JIT Manufacturing and Supply Chain Fragility

One of the problems with JIT manufacturing is that it is susceptible to supply chain interruptions. Taiichi Ohno, the inventor of JIT/Lean manufacturing, recognized that problem. It is worth quoting in full Goetsch & Davis’s discussion of this issue and Ohno’s solution:

Mass production advocates emphasize that the lines need to keep moving and that the only way to do this is to have lots of parts available for any contingency that might arise. This is the fallacy of just-in-time/Lean according to mass production advocates. JIT/Lean, with no buffer stock of parts, is too precarious. One missing part or a single failure of a machine (because there are no stores of parts) causes the JIT/Lean line to stop. It was this very idea that represented the power of JIT/Lean to Ohno. It meant that there could be no work-arounds for problems that did develop, only solutions to the problems. It focused everyone concerned with the production process on anticipating problems before they happened and on developing and implementing solutions so that they would not cause mischief later on. The fact is that as long as the factory has the security buffer of a warehouse full of parts that might be needed, problems that interrupt the flow of parts to the line do not get solved because they are hidden by the buffer stock. When that buffer is eliminated, the same problems become immediately visible, they take on a new urgency, and solutions emerge—solutions that fix the problem not only for this time but for the future as well. Ohno was absolutely correct. JIT/Lean’s perceived weakness is one of its great strengths. (Goetsch & Davis, 2021, p. 378-379)

According to this, maintaining a buffer stock hides any supply chain issues until the buffer stock is exhausted. This only happens, though, when the buffer stock levels are not monitored. By continually tracking buffer stock – and the rate at which the stock is replenished – any supply chain problems are revealed, and they are revealed at the exact same time that users of JIT manufacturing would notice these shortages. The difference is that the company maintaining buffer stock is not immediately affected, whereas the one using JIT must halt production until the situation is resolved.

The solution Ohno advocates (according to Goetsch & Davis) is that supply chain problems cannot occur (“there could be no work-arounds for problems that did develop, only solutions to the problems”). Problems are avoided simply by having everybody involved working on alternatives to problems that have not yet occurred. Unfortunately, no plan survives contact with reality, and no amount of mental gymnastics will change this, and when there are shortages, Ohno would resolve the issue by having multiple people screaming for a solution. Having multiple people call a supplier pressuring them to resolve a delay does no better than having one person making one call. Phone calls, by themselves, are not sufficient to identify and repair the problem that caused the supplier’s inability to produce needed parts.

One of the workarounds (that Ohno claims is unneeded) to the issue of supplier shortage is to maintain “total visibility – of equipment, people, material, and process” (Kumar, et al, 2013). There are two problems with this: adding such visibility is sure to increase the level of bureaucracy in the supplier, and not all suppliers are willing to allow total visibility. The reason for the latter is that when a company wants visibility into a supplier, it is wanting not only the production rates of a certain part, but also for all the company’s competitors that happen to use the same part.

Akhil Bhargava offers a number of different solutions to the supplier shortage issue. According to him, “The solutions to the traditional mindset of holding Safety stock include Increased data processing involvement in implementation planning efforts in order to upgrade systems to JIT level, statistical process control enhancement to provide timely feedback for engineering and managing tuning, meaningful contingency planning as a response to defects in critical parts, and materials and effective user supply dialogues to support delivery and quality issues.” (Bhargava, 2017). He is basically calling for “better living through IT™”, and none of these solutions actually address supplier shortages, except for the “meaningful contingency planning” option, which is just another phrase for maintaining buffer stock.

The JIT supply chain fragility issue appears to be a problem that has not been resolved and may be unsolvable.

References

Bhargava, A. (2017). A study on the challenges and solutions to just in time manufacturing. International Journal of Business and Management Invention, 6(12), 47-54. https://www.academia.edu/69920210/A_Study_on_The_Challenges_And_Solutions_To_Just_In_Time_Manufacturing

Goetsch, D. L. & Davis, S. B. (2021). Quality management for organizational excellence: Introduction to total quality (9^th ed.). Pearson.

