According to Opportimes.com, a strong rebound in global demand, supply disruptions and depletion of inventories have driven up raw material prices and transportation costs around the world — especially in North America. An increase in the price of raw materials, coupled with increasing uncertainty in manufacturing supply chains, has led many to rethink their stock management. Here, Claudia Jarrett, US country manager at industrial parts supplier EU Automation, explains why plant managers should consider the alternatives to lean manufacturing.
Lean manufacturing, which was previously coined as just-in-time (JIT) manufacturing, was originally developed by Toyota in 1970. It is a production method designed to help reduce production time while reducing response times to customers and suppliers. JIT also encourages manufacturers to order parts only when needed, as close as possible to the point of assembly, so there is minimal stock held in inventory.
Simply put, the strategy aims to increase efficiency by eliminating waste, optimizing processes and cutting costs. This is achieved by producing only what is in demand and not overstocking. By reducing the production time, the method improves the productivity rate and helps increase profits. In turn, lean manufacturing has been a popular method for manufacturers to ensure products are received only at the time needed, saving space in their inventories and reducing time in the production cycle.
The current landscape
COVID-19 exposed problems in lean manufacturing that have caused manufacturers to reconsider this methodology. JIT is built on forecast demand which, while reliable in the past, has now become more unpredictable. This is because the forecast is based on historical data, but unpredictable social and political upheavals, such as the national lockdowns and conflict in Ukraine, mean that this data can no longer be relied on to the same extent. However, there are a few strategies to prevent stockouts even given the current levels of uncertainty over the future.
Manufacturers are now after alternatives to ensure components are in continuous supply. Conventional approaches, such as just-in-case (JIC), where manufacturers create a stockpile of components, also provide their own set of challenges. Businesses are instead of wanting a middle ground, which offers reliability without reducing profits.
A solution is moving to nearshoring or reshoring. A supplier closer to production can significantly lower replenishment times and deliver parts faster at times of need. The issue of shipping parts has always hindered faster cycle times while relying on suppliers overseas can add shipping time and coordination complexity.
Manufacturers can also implement a supply chain that operates on a global level, but also adapts to local demand. This is what we call a “glocal” supply chain. Companies like EU Automation rely on a reliable network of global suppliers and work with international sales experts, that speak more than 20 languages, to overcome linguistic and cultural barriers. Operating from four different locations — including the US — we offer manufacturers both the knowledge of global demand and local markets to ensure the right quantity of stock is delivered on time.
By offering visibility over production, newer automation technologies can also help manufacturers decrease lead times and stay afloat during unexpected events. This provides manufacturers with the ability to target specific areas of production that need improving. Moreover, awareness of a component’s journey throughout a warehouse offers insight into waste and consumption rates.
Automated replenishment ensures businesses can manage warehouse assets. Automated devices identify components in short supply, before automatically reordering them from the distributor. This helps production managers to cope with demand, without worrying about the component shortage.
Disruptions are likely to affect manufacturing for many months to come, and while manufacturers enjoyed the benefits of JIT production and lean manufacturing for many years, times have changed.
We are now living in an era where alternative approaches must be considered for a steady supply, with the reality being that supply chain difficulties and component shortages will likely persist for some time. Therefore, it is essential for manufacturers to adapt their stock management to avoid downtime and reduce delays — and consider the benefits of alternative approaches.