If only Just In Time was Just That Easy!
Why do so many people misunderstand JIT?
Just-In-Time. On the surface, this seems to be a pretty easy concept to understand. Cut inventory down to free up cash and floor space, then time your deliveries so that they can be supplied to the production floor “just-in-time” to be used. Accountants love it because it saves a lot of money, and production types love it because it gives them more floor space to do other things. As long as the proper amount of lead time is figured in, it’s a beautiful system!
And it’s wrong.
Unfortunately, mainstream media outlets don’t do anyone any favors when they push out misinformation about JIT, like in these articles from the NYT, WSJ and even my beloved NPR Planet Money. All of these articles make the same critical error regarding Just In Time manufacturing… they think it’s only about inventory reduction, when in fact, that’s merely a resultant of doing a lot of other things right.
Just In Time is not a way to drive inventory down to zero
When Toyota developed JIT manufacturing as part of the Toyota Production System in the 1950’s, it was part of the overarching goal of shortening the time between customer order and receiving cash. This endeavor was something they had to do, given the state of Toyota’s (and Japan’s) economy following WWII. They didn’t have the luxury of “buying in bulk” to reduce their per piece price like Henry Ford did with mass production. Instead, they focused on building their processes to be robust enough so that they didn’t need mountains of inventory to cover up for inefficiencies like long setup times and poor machine reliability. And this, dear friends, is the point of differentiation – where people who practice Lean and seek to understand its methods diverge from what the media’s portrayal of what Just In Time is.
First remove the rocks; then lower the water level
In the analogy we often use to describe Just In Time, we envision a body of water as Inventory. Holding Inventory hides many sins, as it’s a fantastic “pressure relief valve” that allows us not to have to move to quickly when things go awry. Machine went down? That’s okay – we’ve got a few weeks’ worth of inventory that we can ship off of. The last batch of parts all have a quality defect? That’s cool – thankfully we overran the last order, so we’ve got a safety net…
Where many companies go wrong with JIT is that they think inventory reduction comes first. They hack and slash their inventories, then push their suppliers to do the same in order to reduce part costs. This all works fine when things are running well, but it also makes the supply chain extremely fragile – any small “blip” and you’ll get what we’re seeing in the United States right now – empty grocery store shelves and empty car dealerships…
In order to be able to enjoy the fruits of pursuing Just In Time, organizations must first remove the rocks (i.e. the parts of the system that cause downtime). Only then should inventory levels be reduced. To go the other way around is putting the cart before the horse. We must first look at our processes and aggressively attack those things that cause problems:
- Utilize Setup Reduction to reduce our machine setup times,
- Use Total Productive Maintenance to reduce machine downtime,
- Employ Design for Manufacture to make products easier to make & assemble,
- Engage Respect for People to ensure that employees’ voices are being heard.
Utilize local suppliers to reduce Transportation wastes
Chasing overseas low-cost suppliers is, by definition, not Just In Time. There’s no way that a literal slow boat from China (which is currently running about 8-12 weeks) can be called Just In Time. This is also where mainstream media gets JIT wrong. Ordering products within lead time, so that they are delivered “Just In Time” is not the same a true Just In Time manufacturing. I’ve been accused of claiming “No True Scotsman” on this, but hear me out, because it’s an important distinction and will literally be the difference between success and failure.
In the mid-1990’s, Toyota decided to build a plant in Buffalo, WV (TMMWV). Initially slated to make 4 cylinder motors, today it produces a cadre of engines, transmissions and hybrid drivetrains. Around 1998, Toyota made a crucial decision that greatly impacted my professional trajectory – it decided to localize the Camry’s automatic transmission, and they did this in support of Just In Time.
You see, Toyota already produced this exact transmission in Japan. They had it all set – good suppliers, a robust design… the supply chain was humming along and on time delivery was great. But Toyota realized something that a lot of other companies perhaps would never have questioned under those circumstances – with their USA Camry sales increasing, shipping components ½ way around the world was allowing the waste of Transportation. Not only did it take a long time, it was risky. What if there were storms? Container shortages? A global pandemic??
So they made the very expensive decision to “localize” the Camry transmission to the United States to support USA sales. They adjusted the plant layout, and engaged with all-new suppliers, including my employer. We won the business, and ultimately lunched more than 30 bearings and bearing components into production. Our plant was 7 hours from theirs, which is a bit of a drive, but it’s still a heck of a lot closer than Japan! And – there are a lot fewer problems that can happen in 400 miles versus 6,600!
Just In Time is a process
It’s very easy to look at empty store shelves, hear the words “Just In Time” and draw a conclusion that it’s to blame for all of our current supply chain problems. Certainly, the above articles seem to be drawing that conclusion as well. However, that’s not really Just In Time manufacturing. It’s lazy procurement. It’s rolling the dice that nothing will disrupt the supply chain when we’ve done nothing to shore it up first. This is the key difference; achieving lower inventory levels is the result of a lot of other Lean work – Setup Reduction, TPM, Gemba walks, Daily Management… all of these things have to be undertaken first, and the supply chain analyzed for weakness prior to inventory levels getting reduced. Sometimes in our quest to save costs and please our managers (or shareholders) we jump to the end before we adequately support the middle.
