Has the Just in Time economy had its day?

We live in a world where almost anything can be ordered to your front door at the touch of your fingertips and delivered the very next day.

A key methodology that companies have employed to meet consumer demands over the years and is still used to meet these modern requirements is Just in Time manufacturing. However, with supply shortages, dwindling HGV driver numbers, the pandemic and Brexit, there are real fears that the Just in Time economy has had its day.

What is Just in Time (JIT) manufacturing?

Lean manufacturing, or Just in Time (JIT) manufacturing as it’s also known, is an inventory management system where goods are produced as they are required and is designed to increase efficiency and decrease waste. Under the system, a company only receives the raw materials they need as they are required for the production process, meaning lower inventory costs.

The system was adopted by Japanese car manufacturer Toyota in the 1970s, so it is also referred to as the Toyota Production System (TPS). The success of Just in Time manufacturing depends on steady production, high-quality workmanship and no machine breakdowns.

Reliable suppliers are also essential for ensuring the materials used in the production of goods are received in time for production schedules. Otherwise, there is a risk of companies being unable to create their products. If suppliers are unreliable, a company might also have to order more materials to ensure they are available when they need them, but this goes against Just in Time manufacturing principles and means inventory costs are increased.

Is it the end of Just in Time?

In a survey by the Road Haulage Association (RHA), a private company dedicated to the interests of the road haulage industry, they estimate that the UK is currently short of more than 100,000 qualified HGV drivers. According to the Office for National Statistics, from June 2017 to June 2021, the number of HGV drivers in the UK also dropped by 53,000, from 321,000 drivers to 268,000.

As a result of the HGV driver deficit, there have been widespread reports of supply shortages, including food and petrol. This raises important questions concerning whether the days of the Just in Time economy are numbered.

However, Pol Sweeney, Vice President Sales EMENA Fleet at Descartes Systems, believes that with more flexible and responsive supply chains, the Just in Time economy can continue.

“The fundamental drivers that created the Just in Time economy have not gone away,” says Pol. “If anything, the recent combined effects of Brexit and COVID have heightened the need for flexible, dynamic, and highly responsive supply chains.

“Increasing digitalisation and supply chain optimisation through the use of AI systems and techniques will be required to provide the improved responsiveness and the increased efficiency required to deal with the recent disruptions and unpredictability.

“When you are dealing with a scarce, and/or expensive resource such as HGV drivers, the answer is to use them efficiently and effectively. The efficiency gains can be baked in so that the benefit is longstanding even when or if things return to less disruptive conditions.”

Brexit and the pandemic are regularly cited for the dwindling HGV driver numbers and the resulting supply shortages here in the UK, but the pandemic’s wrath has been felt on supply chains worldwide.

However, Douglas Grant, Director of Conister, which is part of AIM listed Manx Financial Group, believes that the Just in Time economy is likely to change in response to the ongoing supply chain issues.

“The ‘just in time economy’ hasn’t had its day and in fact is likely to become more fine-tuned in response to the supply chain issues that are currently impacting the sector,” says Douglas.

“However, this increased focus on business supply chains in the UK has brought to light some of the growing pressures many of our small and medium sized businesses (SMEs) are facing on a day-to-day basis.”

“At Conister, we currently have several instances involving significant advances across many sectors, which are unable to proceed as a result of supply chain holdups, hence stalling any potential growth. Added to this we are seeing rising inflation, labour costs driving upwards and a tightening of the labour market all restricting any business growth.”

Geoff Burch, renowned business coach, speaker and consultant, however, believes that the Just in Time economy might have had its day.

“If the only tool you have is a hammer, then every problem is a nail, and with ‘Just in time’ we are getting well hammered,” says Geoff Burch.

“In its most sensible form it has been with us for centuries, and in its raw form it dealt most excellently with perishability. You wanted a tomato, you went and picked one. An egg? Well, just lift the nearest chicken. Milk? Grab a passing cow.”

“Technology is also perishable. Whilst filming a documentary for the BBC on cyber waste, I visited a technology scrap yard and was shocked by what I found. Large companies would give new recruits a shiny new laptop and had a copious stock of them, but after a year or so…well, who wants a year-old laptop? They were in the scrapheap still in unopened boxes.

“‘Just in Time’ says, go and buy the tech when and where you need it.”

Geoff’s comments are particularly interesting because Just in Time manufacturing is supposed to reduce waste, but in tech, a sector where products have a notoriously short lifespan, it might be having the opposite effect.

In a survey from Lloyds Bank published in 2020, almost two-thirds of small and medium-sized business owners want to improve their environmental sustainability. So, as sustainability appears increasingly on company agendas, it will be interesting to see whether Just in Time manufacturing is consistent with them.

Should we move away from Just in Time manufacturing?

Whilst there is a debate regarding whether the Just in Time economy has had its day, there is no denying that we are currently experiencing major supply shortages across the world.

“Indeed only in August, the Confederation of British Industry (CBI) suggested that the UK’s economy had been plunged into a supply chain crisis, with major retailers’ stock levels at their the lowest since 1983,” continues Douglas. “This comes as a result of worker shortages and transport disruption caused by Covid, the Suez Canal blockage in March and Brexit.”

As a result of the supply shortages, the construction industry could be set to experience stunted growth in the remainder of 2021 and 2022 too.

According to the Construction Products Association’s (CPA) Construction Industry Forecasts for Autumn 2021, since its previous Forecasts, they expect construction output growth to rise for 2021 from 13.7% to 14.3%, but growth for 2022 was expected to drop from 6.3% to 4.8%.

The key factor cited in this revision was that supply chain constraints are expected to hinder growth for the rest of 2021 and in 2022.

So, could Just in Time manufacturing be playing a part in the supply shortages?

Under Just in Time, suppliers are required to deliver small batches of materials and parts more frequently to prevent the need for factories to carry excess raw materials. It also balances and coordinates its production lines to minimise its work in process, and ships finished goods to customers frequently in small batches.

However, since the majority of the goods we consume in developed countries are produced halfway around the world, we’re not only reliant on the capacity of factories, but also on a giant global transportation and logistics network to provide us with the things we need in a timely way.

So, should we move away from this system? Geoff Burch seems to think so.

“I consulted with a global technology manufacturer who ran their own world on ‘just in time’,” continues Geoff. “The heart of their product was a computer that cost a fortune, so having stocks of those lying about made no sense, but the cases were held together with cheap plastic moulding and 27 small screws, all delivered just in time.

“If there were 26 screws, the line stopped. We put huge drums full of screws and mouldings up and down the line – not ‘Just in Time’ but a low cost and very satisfactory fix.

“Now we really are in the eye of the storm, however; we’re seeing car production halted for a few quids worth of missing chips, ports clogged and shortages in the shops. I went to buy a German bike and enquired when I might get one. The answer I received was no stock until 2023.

“Whatever product we make, whilst ‘Just in Time’ was clever, inflation, logistics and demand may suggest ‘Just in Time’ is actually out of time.”