Kumar, S., et al. (2013). Difficulties of Just-in-Time implementation. International Journal on Theoretical and Applied Research in Mechanical Engineering, 2(1), 8-11. http://www.irdindia.in/journal_ijtarme/pdf/vol2_iss1/2.pdf

Review of “The Role of Supply Chain Resilience”

Abstract

This is a review of “The role of supply chain resilience to relationships supply chain risk management culture and firm performance during disruption” by Akbar and Isfianadewi, which examines the relationship between supply chain risk management culture, three approaches to recovering from disruptive events, and the impact of all this on corporate performance. The research by Akbar and Isfianadewi takes the form of a statistical analysis of survey responses by owners or managers of Indonesian apparel manufacturers. It takes place in the context of the COVID-19 plague.

We begin with definitions of needed concepts, then explain the dependencies between those concepts as statistically demonstrated in the paper. We show how supply chain management theory applies, then conclude with managerial implications of the findings in that paper.

 

Authors’ Purpose

Akbar and Isfianadewi seek to examine the relationships between supply chain risk management culture, the various ways a company can successfully respond to adverse events, and overall company performance. After defining the relevant terms and explaining three ways a company can adapt to and overcome extremely unfavorable events, they inquire about the dependencies between supply chain risk management culture and those three ways of recovering from adverse events. To analyze the dependencies, they develop a conceptual model and propose 10 hypotheses that can (partially) test this model. To confirm or reject the hypotheses, the authors surveyed several managers and owners working in a particular segment of the Indonesian apparel industry during the time of COVID-19. The survey responses are analyzed, and the results indeed confirm the conceptual model.

Background Concepts

The authors define supply chain resilience as “the ability of the supply chain to return to its original or more desirable state following a disruption and to avoid failure.” An expanded definition of this term is as follows: supply chain resilience is the ability of a company to prepare for and respond to various types of disruptions and to quickly recover to pre-disruption levels. Methods for doing this include maintaining a buffer inventory, use multiple product suppliers and multiple logistics providers, trace dependencies among relevant suppliers, and so on. (Abeysekara et al, 2019).

Supply chain risk management (SCRM) is the process of identifying, assessing, and mitigating threats to the smooth operation of a supply chain. The immediate goal of SCRM is to improve supply chain resilience, resulting in continuity of operations in the face of disruptions as well as protecting the company’s financial well-being and reputation.

Supply chain risk management culture (SCRMC) is the values and practices a company employs to manage risks to its supply chain, thereby minimizing operational interruptions. A company with a strong SCRMC is not only able to anticipate and face disruptions but also to learn from those disruptions.

Four main activities and processes are necessary for rapid recovery of a company following a disruption: re-engineering, agility, collaboration, and the above-defined SCRMC. (Kumar & Anbanandam, 2019)

Re-engineering a supply chain requires a base understanding of the existing supply chain, supplier risk awareness, and an assessment of the trade-offs between efficiency and redundancy. (Christopher & Peck, 2004). The result of this re-engineering is a more resilient supply chain.

In the context of supply chain resilience, agility is the ability to respond to disruptions promptly, quickly, and efficiently. In the same context, collaboration is the ability to overcome barriers between supply chain partners, including informational barriers.

Application of Supply Chain Management Theory to the Paper

The most fundamental fact of supply chain management theory is that a company’s operation is initiated and continued because of a functioning supply chain. This fact is demonstrated in the paper by the importance of making a supply chain resilient as well as fallback procedures for when the supply chain fails.

The theory outlined in the paper is applicable to both anticipatory (push) and responsive (pull) business models. By allowing for collaboration among suppliers of goods and services that are part of the supply chain, the theory applies to a generalized supply chain model with extension into the enterprise where there is the very real possibility of competing suppliers of materiel and logistics services, and that these suppliers and services may be outsourced. In fact, this redundancy is part of what makes a supply chain resilient.

The concepts SCRMC and recovery procedures are applicable to each of the four parts of the supply chain value proposition (Quigg, 2022) – effectiveness, efficiency, relevancy, and sustainability. The paper is most concerned with effectiveness and sustainability, and efficiency is tangentially addressed through maintaining competing suppliers of materiel and logistics services. Even relevancy is addressed, for there is nothing more irrelevant to a customer than a product or service that isn’t consistently delivered.

