Just-in-Time: Has Its Time Passed?By David F. Carr | Posted 2006-09-11 Email Print
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Has this concept for supply management outlived its usefulness? Experts weigh in.
For years, other companies have been trying to imitate the just-in-time (JIT) supply chain practices exemplified by Toyota. But the basic assumptions behind JIT itself may need to be reexamined in a changing economy.
One assumption is that JIT will always be cheaper than keeping parts on hand. But companies need to be sure their supply chain models aren't so fixated on reducing inventory that they fail to account for other factors. For instance, the economic assumptions behind JIT replenishment are drawing new scrutiny as transportation costs rise--the price of diesel fuel in mid-August topped $3 a gallon, up from about $2.40 last August.
JIT and related concepts have been driven for years "first and foremost by the notion that inventory is evil, and everything should be done to minimize the number of parts in inventory," says Gartner analyst C. Dwight Klappich. So, to minimize the amount of inventory sitting unused in a factory storeroom, many supply chain systems have been optimized around frequent deliveries of small replenishment orders. But as fuel costs and other economic factors drive up the cost of transportation, frequent replenishment orders may not make sense, at least not over long distances. "A lot of companies have not done that analysis for 10 or 14 years," he says.
JIT practices also need to be rethought in an era of global supply chains, where parts may take weeks to arrive by ocean freight from China, Klappich adds, rather than from a nearby supplier.