Just-in-Time Supply Meets Domino Effect

One country’s disaster is everybody’s kaizen

Story update 4/13/2011: We corrected a misquote regarding who first said, “As goes GM, so goes the nation.”

Every day, it seems, business as usual gets a bit more unusual. I’ve been haunting the news portals and blogs, curious to see how experts are viewing potential supply shortages following the March 11, 2011, tsunami and quake in northern Japan. After a month of hard reporting (“This happened, and it’s bad”) and soft theory (“The sky is falling, trust me”), it seems the dearth of qualified opinion is likely to stay that way, for now, along with a dearth of key auto parts and electronic components.

Never before has a triple whammy of earthquake, tsunami, and incipient nuclear disaster hit an economic superstar such as Japan. Everyone, from Prime Minister Naoto Kan to the Red Cross, must respond to a new set of staggering challenges. There’s no precedent upon which to base action, much less analysis. (“Now that’s a precedent,” observed one media hound.)

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Accuracy Matters

There are some interesting points in the atricule however there are some big inaccuracies as well.

GM chief Lee Iacocca reportedly said, “As goes GM, so goes the nation.”

Lee Iacocca never worked for GM he worked for Ford originally and headed the design of the Mustang and several other vehicles there. Then he resurrected Chrysler with the K car, mini van, and intrepid.

It was Charlie Wilson of GM that is quoted as saying "What's good for General Motors is good for the country." Even that is wrong he really said "For years I thought that what was good for our country was good for General Motors, and vice versa."

Second point there is nothing Lean or Just in Time about shipping parts half way around the world. It is economics, not Lean that causes that. The Lean thing would be to have the parts made at the assembly plant, there is zero added value in shipping, but there are realistic costs involved in achieving that, when they occur Lean gets overruled buy economics, and often by poorly thought out economics. Lets put the blame where it belongs kindly.

If you can find one place on this list of lean principles found at http://elseinc.com/lean-manufacturing-principles.html that points to shipping as being Lean, I would agree that Lean failed in the situation. The fact is despite having in principle the ideal production system Toyota has yet to fully implement it in there own operations. In fact there are many companies that have gone far further than Toyota, and you will find that very few of them ship anything unless there is no other way.

Thanks, Robert

“Reportedly” has saved many a reporter’s hide, as I hope it did mine in that context. Correction duly noted and made.
You say, “The Lean thing would be to have the parts made at the assembly plant, there is zero added value in shipping, but there are realistic costs involved in achieving that, when they occur Lean gets overruled buy economics...”
This is something that I run across a lot. Why does lean get overruled? Can it possibly be cost effective to make parts using a less-expensive labor force and then ship them back? It seems like a classic case of stepping over a dollar to pick up a dime.

Lean vs MBA/CFO thinking

Lean often gets overruled by classic MBA and CFO thinking that is often obsessed on unit labor cost, doing a poor job of quantifying supply chain cost and supply chain risk.

Moving production to China has a clearly measurable benefit (lower labor cost) and really unknowable cost. How people make a "cost/benefit" decision based on that is beyond me.

More interesting to me is that both GM and Toyota have production stoppages in North America. One company (GM) lays off workers and the other (Toyota) invests in kaizen and training.

Great article!

Hello Taran:

Just a quick note to thnk you for the great article. The thoughts and data you have included are excellent (except maybe a possible mis-quote.)

Thank you,

Dirk

Do the cumulative benefits of JIT outweigh the current losses?

Terrific article Taran, I appreciated the factual research. I would love to see a study of the cumulative savings (even just a back of the envelope guesstimate) of how much money has been saved by JIT-related initiatives over the last two or three decades, worldwide. And compare that to the losses due to the recent earthquake in Japan. My guess is that, despite the hardships due to the earthquake and all its associated problems, the losses are miniscule compared to the benefits to the global economy. Not a minor task, but I'm hoping to see someone (student thesis, think tank, government commissioned study, etc.) come out with such an analysis.

Thanks, Jeff