Guest column: Has JIT lost its sheen due to shortages during COVID-19 Pandemic?

There have been some noisy accusations of shortages of medicines, vaccines, raw material and many more during the COVID-19 pandemic period to the famous Just in Time (JIT) principles across the globe. 

JIT is a waste management strategy which pivots on effective synchronisation of material, machines, method and people to facilitate the Pull system in operations. It is all about the right material, at the right price, from the right source, in the right quantity, of the right quality, available at the right time in the right place. The JIT system expects suppliers to deliver and customers to receive frequently in small quantities (single piece flow) to ensure low-inventories and expose wastes.  Excess of inventory is waste.

Developed by Taiichi Ohno in the design of Toyota Production System, is an inventory control methodology aimed primarily at reducing lead times in the value-chain to improve the responsiveness to customers. In contrast, in the Just in Case (JIC) inventory management strategy large inventories are kept in hand which aims to minimize the probability that a product will sell out of stock. Here the high inventory holding costs is compensated by the reduction in the number of sales lost due to sold-out inventory.

Lockdowns, illness, fear, quarantine, distancing and the new hygiene quickly slowed the value-chain. Yes, the Somehow in Time (SIT) supplies did benefit some, but temporarily. The last twelve-months period has largely witnessed an unprecedented shortage of vaccines at centres, life-saving drugs in the pharmacy counters, PPE kits for the front-end COVID-19 warriors, oxygen in hospitals, ventilators in ICUs, semi-conductors to engineering OEMs and many more. Some have put the blame of stock-outs on to the low-inventories, which in turn, they say, is due to the JIT principles of Lean.

Is the customer-end noise justified? Has COVID-19 exposed the flaws in JIT / lean approach? Has the low-inventory been the root cause of the prolonged shortage? Has the bottleneck been the complex logistics, long lead time of transportation and the shortage of handling equipment in supply chain during the unprecedented demand period? Did the peak capacity of the system fail to deliver at the right time? Has the real JIT implementation not penetrated comprehensively in the end-to-end supply chain? ….. There are many questions to be answered before accusing the JIT system.  

Holistic benefits from JIT principles are not realized by creating JIT factories alone, but it comes also from upstream and downstream JIT systems in supply chain. The advantages are likely to dampen due to delivery uncertainties when material movement is from far-off suppliers and finished-goods delivered to remote customers. With long lead times, agility is the first casualty during disruption.

Therefore, end-to-end lead time coupled with complexity of supply chain are critical components in JIT. Therefore, there has to be a continuous endeavour to squeeze the lead times, set-up change times and number of hand-offs in the value chain. Shortage of skilled labour, non-availability of handling (e.g., oxygen cylinders, containers) equipment, capacity limitations, warehouse space issues and hoarding can add to the chaos during disruptions.   

It is not the blame game of shortages or stock-out the business leaders should debate about, instead focus on providing counter measures for the exposed problems by increasing velocity of production and reducing lead times, only to deliver what is needed and when it is needed at customer-end. This is what JIT is all about.

In this context, a comprehensive JIT implementation across the value-chain is recommended. 

• When demand implodes or when upstream suppliers struggle or when natural disaster occurs, extra-inventory is of huge help. Truly, low inventories make value chains fragile and brittle. In such volatile situations it is recommended to swiftly move to JIC approach which can manage the uncertainty in the customer mind better. Only after the volatile customer demand dampens and certain degree of predictability is seeable, revert back to JIT to realize its benefits. JIC can be for a short run but JIT is a long-term strategy as it pivots on the key driver of waste elimination.
• JIT is not a standalone set of principles with rigidities. It is not a cost cutting process but a waste reduction approach. Remote working by certain functions (finance / purchasing etc) in the industry, which was perceived to be a waste earlier is now a value-adding innovation today and expected to stay in future. This is continuous improvement in the changed context. Therefore, with reference to the context, provide more space to the elements of JIT, if needed. 
• For harnessing JIT benefits prevent spread of upstream supplier activities only to decrease inflexibilities, weak-agility and over-dependence. Keep them close to factory. 
• With accelerated availability of data, competency in data-analytics and intervention of digital technologies, end-to-end visibility has improved manifolds, giving business leaders additional warnings for changed actions only to harness advantages of responsiveness and efficiency.
• Pandemic has pushed organizations to move from single sourcing strategy to diversification of sourcing (geographically different zones) strategy. Single-sourcing may provide economic benefits (costs due to efficiency) alone but there is a stronger compelling socio-economic need in the world during such ‘black swan’ events.   
• Make the complex logistics simpler in the supply chain with fast turnaround of material handling containers / cylinders / equipment.
• Chaos created by the pandemic has thrown a lot of pain-points of the value chain to be analysed, only to be improved. It is, therefore, recommended to understand it in depth and reimagine & redesign the waste-free new process for making supply chain more robust and resilient.        

It is a myopic view-point to blame the JIT principles of lean for the shortages created during the unprecedented COVID-19 pandemic. Application of 5-WHYs becomes critical to identify the root cause(s) for a deep problem like this. This period has exposed numerous issues of supply chain to be resolved. Global single-sourcing concept for best efficiency has been challenged. Small-batch flow with frequent supplies has inherent advantages. Occasional validation of peak capacity, as a mock check, is needed. Complexity and long transportation lead times of logistic-network can be a serious constraint.

Implementing digital technologies for improving visibility in supply chain is expected to deliver huge JIT benefits. Manufacturers in the in the initial post-covid-19 period will have to strike a balance between the lean inventory of JIT system and delighting the customer by application of real-time data insights in the supply chain. There is no alternative to the Continuous Improvement (CI) culture.  If there is a need for a NEW-JIT system in the new business scenario, let that be debated and evolved.     

Dr Ravindra Ojha is a Professor – Operations at Great Lakes Institute of Management Gurgaon.