Step 1 Earthquake, Step 2 JIT Bashing
A Key Strategy of Japan’s Car Makers Backfires - WSJ.com
I
predicted it, that the Japan earthquake, which led to
production shutdowns about two weeks back at Toyota, Nissan, and
others, would be quickly followed by an article that blames that
risky Just-In-Time strategy. Well, it only took two days for the
WSJ. Either that’s “Just-In-Time” writing, or they keep articles
like that ready to go in the warehouse! The WSJ article says:
“For want of a piston ring costing $1.50, nearly 70% of
Japan’s auto production has been temporarily paralyzed this week.Blame it
on kanban, the just-in-time philosophy of keeping as
little inventory on hand as possible. The strategy keeps
inventory costs down and ensures quality. It generally works
because Japan’s auto makers have long prided themselves on the
almost familial relationships they have with a handful of suppliers
of custom parts that deliver several times a week or even
daily.The strategy also has a
downside, as became evident after the 6.8-magnitude
earthquake that hit central Japan on Monday…”
What is Toyota supposed to do then? Hold lots of expensive
inventory “just in case” they have a once-in-ten-years
catastrophy? The WSJ admitted that Lean is good for costs and
quality, so what are they really suggesting Toyota do? It’s a
pretty shallow and uninformed article on the WSJ’s part.
Toyota (and others) were back up and running within a week.
Let’s say Toyota had the supplier hold lots of just-in-case
inventory…. well the Riken warehouse was damaged, so it’s
possible that all of that inventory would be damaged even if they
had it.
There is also a
free article with similar themes here.
The Journal wrings its hands about JIT and risk about once a year.
Others pick up on this tired theme,
which I blogged about here in response to an article in The
Manufacturer.
Here’s the letter I wrote to the WSJ:
Dear Journal Editors:
After hearing news of the recent earthquake in Japan , I publicly
predicted the coming “Is Just-In-Time Risky?” article
and you delivered (“A Key Strategy of Japan’s Car Makers
Backfires,” July 20). The writer blamed kanban and the
“lean manufacturing” approach used by Toyota and many
others, although you rightfully recognized that the philosophy
“keeps inventory costs down and ensures quality.”
News stories reported that the Toyota supplier, Riken Corp.,
suffered damage to its factory and to its warehouse. It seems
irresponsible to suggest that companies with supply chains that
normally flow smoothly should hold “just in case”
inventory stockpiles that can just as easily be damaged in an
earthquake or other such rare disaster. Toyota suffered a similar
shutdown in 1997 after the Aisin factory
fire, another situation where parts were sourced from a single
supplier and inventory levels were low. As the Journal itself
wrote, again in 1997, “The fire and its aftermath have left
Toyota executives convinced that they have the right balance of
efficiency and risk.’
Should Toyota , and others, sacrifice cost and quality for a one or
two week disruption that happens every ten years? Toyota is, by its
nature, self-critical, so I would trust Toyota management,
especially given their track record of sustained growth and
profitability, to find the right balance more so than outside
analysts or reporters.
Mark Graban
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Mark Graban commented:
Exactly right, Wayne. The WSJ very often gets it wrong when writing
about Lean and TPS, as do many other reporters, unfortunately.
Wayne A. Marhelski commented:
The Wall Street Journal (WSJ) article seems to fall short on
understanding of the entire Toyota thought process. This type of
disaster is difficult, if not downright impossible, for anyone to
predict. The fact that Toyota was able to respond in a quick
fashion is a testament to their methodology. With a standardized
and controlled process, it becomes easy to determine where the
focus needs to be placed when mishaps occur. How fast would the WSJ
be able to pick back up after a 6.8 earthquake?
