The most spectacular failures of the medtech supply chain occurred early in the pandemic with personal protective equipment (PPE) and COVID-19 test kit components. With calm analysis, it is hard to see a compelling reason for replacing JIT or why SARS-CoV-2 is a reason to begin reshoring. Some also opined that reshoring to North America would eliminate much of the disruption. Some suppliers questioned whether the shortages and delays of the past two years could have been avoided if OEMs had taken a JIC approach to inventory. The COVID-19 pandemic has been the greatest disruptor to global supply chains since World War II. While harder to execute than JIC, most modern experts traditionally viewed JIT as a successful inventory strategy for medical device OEMs, at least until 2020. Yet most medtech companies-even those born in the JIC era-have turned to JIT as a financially superior approach. Some industries, particularly natural resource-dependent companies like an electric utility, may be well served by a JIC inventory system. JIC also insulates the OEM from price volatility, at least for a period of time. Missed shipments and other disruptions do not send an OEM scrambling for alternatives. JIC is a buffer against uncertain supply and demand. Yes, JIC was costly and occasionally unproductive, but it was necessary to keep the lines running. Lacking the lean philosophy that birthed JIT or the necessary tools to keep a JIT system running, manufacturers of old carried more inventory than needed as a cushion against uncertainty. JIT had proven itself at Toyota and other firms but it remains a system vulnerable to the unexpected.įor centuries manufacturers had functioned, like it or not, with what are now called JIC inventory systems. Bad weather, strikes, quality problems, price changes, bankruptcies, and other business disruptions affecting a single supplier could disrupt an OEM’s entire production. Not only were these teams and tools necessary to gain the operational and financial benefits of JIT, they were a safeguard against JIT’s short-term fragility. What had been a quiet department became the hub of supply chain management. Management tools like enterprise resource planning systems were added to track inventory with moment-by-moment accuracy. As the clearinghouse between the OEM and its suppliers, this formerly second-line department grew in staff count and business sophistication. Firms choosing JIT commit to a carefully choreographed business ballet.Īs JIT grew in acceptance during the late 20th century, the previously oft-ignored “purchasing office” grew in power and stature. JIT’s success requires a firm handle on production schedules, outstanding communication across the company, and close coordination with carefully selected suppliers. While too much inventory may be an invisible cost, a more obvious problem is the opposite condition-running out of inventory when it is needed on the production line. Too much inventory is a form of excess that drags on operations. These benefits emerged from a supreme truism of manufacturing-most factories run more productively at a steady rate, not in fits and starts. Warehouse space and warehouse staff were reduced, increasing profits. Additionally, the “operational holding cost” of inventory declined. By ordering and consuming inventory closer to the time of sale, practitioners sharply reduced the amount of working capital tied up in inventory buys. Work was more evenly spread across time, reducing slack. JIT resulted in higher productivity among inventory and warehousing staff, as might be expected from a LEAN initiative. Toyota and other manufacturers who adopted JIT inventory found two benefits in carrying less inventory at any given time: These shipments were carefully timed to match the carmaker’s production schedule. Working with suppliers, Toyota arranged for more frequent, smaller shipments of inventory to arrive at its plants. The modern JIT inventory system was developed by Toyota in the 1970s as an extension of the LEAN principles it created to compete against the more richly resourced American automakers. The supply chain wobbled and warped but did not break, likely enshrining JIT as the inventory philosophy for the foreseeable future. The elegant dance between OEMs and suppliers core to JIT has been challenged by the COVID-19 pandemic. Over the last several decades medical device OEMs have transitioned from traditional just-in-case (JIC) inventory, which keeps excess product on hand in case of unforeseen situations, to the more modern just-in-time (JIT) approach. Once committed to, it generally requires a profound world change to instill a new set of beliefs. Inventory management philosophies are like religions.
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