Is ‘just-in-time’ proving just enough?
Many manufacturing industries have become accustomed to just-in-time supply chain operations. Pioneered by Japanese firms over 60 years ago it now dominates global manufacturing. It became dominant in the plastics sector after the 2008 financial crisis when commodity prices collapsed and firms reacted by keeping reduced inventory to help minimise financial risk. Nowadays it continues to dominate in many sectors including the fenestration industry. However, the current supply chain crisis is leading to serious questions being asked about the role just-in-time had in fuelling product shortages. Manufacturing experts have pointed to the belief that just-in-time supply chains are designed around lean production and minimal inventories and unfortunately only function in the good times. A leading voice on supply chain management pointed out: “There is not enough slack in the system to cope with an unexpected shock.” This theory was perfectly demonstrated by the fuel crisis where the majority of petrol stations operated at 40% storage capacity, with a surge in demand from panic buying they were unable to cope which led to shortages in supply at the pumps.
There is no doubt just-in-time is still crucial but there is a need for more back-up at all levels across the supply chain. Globally things will improve as a large number of container ships are being made available towards the end of 2021. Domestically business leaders are looking at increasing storage and warehousing facilities – however, the race is on and many sectors are competing for limited warehousing space. Across all segments of the fenestration sector, the supply of materials has been a major headache. Whether you talk to an extruder of profile, maker of hardware, fabricator of windows, or an installer, they have all been feeling the pressure. For the manufacturers, the options are slightly wider as they can move away from just-in-time supply and investigate storage options for components. But as one window fabricator told me: “This is all well and good, but it relies on me being able to get hold of all of the components I need to make a window or door.”
Against the backdrop of supply issues is a rampant level of demand for finished products. This is a major positive for our sector as demand at current levels is something we should be able to manage with increased lead times and an uplift in retail pricing. Using the petrol shortage analogy, a long-serving retailer told me: “With the petrol crisis we saw a load of panic buying then a price hike for petrol. Supply increased and with it a near return to something that resembled normal. Equate this to the window market, there has been a supply shortage against a backdrop of huge demand as people have money to spend. We should put prices up so those that want products now have to pay extra. Those less desperate will be given longer lead times – maybe 6 months time – and then this will give the supply chain time to recuperate and replenish stocks.”
Eventually, the global supply chain distortions will disappear and there will be permanent adjustments to the way businesses deal with their suppliers. The big question is whether just-in-time supply requires a structural adjustment to make it more adaptable to any further unexpected shocks in the market.
John Cowie – Editor
