JIT Still A-OK

Dec. 21, 2004
Port disputes haven't darkened this inventory-busting practice, but are more 'wildcards' in the future?

Despite plant shutdowns caused by parts being stalled in the West Coast docks dispute, manufacturers using just-in-time (JIT) delivery say they'll stick with it. It's a matter of the good far outweighing the bad. "Admittedly this was a problem, and it was a glaring one, but we are not going to abandon a successful system for what was an aberration," says Michael Damer, manager of community relations for New United Motor Manufacturing Inc., (NUMMI), Fremont, Calif. JIT delivery, in which plants receive frequent deliveries of parts and materials in small lots timed to production, has saved manufacturers millions of dollars in inventory carrying costs. But the logistics turmoil of the Sept. 11 terrorist attacks and this fall's labor disputes on the western waterfront exposed a problem with JIT -- with little or no materials on hand, plants can be immediately idled by delayed deliveries. NUMMI, for instance, shut down its truck line for five days and its car line for two days, amounting to the delayed production of 1,800 cars and 3,000 trucks. Normally, the plant receives 34 containers of supplies daily at the Oakland, Calif., port from four shipping lines. The materials and parts are for the current-day's production. A Dana Corp. plant in Stockton, Calif., that supplies frames to NUMMI also shut down, and Honda of America Manufacturing Inc. temporarily idled several plants in Ohio and Canada as a direct result of the port closures and alleged slowdown. Joyce L. Gioia, a consultant and business futurist with The Herman Group, Greensboro, N.C., says the port labor dispute is an example of one of many challenges JIT will face in the future. "The future of JIT is still bright. However, we are being faced with an ever-increasing number of wildcards -- events that seem to come out of left field," says Gioia, president of The Herman Group. "[No one] had given serious consideration of the [current] events happening and their consequences before they happened." Other JIT wild cards might include terrorist threats and attacks, which could close borders; economic crises overseas, which could paralyze banking systems; and, as always, weather disasters. Gioia, who is co-authoring a book tentatively called "Wildcards: Playing Without a Full Deck," says manufacturing will have to both continue to embrace but also alter JIT. "I don't have a lot of answers, but I suspect one might be to line up alternative local sources of supply to use only when absolutely necessary," she says. "A buyer might take out an 'insurance policy' in the form of a contract with the alternate supplier that would only take effect when needed. At other times, the user would be paying 'premiums' to have the local supplier standing by. This insurance policy might involve giving some of the company's business to the local supplier on an ongoing basis." Damer, of NUMMI, says the company has already faced the weather wildcard by using trucks when trains were disrupted by floods. NUMMI also used some air transportation during the port closure, although it was expensive. One thing NUMMI won't be doing for sure is stockpiling inventory. "Is it really reasonable to build up a couple of months inventory in the event this happens again? We don't have facilities for that inventory, and we don't want them."

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