Just-in-Time: Has Its Time Passed?

By David F. Carr  |  Posted 2006-09-11 Print this article Print

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.

David F. Carr David F. Carr is the Technology Editor for Baseline Magazine, a Ziff Davis publication focused on information technology and its management, with an emphasis on measurable, bottom-line results. He wrote two of Baseline's cover stories focused on the role of technology in disaster recovery, one focused on the response to the tsunami in Indonesia and another on the City of New Orleans after Hurricane Katrina.David has been the author or co-author of many Baseline Case Dissections on corporate technology successes and failures (such as the role of Kmart's inept supply chain implementation in its decline versus Wal-Mart or the successful use of technology to create new market opportunities for office furniture maker Herman Miller). He has also written about the FAA's halting attempts to modernize air traffic control, and in 2003 he traveled to Sierra Leone and Liberia to report on the role of technology in United Nations peacekeeping.David joined Baseline prior to the launch of the magazine in 2001 and helped define popular elements of the magazine such as Gotcha!, which offers cautionary tales about technology pitfalls and how to avoid them.

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