12/29/2023 0 Comments Just in time inventory advantages![]() ![]() They need to make sure that the components are ready when the automotive firm needs them - quite literally, just in time. Everyone in their orbit had to organize themselves according to the pace and speed of the automotive firm. “Since the Industrial Revolution, the automotive industry created the paradigm that virtually every other type of business followed. Allon says for automakers, it wasn’t just a manufacturing play - it was a power play. One way firms can begin to rethink an overreliance on JIT is to understand how it started and how it affects players in an industry. That means they are easily blindsided by disruptions.” Moving Beyond Just-in-Time There is virtually no consideration for pandemic-type risks, such as the weather in Texas and increasingly higher demand for chips. And when lean is the north star, it creates unprecedented levels of unpreparedness. The issue is that the moment you tell people their main objective is reducing inventory, and point all key performance indicators towards that goal, lean becomes their north star. But recent events have demonstrated that firms may have taken it a step too far. “We cannot place all of the blame on just-in-time. “There is nothing inherently wrong with being lean,” says Allon. In other words, virtually no firm is safe from today’s exponential growth of risk due to global exposure, and getting serious about rethinking supply chains should be a top priority for leaders across industries and geographies. As Gad Allon notes, even if you are not global, and your supplier is not global, the supplier to your supplier is. The pandemic-induced devastation of supply chains may have started in China, but that doesn’t mean companies that consider themselves “non-global” are immune. Keswin Professor Professor of Operations, Information and Decisions Director, Jerome Fisher Program in Management & Technology, The Wharton School ![]() There is virtually no consideration for pandemic-type risks, which means they are easily blindsided by disruptions.” But a laser focus on lean may mean that the supply chain is not aligned with the strategy of the firm.” “The moment you tell people their main objective is reducing inventory, and point all key performance indicators towards that goal, lean becomes their north star. “Just-in-time is great for reducing costs,” he says, “and building a lean supply chain has provided fairly good control over value. He says he and co-director Santiago Gallino walk participants through the different decisions they need to make to align their supply chain with their competitive strategy. In many ways, I would argue that the automotive industry has been the canary in the coalmine, or the leader and tone-setter for almost all other sectors.” Better Aligning the Supply ChainĪllon will spend a week in October with managers charged with rethinking their approach in Designing and Managing the Agile Supply Chain for the Future (This program is no longer offered.). Allon notes, “I believe these developments signal important changes to other industries, regardless of whether they seem to be related to the car industry or not. Several governments around the world are intervening in its supply chains, and Toyota and other carmakers announced they are retreating from just-in-time production (a method that minimizes inventory levels across the supply chain). The reality is that most of them are simply not ready for it.”įor the auto industry, being ready is beside the point. Firms are realizing they need to rethink their supply chain in terms of resilience for the types of volatility we have seen and will continue to see. “It just exposed a high degree of supply chain neglect. 2021 | Strategy Rethinking Your Just-in-Time Supply ChainĪlthough widely accepted as the cause of 2020’s supply chain disasters, “COVID is the not the main culprit,” says Gad Allon, Wharton professor and director of the Jerome Fisher Program in Management & Technology. ![]() Blended Learning Solutions for Organizations.Featured Programs for Senior Executives.Certificate of Professional Development. ![]()
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