Along with its tragic impact on human life, the pandemic has caused considerable disruption to businesses. It exposed the underlying vulnerability of relying on ‘Just In Time’ (JIT) manufacturing models that had proved so advantageous in the past.
Many businesses have resumed normal operations in the months since. However, the threat of the coronavirus lingers, and global supply chains remain at risk. Continuing to build on the same fragile assumptions leaves your company vulnerable to future disruptions. Is there any alternative to sourcing and manufacturing your product?
The origins of JIT
JIT manufacturing is sometimes known as the ‘Toyota production system’ because its origins can be traced to Toyota Motors. It emerged out of Japan’s post-war desire to become competitive in the auto industry. Facing established competition from the US, whose car companies could afford to work in batches due to high demand, Toyota decided to go in a lean direction.
In this context, JIT helped Toyota to succeed by enabling cost reduction. With JIT, materials and production systems are intricately linked to forecasting demand. It eliminates waste by avoiding excess inventory. Company resources are maximized instead of being locked up in hard-to-shift surplus. Workers’ efforts are aligned to deliver optimal value.
It’s not hard to see why this sort of system would appeal to other companies outside of the Japanese or automotive context. Any business in a similar position can aspire to compete with large-scale industry players by using these principles.
A trend towards efficiency
But JIT is also part of a bigger movement towards efficiency over the last few decades. Companies have constantly been searching for ways to cut costs, maximize productivity, and trim the excess in their operations. This has resulted in considerable offshoring of manufacturing jobs.
Most of those jobs are being outsourced to a few countries, such as China, India, and Bangladesh. These partners provide businesses with two essential attributes: cheap labor and specialized skills. Along with efficient global shipping, this makes it feasible to follow a JIT model and effectively make your products as needed by consumers.
It’s not hard to see why the impact of Covid-19 throws a wrench into that framework. A product might require several components to function, but if even one is missing, it can’t be assembled and sold. The potential for manufacturing partners or entire countries to suddenly shut down without warning can easily cause businesses worldwide to stop due to a lack of inventory.
Reshoring is problematic
Can’t we solve the problem by bringing manufacturing back onshore? It sounds simple in theory, but reshoring manufacturing jobs is complicated. There are multiple layers of specialization involved. Partners often subcontract work to even more specialized companies. You’d have to replace all of those functions with an onshore team; extensive training will be needed.
Unforeseen situations also increase complexity for teams not accustomed to handling the entire manufacturing process. A simple matter of not having the appropriate packaging size for an order’s quantity can lead to inventory bottlenecks. You’re better off having shipping box suppliers fill those needs. And the same goes for any fabrication job for which you lack the appropriately skilled personnel.
From JIT to JIC
In traditional societies, a farmer wouldn’t just tend to a single plot of land or harvest a specific crop for optimal yields. They would often trek long ranges and varied topographical features, planting different crops across many plots.
This sort of diversity required far more effort than the optimized practice of concentrating on a single farm and harvesting monocultures. The latter is widely encouraged, sometimes enforced, by state-espoused agricultural authorities. But it has proven susceptible, time and again, to the ravages of disease or unfavorable weather conditions.
A farmer who practiced polyculture and maintaining multiple plots of land would be able to manage unexpected change. Their crops might fail in one area, but others would thrive and allow the farmer to survive.
The situation facing many businesses around the world is very similar to this agricultural dilemma. Manufacturing has evolved along increasingly efficient lines, but the JIT model comes at the cost of overall resiliency.
Having ‘Just In Case’ contingencies can help companies as a supplement to traditional JIT supply chains. If you can’t bring manufacturing onshore, you can decentralize your model for now.
Establish a production base in more than one offshore country. It will ensure that you keep going if anything happens that could shut down one facility. And as we move toward a future where nothing is certain and the risk of disruption is high, that could be more than worth the loss of efficiency.