Written by Catherine Bolgar
When Toyota Motor Corp. introduced just-in-time (JIT) manufacturing, it transformed the automotive sector and changed how the business world viewed production and supply chains. Toyota wanted the right quantity and quality of parts to arrive at the factory floor at the right time, allowing the firm to shrink its expensive inventories.
The auto industry continues to innovate. As cars become increasingly customized, the sector is once again leading change, with “just-in-sequence” (JIS) production. Carmakers want to ensure not just that they have enough doors at the right time, but enough blue, red or any other color doors precisely when they need them. If the plant is making a blue, a white, a black and a red car in that order, it has to know that blue, white, black, and red doors will also arrive in that sequence.
Just in sequence “is a very hot topic in the automotive industry,” says Nils Boysen, professor of operations management at Friedrich-Schiller-Universität Jena, in Jena, Germany. A car rolls off the assembly line every 60 to 90 seconds, for which any one of more than a thousand varieties of door trim or seat, and hundreds of different center-consoles, might be needed. JIS allows assembly workers to get the right item quickly, without having to sort through large, cumbersome parts. Given that auto workers are generally well-paid, carmakers have an interest in improving workflow efficiency. It’s a little like Charlie Chaplin’s film ‘Modern Times,’ Dr. Boysen says. “It’s pretty fast and exhausting if you have to take a door every 90 seconds again and again.”
JIS isn’t practical for all manufacturers. Aircraft makers, which also require large parts, operate at a different pace—typically producing a plane every 2.5 days—and many parts, such as passenger seats, come in large, standardized quantities. At the other end of the spectrum, electronics factories require large quantities of small but expensive parts, which workers can easily handle multiple times, says Dr. Boysen. Even in the auto sector, not all parts are sequenced: mirrors, for example, are too small to be worth the trouble.
Just in sequence has a lot of prerequisites,” Dr. Boysen notes. “The parts and products must be assembled very often and in huge variety.”
With JIS, the cost of getting parts in the correct sequence shifts from the factory worker to the supplier. With JIT, companies reduce warehousing costs by leaving inventory with suppliers, who are then expected to deliver them at the right time. Companies outside the auto sector have adopted what is effectively a less-complex version of JIS. Certain clothing retailers, for instance, ship clothes with price tags and hangers attached, so shop staff don’t have to iron, hang and tag them. The main benefit of this is not about saving the time of salespeople, whose wages are generally not high, but in displaying the clothes more quickly for loyal customers who want first pick of the new arrivals.
Companies shift costs to suppliers in other ways besides JIT and JIS. Some manufacturers and retailers deploy vendor-managed inventory, providing point-of-sale data to vendors who ensure that warehouses or shelves are efficiently stocked. Other companies are shifting research-and-development operations to their suppliers, so that those suppliers can become more innovative.
Although JIS is mainly about cost-cutting, even the auto industry isn’t entirely convinced that the returns justify the investment. “It’s hard to measure the effects of how much does it cost and how much does it bring you,” says Dr. Boysen. The automakers “plan their sequence and order some parts, like engines, in JIS, then they receive these parts in the planned sequence, but their production processes aren’t that reliable. There are always problems with the paint shop. When a sensor detects a paint defect, the car has to be repainted. So they don’t make sequence as planned. They have to reorder or resequence.”
In a factory producing several thousand cars a day, the buffer inventory can take up a lot of space and cost tens of thousands of euros, Dr. Boysen points out. Even the world’s largest car companies struggle with “huge space problems,” he notes.
Catherine Bolgar is a former managing editor of The Wall Street Journal Europe. For more from Catherine Bolgar, contributors from the Economist Intelligence Unit along with industry experts, join the Future Realities discussion.
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