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"Just In Time" is about lead-time improvement and then inventory reduction


As we face supply chain issues, many are pointing fingers at "Just In Time"? I didn't know that so many companies practice "Just In Time." When did the definition of "Just In Time" change to inventory reduction without logic? Not every inventory reduction activity is "Just In Time."

  • "Just In Time" is about lead-time improvement and then inventory reduction

  • "Just In Time" and Kaizen is inseparable




1. "Just In Time" is about lead-time improvement and then inventory reduction


I worked as an accountant at a headquarters in Tokyo a long time ago. I saw three months' worth of finished goods sitting in our warehouse. As an arrogant accountant, I told the factory to reduce those inventory. That weekend, my father, TPS guru, called me and asked me how I was doing. I told him that I was doing the same as him since I told the plant to reduce inventory. Without getting angry, he instantly asked me, "what is the lead-time"? Honestly, I didn't know what is lead-time at that point. I interviewed several people in the company and returned to my father. I told him that the lead-time is two weeks. Then he started laughing. He stated car assembly line is less than the one-day production lead-time. Three days for an order to confirm. Is the product more complicated than a car? I reflected on this dialog and learned several things. My father knew from the beginning that the lead-time couldn't exceed three months. Yet, he still asked to confirm. He adds a step before concluding to reduce inventory.

According to the original "house of TPS" made by Toyota Supplier Support Center, the objective of TPS is about accomplishing the highest quality, lowest cost, and shortest lead time. Inventory reduction is not necessary inside this trinity of TPS, rather the shadow. As we accomplish the trinity, the inventory should go down. The stock is a waste, and we should always reduce it logically, not based on opinions. Nowhere does it says that we should reduce the inventory without touching the lead-time.

There are numerous episodes where TPS personnel come to a factory, and the first thing they do is inventory reduction. Another similar action is what I call a "Kanban thief." A TPS coach will come to the shop floor and steal a Kanban card. After a while, the coach asks the shop floor how is the Kanban working? When the shop floor responds that the Kanban is doing fine, the guy will show the stolen Kanban and ask, "Don't you think we have too much inventory?" After being the victim of this trick several times, I did it myself. I took out the Kanban. The line stopped due to lack of material, and my coach looked at me in disbelief. I thought I was doing the same. But I wasn't thinking the same way. The coach was looking at the lead time while I was randomly taking out the stock. The action might look the same, but the logic was different.

Lead-time improvements lead to inventory reduction. "Global supply chain" hints that lead-time is getting longer and more unstable. Taking inventory out without reducing the risk is just suicidal. "Just In Time" is not such crazy thinking. It is very logical.





2. Just In Time and Kaizen is inseparable


"How much is your lead-time?"

When we ask this question, I have seen three different approaches to this question.

The first is the interview approach. We ask someone for the answer. "The supplier told us." "Let me ask the expert." These responses belong to this category. Unfortunately, this is an unreliable approach. Most likely, depending on the intention, the answer will change. It is not a reliable method yet frequently used.

The second approach is the data. We calculate the lead-time based on historical data. The problem with this approach is that the data includes both normal and abnormal lead-time. When abnormality happens, we wait for the impact to appear on data. The lead-time to take action becomes longer.

The third approach is to pile up the lead-time of every process. It doesn't matter if it is information, production, or transportation. We add all process lead-time up. When we "add," we don't just count numbers but make sure we implement the standardized work. When a problem happens, we implement a solution around the problem process. The action becomes "Just In Time."

Of course, the third approach is not perfect. It requires time to implement. But that is the reason why we need continuous daily improvements. We might start with the first or second approach. But daily, we standardized the entire supply chain. "Just In Time" and Kaizen is inseparable. "Just In Time" forces Kaizen but also requires it. When there is a problem with "Just In Time," don't blame the concept. The only thing to blame is that the Kaizen did not reach the required level.

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