Sunday, March 20, 2011

Just-In-Time to fail

After working at a production line for way too long. I started thinking about the philosophy of having your supply chain tightly linked to your product so that you hold next to no inventory because inventory cost money. I was taught that in managerial accounting in University.

After observing this in action, I have come to the following conclusion: since you cannot eliminate risk entirely, not having an inventory buffer is a recipe for production disruptions up and down the line. If your bottom-line depends on making specific shipments on a set schedule. This will result in unreliable production scheduling and missed shipments.

For example, since parts have to be ordered months in advance and the time of order and time of shipment arrival is not easily predictable. Not having a buffer of part inventories does not make any sense. What actually happened was the parts kept running out and the order never arrived on time and the shipments always have to be negotiated lower. This obviously did not jive well with management so every so often the panic button is pushed and workers are pushed to produce more. This has an unfortunate effect of increasing the rate of error in the process. Hopefully new production managers become better at this, otherwise they're definitely going to go out of business.

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