costs.
In recent years manufacturers have continued to try to hone forecasting methods (such as applying a trailing 13 week average as a better predictor for JIT planning, however some research demonstrates that
basing JIT on the presumption of stability is inherently flawed.
I
nventory is seen as incurring costs, or waste, instead of
adding and storing value, contrary to traditional accounting.
JIT reduces inventory in a firm. However, a firm may simply be
outsourcing their input inventory to suppliers, even if those suppliers don't use Just in time.investigated this effect and found that suppliers in Japan charged JIT customers, on average,
a 5% price premium.
JIT implicitly assumes a level of input price stability that obviates the need to buy parts in advance of price rises.
Where input prices are expected to rise, storing inventory may be desirable.
Karmarker highlights
the importance of relatively stable demand, which helps ensure efficient capital utilization rates. Karmarker argues that
without significantly stable demand, JIT becomes untenable in high capital cost production.
Also, t
he factory began building many vehicles to order, eliminating the risk they would not be sold. This improved the company's return on equity.
Problems
[edit] Within a JIT system
Just-in-time operation leaves suppliers and downstream consumers open to supply shocks and large supply or demand changes. For internal reasons, Ohno saw this as a feature rather than a bug. He used an analogy of lowering the water level in a river to expose the rocks to explain how removing inventory showed where production flow was interrupted. Once barriers were exposed, they could be removed. Since one of the main barriers was rework, lowering inventory forced each shop to improve its own quality or cause a holdup downstream. A key tool to manage this weakness is production levelling to remove these variations.
Just-in-time is a means to improving performance of the system, not an end.
Very low stock levels means shipments of the same part can come in several times per day.
This means Toyota is especially susceptible to flow interruption. For that reason,
Toyota uses two suppliers for most assemblies. As noted in Liker (2003), there was an exception to this rule that put the entire company at risk because of the 1997 Aisin fire. However, since Toyota also makes a point of maintaining high quality relations with its entire supplier network, several other suppliers immediately took up production of the Aisin-built parts by using existing capability and documentation. Thus, a strong, long-term relationship with a few suppliers is
better than short-term, price-based relationships with many competing suppliers. Toyota uses this long-term relationship to send Toyota staff to help suppliers improve their processes. These interventions have been going on for twenty years and have created a more reliable supply chain,
improved margins for Toyota and suppliers, and lowered prices for customers. Toyota encourages their suppliers to use JIT with their own suppliers.
My take on the situation is that JIT undoubtely improves the returns on investment for large car manufacturing companies. It saves considerable sums of money in the car manufacturing process but may simply pass on these costs to suppliers who charge more. There is also the question of just what proportion of these reduced costs are passed on to the customer in the form of reduced prices of cars or spare parts and what proportion goes to shareholder as returns on invested capital?
The down side for the customer is increased waiting time for certain models or parts , stretching to many months in some cases, because the production system is being "throttled " in the name of the JIT system. In other words the JIT system works to optimise the production process not satisfy customer demand. In the end for manufacturers that cannot achieve the correct balance between production costs and satisfying customer demand the result may be the loss of customers to another marque which actually has cars for sale.
A some examples
The recent debacle with Mercedes blue efficiency injectors
Not enough 5 speed automatic gearboxes in certain models.
Halt to certain models due to lack of certain electronic modules.
My take on JIT is that it works extremely well for the manufacturers but that the customer is expected to simply
accept as inevitable any difficulties in supply the system may produce.
People reading this thread on their computer are benefiting from a digital electronics technique known as "buffering"
Data buffer - Wikipedia, the free encyclopedia Chances are their computer wouldn't work without it. Maybe the return of a little "buffering" in the car manufacturing process might not be a bad thing either.
