Posted on 06/03/2021 2:41:41 PM PDT by blam
In the story of how the modern world was constructed, Toyota stands out as the mastermind of a monumental advance in industrial efficiency. The Japanese automaker pioneered so-called Just In Time manufacturing, in which parts are delivered to factories right as they are required, minimizing the need to stockpile them.
Over the last half-century, this approach has captivated global business in industries far beyond autos. From fashion to food processing to pharmaceuticals, companies have embraced Just In Time to stay nimble, allowing them to adapt to changing market demands, while cutting costs.
But the tumultuous events of the past year have challenged the merits of paring inventories, while reinvigorating concerns that some industries have gone too far, leaving them vulnerable to disruption. As the pandemic has hampered factory operations and sown chaos in global shipping, many economies around the world have been bedeviled by shortages of a vast range of goods — from electronics to lumber to clothing.
In a time of extraordinary upheaval in the global economy, Just In Time is running late.
“It’s sort of like supply chain run amok,” said Willy C. Shih, an international trade expert at Harvard Business School. “In a race to get to the lowest cost, I have concentrated my risk. We are at the logical conclusion of all that.”
The most prominent manifestation of too much reliance on Just In Time is found in the very industry that invented it: Automakers have been crippled by a shortage of computer chips — vital car components produced mostly in Asia. Without enough chips on hand, auto factories from India to the United States to Brazil have been forced to halt assembly lines.
But the breadth and persistence of the shortages reveal the extent to which the Just In Time idea has come to dominate commercial life. This helps explain why Nike and other apparel brands struggle to stock retail outlets with their wares. It’s one of the reasons construction companies are having trouble purchasing paints and sealants. It was a principal contributor to the tragic shortages of personal protective equipment early in the pandemic, which left frontline medical workers without adequate gear.
Just In Time has amounted to no less than a revolution in the business world. By keeping inventories thin, major retailers have been able to use more of their space to display a wider array of goods. Just In Time has enabled manufacturers to customize their wares. And lean production has significantly cut costs while allowing companies to pivot quickly to new products.
These virtues have added value to companies, spurred innovation and promoted trade, ensuring that Just In Time will retain its force long after the current crisis abates. The approach has also enriched shareholders by generating savings that companies have distributed in the form of dividends and share buybacks.
Still, the shortages raise questions about whether some companies have been too aggressive in harvesting savings by slashing inventory, leaving them unprepared for whatever trouble inevitably emerges.
“It’s the investments that they don’t make,” said William Lazonick, an economist at the University of Massachusetts.
Intel, the American chip-maker, has outlined plans to spend $20 billion to erect new plants in Arizona. But that is less than the $26 billion that Intel spent on share buybacks in 2018 and 2019 — money the company could have used to expand capacity, Mr. Lazonick said.
Some experts assume that the crisis will change the way companies operate, prompting some to stockpile more inventory and forge relationships with extra suppliers as a hedge against problems. But others are dubious, assuming that — same as after past crises — the pursuit of cost savings will again trump other considerations.
Chaos on the Seas
The shortages in the world economy stem from factors beyond lean inventories. The spread of Covid-19 has sidelined port workers and truck drivers, impeding the unloading and distribution of goods made at factories in Asia and arriving by ship to North America and Europe.
The pandemic has slowed sawmill operations, causing a shortage of lumber that has stymied home building in the United States.
Winter storms that shut down petrochemical plants in the Gulf of Mexico have left key products in short supply. Andrew Romano, who runs sales at a chemical company outside Philadelphia, has grown accustomed to telling customers they must wait on their orders.
“You have a confluence of forces,” he said. “It just ripples through the supply.”
Steep increases in demand made pet food scarce and Grape-Nuts cereal all but disappear from American store shelves for a time.
Some companies were especially exposed to such forces given that they were already running lean as the crisis began.