The paper applies to all forms of industry disruptions, not only changes to consumer requirements and technology adoptions, but also disruptions brought about by social and economic factors as well as (more or less) unexpected events such as pandemics.

Summary of the Article

The paper examines the relationship between SCRMC, re-engineering, agility, collaboration, and firm performance. The authors’ research confirms that these five qualities are dependent on each other as shown in the following diagram taken from the paper:

These relations are confirmed by evaluating ten hypotheses, which can be grouped as follows:

H1 – H4: SCRMC has a positive effect on each of firm performance, re-engineering, agility, and collaboration.

H5 – H7: Re-engineering, agility, and collaboration each have a positive impact on firm performance.

H8 – H10: Re-engineering, agility, and collaboration each mediates SCRMC’s impact on firm performance.

These ten hypotheses are not deductively proven but are instead statistically verified by surveying 87 owners and managers in the batik clothing business in the Wedi subdistrict of Klaten, Yogyakarta, Indonesia.

Conclusion - Managerial Implications

Operational disruptions can come from sources internal or external to a company, and can not only include economic, political, and social events, but also “black swan” events such as COVID-19. To face such adversarial events, a flexible and adaptable supply chain must be established. The authors statistically demonstrate that a robust supply chain risk management culture is crucial for maintaining a resilient supply chain. Companies that are resilient in the face of disruptions are a result of resilient supply chains.

Of course, disruptive events will occur, and companies recover from them by being agile in their response, by building new relationships between their partners (even if that entails some redundancy), and re-engineering their supply chains. The authors demonstrate that agility, collaboration, and the ability to re-engineer supply chains each positively contribute to the company’s performance. Further, they show that a strong supply chain risk management culture is fundamental to a company’s agility, collaboration, and re-engineering abilities.

The most important implication for managers is that a resilient supply chain must be established, and to ensure that the supply chain remains resilient, the company must possess and encourage a strong supply chain risk management culture. Part of this culture requires that managers must learn from disruptions – how and when they occur, and to address any problems the disruptions reveal in our plans for a resilient supply chain.

Other important implications for managers are the ways they must respond to supply chain failures: they must be agile (respond quickly and aggressively), they must shore-up any collaborations between outside companies that are part of the supply chain, and they must be willing to re-engineer their supply chain to restore services. This paper shows that each of these restorative approaches lead to resuming the company’s operations, and that a culture of supply chain risk management is fundamental to this.

Agility, collaboration, willingness to re-engineer the supply chain, and a culture of risk management when it comes to the supply chain together mitigate the impact of calamities upon business continuity. 

References

Abeysekara, N., Wang, H., & Kuruppuarachchi, D. (2019). Effect of supply-chain resilience on firm performance and competitive advantage: A study of the Sri Lankan apparel industry. Business Process Management Journal, 25(7), 1673–1695. http://dx.doi.org/10.1108/bpmj-09-2018-0241

Akbar, H.M. & Isfianadewi, D. (2023). The role of supply chain resilience to relationships supply chain risk management culture and firm performance during disruption. International Journal of Research in Business and Social Science, 12(2), 643-652. Retrieved 26 August 2024 from https://www.proquest.com/docview/2800278031/fulltextPDF/9FB3E428B04B48BCPQ/2

Christopher, M., & Peck, H. (2004). Building the Resilient Supply Chain. The International Journal of Logistics Management, 15(2), 1–14. http://dx.doi.org/10.1108/09574090410700275

Kumar, S., & Anbanandam, R. (2019). Impact of risk management culture on supply chain resilience: An empirical study from Indian manufacturing industry. Proceedings of the Institution of Mechanical Engineers, Part O: Journal of Risk and Reliability, 234(2), 1-14. https://doi.org/10.1177/1748006X19886718

Quigg, B. (2022). Supply Chain Management (1st ed). McGraw-Hill Create. https://bookshelf.vitalsource.com/books/9781307866025