Just-in-tine (JIT) manufacturing is the idea that a manufacturer should order component parts only when a customer places an order from the manufacturer. As such it is a pull-only process. There are several advantages: the manufacturer does not incur any inventory holding costs; there is no chance of components becoming spoiled (in the case of non-durable goods) or obsolete; and that any defects in the component parts can be quickly identified, and remedial steps can be taken.
The obvious problem with JIT manufacturing is that it is highly vulnerable to supply chain disruptions (Goetsch & Davis, p. 378-379). By having no inventory, a company practicing JIT cannot easily weather interruptions in the flow of needed parts. Problems like this can be minimized by using multiple suppliers, if not all the suppliers are disrupted. Ye et al (2022) recommend a global centralized solution, but this is just making the problem bigger.
There are other problems, however.
Goetsch & Davis discuss the problem of supply chain interruptions from the “up-stream” perspective. Another problem, a “down-stream” problem, is that the customer may be unable to make requests. For example, a recent storm here caused damage to a power station, which forced the closings of two car dealerships and one auto mechanic for four days. During that time there were demands for automobiles and auto parts, but the dealerships and mechanics were unable to place orders for them.
Another problem with JIT is synchronizing the arrival of parts (Guo et al, 2022). If the parts do not arrive at the same time, then production cannot be completed until the remaining parts arrive. The manufacturer not only depends on one supplier but all suppliers. During that time, the manufacturer incurs storage costs. Guo, et al, call for improved manufacturing planning and control (MPC) systems, but no MPC system was listed in their paper.
Does it make sense for all supply chain partners to practice JIT? For example, suppose an automobile maker practices JIT. The maker receives an order for a car, and they then must place orders for each of the component parts (and according to Collectors Auto Supply (2020), there are approximately 30,000 parts). Next, a part maker must order the parts they need from other suppliers. Finally, the raw materials must be dug from the ground and smelted. This is a consequence for when all supply chain partners follow JIT practices. Does this make sense, or is it “JIT for me but not for thee?”
When seen in this light, one of the major benefits of JIT manufacturing vanishes: inventory costs are merely pushed off to suppliers.
The result is to lower customer satisfaction by forcing the customer to wait for fulfillment of his demands. This is acceptable in some industries. For example, certain medium- to high-end automakers sometimes have a waiting period of weeks. Construction companies operate on a timeframe of months - unless they’re Amish! Customer needs are most often better met through companies not practicing strict JIT.
One last problem, the most fundamental problem, is that JIT explicitly ignores sales forecasts. “As the processes and suppliers become more proficient, and the JIT/Lean line takes hold, production will be geared to customer demand rather than to sales forecasts.” (Goetsch & Davis, 2021, p. 383). JIT is calling for us to close our eyes to very real situations where sales forecasts are repeating patterns based on historical data. This happens anywhere from Christmas shopping patterns to the battle regularities of the Taliban in Afghanistan. These patterns are very real, and it is foolish to ignore them.
Imagine a situation where a customer is shopping for a high-value product. This is currently happening in the US where we are seeking to increase the number of merchant vessels and battle force ships. One cannot simply go to a shipbuilder and have the same experience as buying a car! Instead, the customer is purchasing a currently nonexistent product, based only on detailed plans plus the shipbuilder’s reputation. This is a situation where JIT is practical, and it may be practical for other high-value or luxury products. Otherwise, JIT cannot be used as a universal management policy.
References
Collectors Auto Supply. (2020, 5 May). How many parts are in a car? https://collectorsautosupply.com/blog/how-many-parts-are-in-a-car/
Goetsch, D. L. & Davis, S. B. (2021). Quality management for organizational excellence: Introduction to total quality (9th ed.). Pearson.
Guo, D., et al. (2022). Towards synchronization-oriented manufacturing planning and control for Industry 4.0 and beyond. IFAC, 55(2), 163-168. https://doi.org/10.1016/j.ifacol.2022.04.187
Ye, Y., Suleiman, M., & Huo, B. (2022) Impact of just-in-time (JIT) on supply chain disruption risk: The moderating role of supply chain centralization. Industrial Management & Data Systems, 122(7), 1665–1685. https://doi.org/10.1108/IMDS-09-2021-0552
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