Wednesday
Dec232009
Whatever happened to JIT?
Wednesday, December 23, 2009 at 7:25AM
Just-in-Time (JIT) was all the rage twenty years ago. People were studying the Toyota Production System, synchronizing their production plans with those of their suppliers, and reducing lead times in order to minimize inventory and maximize flexibility and responsiveness. One of the goals was to systematically and effectively reduce the planning horizon from months to weeks to days. Indeed when the horizon is reduced to days, forecasting truly becomes demand management or demand planning.
For JIT to work in the extended supply chain, suppliers, as in Japan, needed to be close to their customers’ factory. The customer would communicate their needs for the next day or better yet the next shift and the goods would be there organized by the customers’ production plan. Any inventory was in smaller quantities and replenished in a true pull system.
JIT was a continuous improvement process. Lead times were tightened and inventory lowered until the dominant constraint became evident. Process improvement techniques were then applied to eliminate or minimize the constraint. The lead times and inventories were reduced again until the next dominant constraint was evident. The process was repeated over and over again. The goal was to constantly improve the Physics of the Supply Chain. This was the theory. This was how we understood it worked in Japan. We understood that the compact geography of the Japan and the kereitsu structure of companies and their suppliers also contributed to the success of the JIT model.
We tried to implement this model in the United States without the advantage of the geography and the kereitsu structure. Depending on the company and industry, this was done with varying degrees of success. There were many cases where the raw and pack inventories were simply pushed back onto the books of suppliers under Vendor Managed Inventory programs. Changeover times were greatly reduced and many companies went line to truck on the super A SKUs for direct shipment to customers during peak periods.
JIT was very popular. The term was ubiquitous and well on its way of moving from fad to an integral part of how business was conducted. Ironically, the auto industry was probably at the forefront of this movement.
The dominant term was JIT. But, JIT and Lean were bandied about interchangeably. There was no different save for the marketing spin of one author or consulting firm over another. But that has changed. The change resulted because the manufacturing base moved, mostly, to Asia. This was contrary to the principle of reducing lead times so central to JIT. The lead time for goods from Asia dramatically increased to four, five, six, or more weeks. Just-in-Time simply did not fit.
No matter what the lead times, one could be “lean” by taking the slack out of the lead times. But as the overall lead times increased so much that planning was once again based on forecasts. JIT, when done right, minimized the forecasting horizon and thus the need to worry as much about forecasts as we do today.
For JIT to work in the extended supply chain, suppliers, as in Japan, needed to be close to their customers’ factory. The customer would communicate their needs for the next day or better yet the next shift and the goods would be there organized by the customers’ production plan. Any inventory was in smaller quantities and replenished in a true pull system.
JIT was a continuous improvement process. Lead times were tightened and inventory lowered until the dominant constraint became evident. Process improvement techniques were then applied to eliminate or minimize the constraint. The lead times and inventories were reduced again until the next dominant constraint was evident. The process was repeated over and over again. The goal was to constantly improve the Physics of the Supply Chain. This was the theory. This was how we understood it worked in Japan. We understood that the compact geography of the Japan and the kereitsu structure of companies and their suppliers also contributed to the success of the JIT model.
We tried to implement this model in the United States without the advantage of the geography and the kereitsu structure. Depending on the company and industry, this was done with varying degrees of success. There were many cases where the raw and pack inventories were simply pushed back onto the books of suppliers under Vendor Managed Inventory programs. Changeover times were greatly reduced and many companies went line to truck on the super A SKUs for direct shipment to customers during peak periods.
JIT was very popular. The term was ubiquitous and well on its way of moving from fad to an integral part of how business was conducted. Ironically, the auto industry was probably at the forefront of this movement.
The dominant term was JIT. But, JIT and Lean were bandied about interchangeably. There was no different save for the marketing spin of one author or consulting firm over another. But that has changed. The change resulted because the manufacturing base moved, mostly, to Asia. This was contrary to the principle of reducing lead times so central to JIT. The lead time for goods from Asia dramatically increased to four, five, six, or more weeks. Just-in-Time simply did not fit.
No matter what the lead times, one could be “lean” by taking the slack out of the lead times. But as the overall lead times increased so much that planning was once again based on forecasts. JIT, when done right, minimized the forecasting horizon and thus the need to worry as much about forecasts as we do today.
RIP JIT
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