Just in time to do something about component supply

Are there cracks appearing in just in time manufacturing? At a meeting of component suppliers and customers earlier this month, it was clear that some suppliers are struggling to cope with the demands of – in this case – vehicle manufacturers. With several different customers in the mix and delivery schedules ranging from twice daily […]

Are there cracks appearing in just in time manufacturing? At a meeting of component suppliers and customers earlier this month, it was clear that some suppliers are struggling to cope with the demands of – in this case – vehicle manufacturers. With several different customers in the mix and delivery schedules ranging from twice daily to once weekly, and with minimal inventory stock too, the logistical challenge is obvious.

This is more than just a case of over-ambitious component suppliers biting off more than they can chew, and then whingeing about it.

Logistical problems can be solved. But the risks of bottlenecks exist all the way down the supply chain. Much of this risk is borne by the component supplier to the final assembly line – the one which causes the track to stop if the goods arrive late, with the usual punitive fines.

While car makers can get organised to respond to schedule changes rapidly, it is far harder for suppliers to plan to meet this fluctuating demand and to make up for unexpected shortages from suppliers lower down the chain.

Some experts think spreading the risk between manufacturer and supplier would be sensible. And in the car industry, some have even suggested drawing such an incentive from customers through premium pricing. If one buyer wants an individually-specified and custom-built car delivered within a week, they should pay more than someone who is happy to wait eight weeks. Then pay the component suppliers comparatively more for goods supplied to tighter order schedules, and make the risk justify the rewards.