This is the starting point for a blog post that I should expand on… after posting these initial thought fragments on LinkedIn.
JIT might have been given the wrong name… please hear me out.
There has been so much confusion over time about the phrase “Just in Time” related to #Lean / Toyota Production System.
Just in Time production or Just in Time receipt of supplies is a CONSEQUENCE of operations and supply chain design and decisions that are made by leaders.
As Jamie Flinchbaugh pointed out:
“Building on that theme…I think we should separate JIT “production” from JIT “supply chain.” Those are two different environments, two different sets of problems, and two different sets of problems.“
He's right, let's talk here about “just-in-time supply chains” — the purchasing of parts to use in our factory or the purchasing of items to sell in our retail establishment.
You cannot just mandate “low inventory” — low inventory might be a consequence of good system design.
Supplies or products arriving “Just in Time” is also a consequence of, among other things, SHORT LEAD TIMES.
When Toyota set up their San Antonio factory, they didn't set up a supply chain that brings parts from Michigan (yet alone China) — they set up local if not directly on-site suppliers.
SHORT LEAD TIME –> SLT
Bringing parts from China on a literal slow boat is a LONG lead time approach. That's not “Just in Time.” JIT cannot be a consequence of LONG lead times and poor supply chain decisions.
Maybe JIT should have been called SLT
Would that have reduced confusion, leaving us in a better place?
You can join the discussion on LinkedIn:
There's already some great discussion taking place…
Here is the Toyota explanation of JIT from their Toyota Production System page. They describe the consequence of good supply chain decisions:
Making only “what is needed, when it is needed, and in the amount needed”
When we have LONG lead times, we then get forced into relying on forecasts. Forecasts are notoriously difficult to do. The longer the lead times, the less accurate the forecasts will be. That's a fact of life — basically a law of physics. Having long lead times means you'll not be making or receiving the right quantities at the right time. You'll have too much of some parts and not enough of others.
Short Lead Times really help. Short lead times, among other factors, make low inventory possible without interrupting flow, production, or sales. Or, we could say Short Lead Times are a precondition for Lean or JIT.
Here's just one of the MANY examples where the Wall Street Journal totally misrepresents JIT as somehow involving long, slow, global supply chains:
Here's an article about the pain felt by retailers who have long, slow supply chains:
Online retailers are feeling the pain as pandemic-driven e-commerce slows
After optimistic forecasts based on early pandemic buying patterns… overoptimistic orders plus long lead times means missing the market:
“So to fill all the orders they think shoppers are going to make, Amazon sellers are ordering more and more and more stuff from overseas.”
And there was this article from July
“It's a retail armageddon”: Overstocked stores give big discounts as supply chain backlog eases
The merchandise surplus comes at a time when inflation is forcing consumers to cut back. Flickinger says some stores are overstocked by more than 30% and there's no place to put everything. Target recently admitted it needs to “right-size its inventory” and the retailer's plans include “additional markdowns.”
Again, Short Lead Times mean that you're relying less on forecasts to be accurate… Target could reduce the need to “right-size” (meaning reduce) their excess inventories by shifting to suppliers with shorter lead times, but given the global shift of manufacturing to China and the rest of Asia.
But, it's easier for a manufacturer like Toyota to put a captive supplier next to (or inside) their factory than it is for a retailer to reverse 25+ years of shifting manufacturing to China.
Thanks for reading. What do you think?
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Dr. Neale G. O’Connor commented:
Nice points Mark. The Japanese used just-in-time in a context of strong supplier relationships which enables short lead times to be sustainable. Just to take the discussion further the Japanese always took their ecosystems with them wherever they went enabling SLTs. In the 1980s that US companies had the choice of doing the same and using technology to improve their home operations but instead they chose to globally source from cheap labour countries and in so doing, it delayed any homegrown automation and opportunities for SLTs that would have given them an edge in todays competitive landscape.
Chad Bareither commented:
Appreciate your positioning JIT as “a consequence of good system design … [and] short lead times”
Early in my career working for the US Army I recall visiting a supplier and the grouchy production manager was flying off the handle about:
“JIT … yeah JUST ISN’T THERE! We’re stocking out on a daily basis.”
Their Quality team had worked to reduce inventory without improving delivery variability and lead time.
Oops. Yeah, that happens way too often. See “Any fool can cut inventory.”
Sorry if “fool” is disrespectful language. The original expression was “Any fool can cut costs.”
Cutting inventory without first addressing the causes of the need to hold inventory is catastrophic.
In no particular order:
1) Demand variation — including non-level production
2) Supply lead time variation
3) Supply quality variation
4) Supply lead time average
I’m reminded of a Japanese TPS sensei I got to spend some time with. We were at a factory that had an awful on-time delivery rate to customers.
They had slashed inventory to the point that they could hardly build anything.
My sensei said, “Job 1 is meet customer demand. Job 2 is low inventory.”
I need to get t-shirts printed with that.
More inventory can be a necessary short-term countermeasure. Then work on improving the system design and system performance so that you need less inventory.
Craig Johnson commented:
So many organizations have done (and continue to do) exactly that – they mandated low inventory without consideration for the impact on the overall system. Mandating low inventory and calling it Lean might be like catapulting an aluminum tube into the sky and calling it an airplane. It flies for a while, but it will eventually crash and burn.
Purposeful and patient systems-wide effort is required for a truly robust system.
John Thacker commented:
It’s a great thing to think through. I definitely think the name is a stumbling block. I’m reminded of Toyota starting up vehicle production in the US and almost immediately investing in a transmission factory in the US. Why not just ship them from Japan? I think there is a lot of fog around JIT in the US.
Abel Victorio commented:
This is where people make assumptions about catchphrases and their meaning without exploring the depths of principle and function.
Get on the relentless pursuit of preventing the consumer from ever having to wait; do that, and you’ll find that the same applies to every set of hands in the process.
Be relentless. Iterative. Involve those that do the work in that pursuit. Ditch the terminology.
John Bushling commented:
In my experience, local supply (within 60 minutes) was always what I strived for.
China supply was always about nickels and dimes. However, I always looked at what I called the China Cost…long and interrupted lead time. Time on the water, delays on the docks, transport delays, loading/unloading, etc.
A combination of JIT/SLT is ideal but the Lean systems and strategies must be in place.
That also means working the logistics WITH your local suppliers.
Arnout Orelio commented:
Short lead time, although closer to the process, is also an outcome of the system(‘s design). We could also call it “No Overproduction” which teaches people about the mindset required and it will inform decision making.
I also added:
Reducing supply inventory is a consequence. I always cringed in 1999-2000 when Dell Computer was referred to as “lean” or “JIT.” They had low inventory on their books. But huge warehouses that were local to the assembly plants. Yet they never had the exact inventory that they needed.
There was, I believe, only one local supplier — one that made the PC cases… but that was then probably moved to the cheaper labor cost location.
Dell was that “fake JIT” — short lead times made possible by forcing suppliers to hold local inventory — parts that were usually produced in Asia, a long lead time away.