Wednesday, June 30, 2010

Just-In-Time For Disaster

"Car production lines worldwide look set to grind to a halt as the flight ban over much of Europe begins to starve manufacturing of key electronic components. ... The problems highlight industry's dependence on complex, worldwide supply chains that need multiple modes of transport to deliver goods and compenents just in time to where they are needed. ... Air freight accounts to a tiny amount of world trade by weight--about 0.5 per cent for the UK. But the disruption has highlighted how it plays a vital role in supplying key, high-value components to many manufacturers. In spite of its tiny volume, it accounts for 25 per cent of UK trade by value. ... They are now looking to revert to a mixture of air and sea, moving goods from aircraft in Dubai on to ships to prevent goods piling up in one place. ... Companies have become more vulnerable to disruption since moving to just-in-time producton methods, where hardly any stock of products in held, said Emma Scott, representation manager for the Chartered Institute of Purchasing & Supply in the UK", John Reed at the FT, 21 April 2010, link:

Just-in-time inventory is a disaster waiting to happen. See my 26 February 2010 post: http://skepticaltexascpa.blogspot.com/2010/02/lean-manufacturings-dangers.html.

2 comments:

Anonymous said...

Yes - from your previous post...

We need slack in the system to avoid major breakdowns.

Ubu said...

My company is getting killed by inventory shortages; we sell our products, but now can't deliver because critical components from Asia take x2 as long. I see big problems down the road for us; it took years to adjust to just-in-time inventory, how long to switch gears to another time frame?

And naturally, our atrocious management is only interested in playing quarterly games of hide the loss, over-state the profit. If you took a snap shot on June 29th, and then on July 5th, you would see two very different balance sheets. Our company song should be "Big Hat, No Cattle," by Randy Newman:

"at the end of quarter, the CFO brought our company together, stood up straight, threw his head back, and lied, lied, lied."