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I was asked to respond to this article based on my experience with lean, and honestly, this article is not very accurate from my point of view. I see no one in any industry blaming just-in-time (JIT) for supply chain issues.

I mean, think about it this way. The whole free-market economy is based on a pull system and a JIT system implemented at a local level manufacturer is a microcosm of that.

Let’s think about a grocery store as our example. Would the local market load up on milk or bread or anything as a just-in-case (JIC)? The answer to that is no, because bread and milk are perishable, which would lead to lost revenue if the bread and milk inventory exceeded customer demand. Not to mention the overhead cost of storing such additional inventory would negatively impact revenue. If there were a surge in demand, for example, if snowy weather was forecast and a brief scarcity of bread and milk resulted, the supermarket would not close down or ration those goods. The next day the store would just replenish them. Grocery stores do not stock inventory for the “what if”; they stock for the “what is” normal demand.

No one could have predicted COVID-19 and the lockdowns that ensued. The lack of labor force led to a supply chain shortage and is still an issue as I type. A company can’t get the raw materials from the ground to the factory if there aren’t miners working, truckers trucking or shippers shipping. Furthermore, if you were a supplier of a raw material, let’s use the example of silver or aluminum used in microchips, and Taiwan is on lockdown. Taiwan produces 80% of all microchips in the world. Due to this lockdown, new orders will not be filled, therefore reducing the demand for silver or aluminum. The silver and aluminum mines reduce production. What incentive do you have to “push” production when there are no orders “pulling” your product? The answer is none. 

Now let’s say you are an automobile manufacturer such as Tesla, Toyota or Ford. You know you won’t be able to produce automobiles without the microchips from Taiwan. Auto manufacturing declines. This production slow-down has a bleed-through effect on the steel industry, whose primary customer is the auto industry. The automobile manufacturer does not order as much steel. The trucking company can’t replace a decommissioned truck for their fleet because microchip availability is low, which reduced the production of new trucks, so the trucking company’s ability to ship goods is diminished. This cycle perpetuates itself.

In summary, was it the fault of the microchip company for not putting forth an excessive amount of revenue in an upfront inventory of very, very expensive microchips just-in-case? I think any reasonable person would wholeheartedly agree that the answer to that is no. Just-in-time (JIT) strategy ensures that a manufacturer has what they need to produce or when they need to produce, under normal circumstances.

It is clear that the current supply chain crisis is being perpetuated by a once-in-a-hundred years pandemic and did not happen under normal circumstances.