With floods in Thailand disrupting auto manufacturers and hard-disk drive producers, supply chain interruption is again making news. After the earthquakes and tsunami in Japan in March, Just in Time (JIT) was impugned in the press. Let’s take a look at what JIT really is, and why it is still a viable approach.
JIT is not just an inventory program, it is a waste reduction methodology. When the Toyota production team coined the term JIT they were looking for ways to eliminate waste, and one way was to minimize inventory. This brings us to cause and effect.
The following diagram was created by Alan Weiss, and shows past/future and cause/effect. I’ve added examples of what this would look like when we apply it to supply chain management. Smart companies stay in the “preventive” quadrant to address root causes or potential supply chain interruptions and prevent them from happening in the first place.
Let’s say we’re looking at mitigating the risk of fire. To prevent a fire from occurring, we could have the fire marshal come in for an inspection, remove flammable materials, or put up no-smoking signs. Contingency plans are important, but ideally we want to prevent the fire.
In the case of stock outs, we could address past problems by switching freight methods or changing suppliers, but ideally we want to set the stage for future success, and one way of doing that is by building sound supplier partnerships.
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