And many businesses have combined a dedication to Just In Time with a reliance on suppliers in low-wage countries like China and India, making any disruption to global shipping an immediate problem. That has amplified the damage when something goes awry — as when an enormous vessel lodged in the Suez Canal this year, closing the primary channel linking Europe and Asia.
“People adopted that kind of lean mentality, and then they applied it to supply chains with the assumption that they would have low-cost and reliable shipping,” said Mr. Shih, the Harvard Business School trade expert. “Then, you have some shocks to the system.”
An Idea That Went ‘Way Too Far’
Just In Time was itself an adaptation to turmoil, as Japan mobilized to recover from the devastation of World War II.
Densely populated and lacking in natural resources, Japan sought to conserve land and limit waste. Toyota eschewed warehousing, while choreographing production with suppliers to ensure that parts arrived when needed.
By the 1980s, companies around the globe were emulating Toyota’s production system. Management experts promoted Just In Time as a way to boost profits.
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This goes to show you that the Lefty “brainiacs” who shut down the economy to “get Trump” haven’t got the brains God give gophers.
Short-sightedness is not limited to leftwing idiots.
It was just a matter of time until on demand and on time deli9very screwed us. it wont be the last, expect many more in the future
I get the feeling there is something else going on.
It’s not chip shortages, or lack of people working because they are on the government dole.
It seems more like something similar to but on a smaller scale of the beginning of the pandemic, when the gov was buying up all the masks, latex gloves and disinfectants.
I’d be interested it know why the price of lumber is so high. I’m familiar with reason in the news, that homeowners stuck at home during the pandemic bought a lot of wood for home upgrades, but I don’t really believe that.
Are govs world over on a buying frenzy for certain items?
Fortunately I haven’t been in the market for a car. Is the auto market as fouled up as everything else? High prices, no selection, unavailability?
Used car prices have increased 50% in the last 12 months.
I read an article that said rental car companies are buying the used cars at auto auctions to maintain their stocks because they cannot get new cars.
Just-in-time is not a new concept. In fact they were talking about a Just-in-time ammunition system for the DOD back when Bush-Daddy was Prez. Fortunately there were still a few generals around who had some combat experience.
I can just see FedEX trucks pulling up behind foxholes with boxes of 30 round magazines and boxes of 5.56 ammo during a fire-fight.
Not just lefties.
Just In Time was, and is stupid, period.
Nothing beats a year’s stash of *EVERYTHING*
bookmark
Ford cut its own throat by putting useless bs
in their trucks
A relative whom I like quite a lot is a “BIG” in the auto business. Recently spoke of heated bidding wars on the car lots for new vehicles here in Georgia.
We’re in the market to replace one of ours and he said to wait....
I am in the market for a car (pickup). Dealers have vehicles, but lots are sparse and most incoming trucks are sold before they arrive. Assumption is negotiating price won’t get anywhere - they _will_ get asking price, and soon.
True - but they like to portray themselves as "brilliant", while we're "stupid".
I'm just waiting for the other shoe to drop at the universities, where they're trying to stuff the remote learning genie back in the bottle.
They didn't really think that one through... 
Yes, for me it is anyway.
I just hired a new employee, and I’m told it will be at least 6 months before I can get a company vehicle (Ford Escape) for him.
I'm bummed that I only have 20 or so 2x4x8s lying around the house.
I’m not sure if the author’s assessment is based entirely on current practices. I have been dealing with a number of industries in recent years that have replaced their Just In Time logistics model with a “Just In Case” model with multiple suppliers and multiple supply chains. This had been done in response with several highly disruptive events like hurricanes, civil unrest, labor disputes at West Coast ports, the Fukushima meltdown, etc.
I suspect that the cost of this series of scre-ups will educate a lot of companies.
regardless of how the world has changed, nothing changes when it comes to having what you need when you need it....and just in time can’t do it in an emergency.
Just In Time logistics for a combat area? That sounds like it could be one of Robert McNamara’s harebrained schemes.
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