Executive Briefings

Just-in-Time Policies Can Negatively Impact Supply Chains

The rise of just-in-time manufacturing has created a revolution across the supply chains of many industries, including electronics components.

Accurate forecasting and inventory control have enabled far-flung manufacturers to produce and deliver components, essentially on demand, to a global network of suppliers and customers, while avoiding costly warehousing and other overhead expenses. However, these just-in-time policies have a downside and can leave many companies vulnerable to missed production targets and inability to meet customer demands.

Whenever there is an interruption in the supply chain (natural or man-made), the "just-in-time" system is in jeopardy of breaking down and mission-critical industries must look elsewhere for highly desirable components. If a manufacturer has forecasted incorrectly and not manufactured enough of a product line, it could take 6 to12 months before it can return to production after having retooled for other components.

Steve Culp of Accenture's Risk Management practice stated in an October 2012 article in Forbes, "the fragility of global supply chains is related to emerging risks, but is also related to supply and network design strategies."

He may have added that these seemingly well-thought out design strategies have proven to be easily impacted by interruptions. Take the example of a natural disaster. When the 2011 Japanese earthquake and tsunami struck, production delays rippled throughout the supply chain.

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Keywords: Supply Chain Management, Electronics Supply Chain, SCM IT, Logistics Management, Supply Chain Risk Management

Accurate forecasting and inventory control have enabled far-flung manufacturers to produce and deliver components, essentially on demand, to a global network of suppliers and customers, while avoiding costly warehousing and other overhead expenses. However, these just-in-time policies have a downside and can leave many companies vulnerable to missed production targets and inability to meet customer demands.

Whenever there is an interruption in the supply chain (natural or man-made), the "just-in-time" system is in jeopardy of breaking down and mission-critical industries must look elsewhere for highly desirable components. If a manufacturer has forecasted incorrectly and not manufactured enough of a product line, it could take 6 to12 months before it can return to production after having retooled for other components.

Steve Culp of Accenture's Risk Management practice stated in an October 2012 article in Forbes, "the fragility of global supply chains is related to emerging risks, but is also related to supply and network design strategies."

He may have added that these seemingly well-thought out design strategies have proven to be easily impacted by interruptions. Take the example of a natural disaster. When the 2011 Japanese earthquake and tsunami struck, production delays rippled throughout the supply chain.

Read Full Article

Keywords: Supply Chain Management, Electronics Supply Chain, SCM IT, Logistics Management, Supply Chain Risk Management