lindsay clark | procurement leaders | 2 july 2016
Tim Lawrence, head of manufacturing at PA, is quoted in an article in Procurement Leaders about Just In Time (JIT) manufacturing. The article looks at the consequences for JIT manufacturers when natural disasters occur.
Tim questions whether the JIT manufacturing strategy needs to be amended: “The key shortcoming of JIT are the issues that occur around risk. The problem is, as you move from the original equipment manufacturers (OEMs) down the chain, that risk is not well understood. They might understand Tier-1 well, and Tier-2 less well, but risks in Tier-3 or Tier-4 are not well understood at all.”
The article explains that top-tier suppliers have no knowledge of their true risks before disruptions hit, while JIT ensures there is no spare inventory in the system to buy time to find alternative supply.
Tim says that since the 2011 tsunami, OEMs have been trying to better understand these risks and mitigate them with the application of new computer-modelling and analytics techniques.
“The improvement in visualisation of the supply chain is helping. Although there is a lot more work to be done, the ability to have a clear picture and the ability to see the state of supply down to the next lever is starting to come in,” says Tim.
The article goes on to say that the Internet of Things (IoT) allows manufacturing machines and robots to be connected which means that it can offer near-constant information about inventory location and time to factory floor.
“The IoT is going to be an enabler to improve flexibility and responsiveness in supply chains,” says Tim. “You currently get delays in sending information up and down the supply chain in the case of sudden events. Taking the human interface out of the equation can, to some extent, create a more direct contract between factory and customer, helping the ability to respond.”
Tim goes on to say that to take advantage of the tools on offer, buying organisation and their supply chain partners must enter into a spirit of cooperation, which can be hard to come by.
Tim explains: “It comes down to the attitude of Tier-1s and OEMs about how they treat their suppliers. If they know that suppliers have problems every now and then, visibility is important to have time to react. But what tends to happen is suppliers are fearful about being open because of the effect on the relationship with the buyer, so do not collaborate to the necessary degree or fail to bring up issues quickly enough.”
Tim says that while there has been a focus on using technology to improve JIT, manufacturers are also trying to mitigate risk in a more low-tech fashion by moving inventory to suppliers.
“There are some myths about JIT. Companies do hold inventory, but they put buffers in place on the supply side and keep it off their books. That happens. If the OEM is concerned about risk, it pushes more onto supplier inventory,” concludes Tim.