The Death of Just-In-Time Manufacturing?

In My Humble Opinion
21

I think this is the key point, but I want to amplify why it is may be perceived as ‘good’ especially in the US. During COVID, a huge number of raw and finished goods and materials were suddenly hard to get, or more expensive. People complained, but still bought them as soon as they were available again, and sometimes at vastly inflated prices.

Very, very few people changed their preferred ‘brands’ due to a shortage. And what most people were and are complaining about is price. People, overall, seem less concerned about having to wait for something if the delay is explicable, but will cry to the heavens if it becomes more expensive. And JIT helps keeps prices down while maximizing profitability. Not that the two always go hand in hand, far from it, but it does enable more competitive pricing in non-monopolistic areas.

22

No one is proposing any government intervention.

The question is is businesses will stop relying so heavily on JIT now that a globally disruptive event is no longer a hypothetical.

Many smaller companies have gone out of business due to the lack of inventory. Maybe that could have been prevented and some start-ups will adjust in the future.

If car and computer prices are goning up across the board, the company who planned ahead for a supply chain disruption would be at a major advantage. The free market would reward them for investing in a more resilient resource plan.

23

But my point is that the free market may very well punish them for being less efficient during normal times when components are easy to source. Normal times are more, er, normal so the shocks to the system would need to be frequent or huge to completely guard against that. I’m not saying that I’m sure that isn’t the case, but I’m not convinced it is either.

24

This is not what I observed. It’s a poor example admittedly, but the shortages in toilet paper, masks and sanitizer were the problem. Not the price gouging. People may not have been willing to go to the black market for it, but they would have been fine spending significantly more if they’d have just been able to get it.

People are furious that you can’t get your hands on Xbox’s, PS5 and graphics cards. They aren’t pissed about a price increase from the manufacturer, they are pissed because no store has inventory.

People are tolerating the price increase on lumber and home construction is continuing. If there was no lumber to buy anywhere and projects were going belly up or people couldn’t repair damages you’d see a national emergency.

25

My car is two years old and wasn’t the bleeding edge at the time. It still has a cell phone connection as fast as my phone’s, front and rear facing cameras like my phone, a giant touch screen just like my phone, a second monitor (which my phone lacks), GPS just like my phone, numerous accelerometers (to run the stability control system and airbag systems) of which I think my phone just has one, stereo speakers like my phone, a wifi chip like my phone, radio receiver like my phone, etc. I can’t think of any system my phone has that my car doesn’t. Unlike my phone, it also has a remarkably complicated electronic stability control system, various driver aids to keep me from getting killed (including even more cameras), various airbags, sophisticated engine management and transmission control systems, etc., all of which my phone lacks. My car has never had to reboot during operation. My phone has crashed at least five or six times during the pandemic, which would likely to translate to at least one real crash if my car had the same performance. I suspect carmakers know more about getting cars to run dependably than you.

You seemingly give credit to Tesla for using bleeding edge technology. In fact, they relied a lot on off-the-shelf processors and memory to run their Model S and Model X cars although even they weren’t dumb enough to buy used components of dubious provenance. The result of their genius move was that the components failed after a few years leading to bricked cars, thousands in repairs for owners, and an investigation by the NHTSA into whether they must recall the cars. I’m sure had they used old cell phones though, it would have all worked out great.

Back on topic - Just-in-Time isn’t going anywhere. In most situations it will save billions per year. So in normal times, if you aren’t doing it and everyone else is, you will lose billions, be uncompetitive, and lose your job running a car company. If everyone is doing it, no one is at a competitive disadvantage by doing it. If everyone is doing it, no one gets fired for doing it too, even if it causes a short term disruption. Even if you abandoned Just-in-Time, the advantage of storing a week’s worth of parts (or even a month’s) is minimal when the shortages persist for months or a year. You can’t store enough parts to make a real difference.

If you stored all the parts you might need for, let’s say, a year’s production “just in case,” you would have finance it, insure it (or eat the risk of loss), store it, secure it, and inventory it, which all adds up to money. All that so you have the dubious advantage every once in a while of writing off and throwing away a few billion of essentially worthless inventory when you misjudge how popular a particular model of car is going to be. Automakers have gotten smarter than that. Yes, they’ve been hurt a bit by production problems in this economy but they have over the life of just-in-time inventories saved multiples of what they have lost recently.

26

I would say more, but in an attempt to say on topic I’m keeping it brief. Not a single one of those systems is equivalent to what’s in your smart phone. Be it bandwidth, screen resolution, camera resolution/zoom/HDR etc, GPS precision or any other feature, the phone’s version of the tech is years ahead. It’s quality not quantity.

27

Add in that they push their vendors to reduce costs themselves - they want the best product, right now, at the lowest price. The vendor takes all the risks - including that next month Big Customer will find another vendor. And then are SHOCKED when the vendor is like “you know, I don’t make any profit selling to you, I think I’ll make hand sanitizer.” I’ve worked with a few companies who were thrilled to get their product into Target or WalMart - and even more excited to get out of Target and WalMart and open up more profitable avenues.

I don’t think JIT is going anywhere, but I think there might be a better understanding of where the risks are - they’ll still ignore them because it keeps costs down.

28

It’s not that it’s a poor example, but I didn’t make my case clearly enough. So my bad, not yours. People complain less when it’s explicable, so for example when everything is out. If brand X is available, when brand Y is always gone, people are going to reconsider brand Y . . . unless brand X is 20/30/40% more expensive all the time, when brand Y is always cheaper when it’s in stock.

