Worried about how bird flu, hurricanes or civil unrest could impact a lean supply chain? Despite such inherent risks, the benefits of just-in-time manufacturing may still be too much to pass up.
Executives at mattress maker Sealy Corp. learned the hard way in 2005 how much a natural disaster could disrupt a supply chain. That’s when hurricanes Katrina and Rita battered the Gulf Coast and caused major damage to petrochemical processing facilities that supply Sealy with a raw material called toluene diisocyanate, or TDI, which is used to manufacture the polyurethane foam found in most of Sealy’s bedding products.
This was bad news for a company that takes pride in its just-in-time (JIT) operations. In its company statement, Sealy notes that most bedding orders are shipped to warehouses within 72 hours of receipt. With a foam shortage at hand, the company issued a notice in October 2005 acknowledging production delays were imminent.
“The industry allocation of foam over the next several weeks will affect our just-in-time manufacturing output in the U.S. and Canada,” said Michael Hoffman, now Sealy’s executive vice president of operations for North America, in the October 2005 statement. “We’re working in close partnership with our suppliers, customers and entire manufacturing system to minimize the disruption to our business.”
Similar stories were reported shortly after the Sept. 11 terrorist attacks, and doomsday predictions of health epidemics, war and more hurricanes continue to keep many manufacturers on their toes.
But for the most part, analysts and manufacturers contend the benefits of JIT outweigh the risks.
“The risk is so small when you consider the gains and what it does for you as far as the bottom line,” says Paul Adelberg, vice president of lean technology for swimming pool components manufacturer Hayward Industries Inc. Research published in the IndustryWeek/Manufacturing Performance Institute 2006 Census of Manufacturers supports Adelberg’s contention, with 43.4% of 758 manufacturers responding saying they use JIT supplier deliveries to manage inventory.
Even so, a statistical profile of IW’s Best Plants finalists in 2006 shows manufacturer confidence in JIT could be waning. In 2006 IW Best Plants finalists said on average 49.6% of their key suppliers provide JIT delivery compared with 50.8% the previous year, 58.4% in 2004 and 77.2% in 2003.
This could be because manufacturers jump ship too quickly when problems arise with JIT. “It seems very common that people get on the bandwagon of some of these philosophies like JIT, and they give up as opposed to understanding that it’s not something trendy to do,” says Lisa Anderson, president and founder of business processes advisory firm LMA Consulting Group Inc.
Anderson and other industry experts say manufacturers can lessen the risks associated with JIT and make it more effective by forming strong partnerships with their suppliers and establishing backup plans for unforeseen circumstances.
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Published in Industry Week on May 11, 2007