Tag Archives: Just-In-Time Inventory

There are a host of different philosophies that business owners adopt to effectively manage their organizations. One of the most successful and widely utilized in the manufacturing sector is just-in-time inventory. Although not exclusive to manufacturers, lean manufacturing — as it’s more commonly known — is designed to improve process efficiencies by minimizing waste and maximizing output, producing just enough volume to sell quickly.

However, as the supply chain challenges of the coronavirus crisis continue to play out, with certain household products like paper towels, baking ingredients, and cleaning supplies still difficult to find, some are questioning the wisdom of this management philosophy. During the height of the pandemic amid “panic buying,” shortages dragged on for weeks at a time all across the country. Since manufacturers kept their own supply levels low and couldn’t ramp up production due to social distancing measures, stockers could barely keep up with the pace of demand. Shoppers snatched up household staples just as soon as they could find them.

Steve Cahillane, CEO for the breakfast cereal giant Kellogg’s, told The Wall Street Journal the company is considering amending its just-in-time inventory approach.

“There is appetite for more safety stock going forward,” Cahillane explained. “That is something that everybody is talking about.”

Some experts have concluded that lean manufacturing principles don’t work well within an environment with demand uncertainty. Contrary to what the critics say, this strategy remains a relevant and effective production principle during these times. Here are five unwavering reasons as to why:

1. Lean manufacturing principles are more than “just-in-time”

Lean manufacturing as a concept has been around for a while now, born in the 1930s and adopted by the automotive titan Toyota. Ninety years in the making, the thrust of lean manufacturing remains the same, but due to some nuanced understandings of lean, some organizations seem to have misconstrued what the term actually means. As noted by Industry Week, lean manufacturing isn’t just about inventory, but rather maximizing customer value while minimizing waste. Citing the definition that Lean Enterprise Institute uses, the publication noted that lean manufacturing is all about changing “the focus of management from optimizing separate technologies, assets, and vertical departments to optimizing the flow of products and services through entire value streams.”

Wally Hopp of the University of Michigan Ross School of Business goes further. He told The Wall Street Journal that lean inventory originally urged adopters to have backup plans in place to guard against circumstances preventing businesses from producing as they do normally.

“In a lot of the lean literature, that’s just stripped out,” Hopp said.

2. Lean can enhance flexibility

Another way in which lean manufacturing principles have been misconstrued is from a standpoint of flexibility. When implemented properly, through strategies like lot size reduction, level scheduling, and employee cross training, lean manufacturing is designed to help companies improve their process efficiencies. Theodore Duclos, chief operating officer for Freudenberg Sealing Technologies, told IndustryWeek that these same principles can also be applied to mission-critical equipment so these resources designed to enhance output can do more than one thing. In other words, instead of equipment being devoted to one specific task, optimizing equipment to handle multiple tasks helps to pick up the slack as a result of supply chain disruptions. It’s likely that product shortages stemmed from one dimensional equipment, thereby preventing some businesses from improvising.

3. Lean increases engagement among employees

A fundamental component of improving output in any business is engagement, which many businesses and decision makers say their company is lacking. Worldwide, it’s estimated that over two-thirds of workforces are not engaged, according to polling done by Gallup. Additionally this lack of engagement winds up costing business owners roughly 18% of their annual salary.

The very meaning of lean from a standpoint of running a business enables workers to have more say in terms of decision-making as they become stakeholders, noted IndustryWeek contributor Eli Boufis, co-founder and executive principal for Driehaus Private Equity. An engaged employee culture helps staff change their perspective by viewing problems not as stumbling blocks but as opportunities for improvement.

4. Lean improves responses to behaviors of customers

Similar to the misunderstanding of what lean means, there is also a misconception of the root cause of the ongoing shortages. There’s reason to believe it was more the multiplier effect than anything else. Perhaps the best example was what occurred with toilet paper. When news organizations reported that store shelves were increasingly bare with this staple product, many consumers responded by purchasing more rolls than they would normally, fearful that they would run out come the time they needed it. This thinking process resulted in a chain reaction in which everyone was thinking the same thing. In short, perception drove the shortage, which ultimately became a reality.

In the book “Lean Thinking” by James Womack and Daniel Jones, the co-authors write that lean as a concept and approach serves as “a way to do more with less human effort, less equipment, less time and less space — while coming closer and closer to providing customers exactly what they want.”

In short, lean practices aren’t part of the problem, but part of the solution as this approach is designed to help producers adapt and respond to changing customer demands as they occur.

5. Lean is widely adopted by industry leaders

Lean manufacturing principles are not just some idea or concept that works for some organizations and not for others. In many ways, it’s a way of life and highly prioritized. According to a joint report issued by Kronos and IndustryWeek titled “The Future of Manufacturing: 2020 and Beyond,” when business owner respondents were asked about their priorities moving forward, “lean manufacturing systems” was the second-most common response, behind only quality management systems.

Some of the most successful companies in the world have adopted lean manufacturing practices, including:

• Caterpillar
• John Deere
• Walmart
• Kimberley-Clark Corporation
• Intel
• Ford
• Toyota
• Georgia-Pacific

COVID-19 and the adverse effects on the economy that resulted are real, but lean manufacturing can be a solution. USC Consulting Group can help you implement this strategy in a way that works best for your organization. Contact us today to learn more about how to get more out of your business with less.

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