A better example of this comes in various types of organic foods during COVID. If you wanted alfredo sauce in my area (and a few others by reporting) all of the store and major brand names were off the shelves. But some of the expensive, foo-foo $8+ dollars a jar brands were still in stock. But few people wanted Alfredo quite that badly.

That’s why during the worst days, if there was a food I wanted really badly, I’d check Whole foods first - sure, it was noticeably more expensive, but more likely to be in stock. But the moment availability was back on a less expensive but still satisfactory option, I went with that. And that’s what I’m seeing for the most part - there are going to be tons of exceptions where someone falls in love with a replacement, cost be damned. But the biggest driver for most US shoppers always has been price, and JIT is a tool to keep prices low. (and make tons of profit, natch)

But again, I was being to simple and too flip in my earlier post, so lots of room for miscommunication.

29

Are we sure yet that this pandemic, or some event with similar effects, IS a once-in-a-century event? It’s been a century since the Spanish Flu, but to me it looks more like luck and chance that SARS in 2002-4, or MERS a few years later, didn’t become pandemic. Given that those are all related viruses, that’s three potential coronavirus pandemics in less than two decades. We got lucky twice, but assuming we’re always going to be lucky isn’t perhaps the best plan.

30

Yes, more demanding. Computers have more than one degree of freedom. The computers in cars are designed to do the things that cars need to do. The fact that a used iPhone chip can push a lot of pixels around an HD screen doesn’t make it well-suited for other tasks. Can it do so with the power budget available? Probably not. Can it do so within thermal constraints? Doubt it. Can you get a contract with a major company to provide them to a given quality level on a specific schedule? Maybe? Can you get published errata from the chipmaker so you can work around hardware bugs? Hell no (this is Apple we’re talking about).

It is absolutely bonkers to suggest that it makes any sense to use recycled smartphone chips in cars.

May I ask what your background in software/EE/automotive design is that you’re so sure this is a good idea?

31

JIT is not going away because it’s profitable, and profits are what attract investors. If the concern is supply chain disruption, the answer won’t be ditching JIT as a system; it’ll be finding ways to work around disruption (i.e. more versatile supply chains)

32

I would say naive, but that’s likely too generous.

33

This is not the death knell for just in time manufacturing. There are advantages to such a system - control, low warehousing and storage costs, flexibility and lower costs in general.

However, the pandemic has laid bare the problems of not having any redundancy in supply systems. This matters a great deal in some industries and much less so in others. It sucks if you can’t buy cold pickles. It’s much worse if your home lacks water or electricity for long periods. Accordingly, hackers have also emphasized problems in not having access to gasoline in certain areas. These problems will probably get worse before they get better. At a minimum, the value of redundancy will be reassessed in industries like utilities and not much will change in industries where just-in-time has generally been profitable, once better times return.

34

Modnote: Do not post any more animated Gifs. They are specifically forbidden in the SDMB rules that TubaDiva published for the Discourse version of the board.

Please, if anyone sees an animated GIF, let us know by flagging it.

35

I started a hand sanitizer company that was based around stockpiled inventory and pitching an uninterruptable supply of sanitizer to government entities. They hated the idea and when the company was forced to pivot to different types of sanitizer products we had to destroy a quarter of the value of the company in un-sellable sanitizer.

The ability to pivot and move is too valuable to get rid of I think shrinking supply lines so more things are produced locally is more likely though that increases the chance of a local event causing more problems.

36

Pretty much. German auto makers like Audi and Mercedes were accustomed to being the big boss in town and suppliers groveling since they depended on the big boss for survival. They were sharks surrounded by minnows. It was a shock to them to find that chipmakers like TSMC cared much more about Apple (a far bigger and more lucrative client) than a few measly car chips.

37

JIT assumes run rate and predictable demand forecasts. Well, that goes out the window when

  1. work from home and remote learning has kept PC demand at high levels for the past 15 months with no end in sight. IC demand
  2. lockdown means a lot more people spending money on consumer electronic items out of boredom/free time. IC demand
  3. Since I’m stuck at home, let me do those home projects that have been on the back burner forever. lumber and building material demand
  4. natural calamities like forest fires, hurricans and the Texas debacle means that there are an awful lot of homeowners that need to repair homes to make them habitable. Lumber and building material demand
  5. People returning to work need cars. Auto demand and IC demand
  6. As happened during SARS, and net new % of people that decided they need cars instead of public transportation. Auto demand and IC demand.
  7. Y’all better pray that a typhoon makes a direct hit on Taiwan soon, or the drought there will shut down something like 50% of the global IC production

JIT might be exacerbating the above dynamics, but isn’t the cause of supply chain disruptions. We’ve got 1-2 years before the supply chains reach a new equilibrium.
4.

38

I feel like these two sentences say something meaningful about this debate but I’m not sure what. Lack of TP was a problem, despite nothing about Covid causing any problem with TP. And people are “furious” about not being able to buy the absolute latest in certain toys, when the country is flooded with them.

If these are key examples, I feel that it is unlikely that any great changes in the way manufacturing and distribution is operated are likely to be forthcoming.

39

I suspect it mostly says something about what the media chooses to cover. I have no doubt that there are much less frivolous examples of shortages and the related angst but they aren’t top of mind.

40

It’s interesting hijack though. I was wondering about it from a marketing point of view.

Because, there’s a risk that if people discover that your brand new model is using recycled and/or obsolete chips that that will give a perception of a car that’s already out of date. Not good when you want people to drop tens of thousands of dollars on something to make the neighbours jealous.
Of course, in terms of environmentally-minded consumers, it could be a positive. But even then, if you’re going to sell your car as green, then that’s going to ripple through to other design choices, which will need to not contradict that.