The Great Supply Chain Disruption - According to New York Times...

Laying out some Background

Last autumn I heard one episode of one of the most popular and interesting podcasts out there: The Daily. On October 15th they release an episode talking about the Great Disruption affecting supply chains. Journalist Peter Goodman described in detail what is affecting supply, ports, containers, deliveries, etc. 

At that time I was in a logistics role, and experiencing variation and shortages from all over the world, was curious about what was causing the shortages of materials. Of course, we all know that pandemics had hit hard multiple manufacturing niches and that has hurt industries around the globe. However, as the Daily is one of the shows I like, was interested in the New York Times take on this. 

Peter went to Gemba, and walked the process at one of the biggest ports in the US; the one in Savanna Georgia. He described the thousands of containers sitting there waiting to be shipped, and even though this massive port was working its best to keep up, it was simply too much. 

One of the contributors to this problem was of course the pandemic. As China shut down Wuhan and many factories as well, American companies closed retail stores and factories, because of the outbreak. Peter claims that companies thought that eventually, a downturn would take place. just like when the financial crisis hit, so, everybody canceled routes, stopped moving materials, and productive capacity shrank. So as people started to work from home, exercise from home, buying tablets and laptops from home, a surge in demand for different products started to increase. So, the problem was, according to Peter, that there weren't enough containers to bring everything from China into the US. Why? Because there is a high demand for EPP to combat Covid, all over the world. 

One part of the problem, he says, is that as we're buying stuff made in China or components from China, needed to assemble products, so, containers that have spread around the world now have to come quickly back to China to pick up materials. As companies have started to be aware of the problems in distribution chains, businesses have started to order large amounts of materials. And then,  when containers arrived at the ports, they are left there and cannot be picked up, cause warehouses are full. 

This is more-less what Peter Goodman explains. As I drive my car, heading to work, zipping my coffee, think to myself, makes sense, somehow this chaos makes some kind of sense. 

The Critique of Just In Time

Then he goes on to explain that there are shortages of truck drivers, causing slow delivery of containers to their owners. And all of the sudden he says:

But there’s also a big picture element that we need to reckon with. And that’s that for, really, four decades publicly traded companies have been under tremendous pressure to go as lean as possible.

Yes, you guessed it. He then goes, as the WSJ has done before, to blame JIT for the shortages and the disruption, supply chains are going through. Peter explains that because now companies rely on the supply chain, instead of having materials stored at a warehouse, companies bring whatever they need from China. Those companies basically decided to avoid having storage and use that money to make share prices go up or pay dividends. 

So, at this point, I am trying to absorb what I just heard. Just in time is the great root cause for this great shortage. I just couldn't believe it. I have always respected journalists and media that inform people. They are an essential part of everybody's life. We make decisions based on the information journalists provide. We judge others and form opinions about topics that seem to be important. But when the information a journalist provides, is not right or isn´t fair, can help to think that there are topics media do not know well, and still, here they are, talking about it, misinforming people.

Then, there is an exchange between Sabrina Tavernise (host for the show that day) who asks:

So Peter, what’s happened is our behavior has changed, and that’s not going away. But also, these are vast, very complicated systems. I guess what I’m wondering is, what happens to this lean model of manufacturing that does leave companies incredibly vulnerable to major global shifts like this?

 Then Peter finalizes with a harsh voice:

Well, that’s a crucial question, and there are all sorts of varying opinions. There’s no question that just in time has been running late. And the mantra of lean is now provoking much discussion of, well, we need more resilience in supply chains, we need to think about backup plans.

 

 Enough...

Clearly, Neither Peter Goodman nor Sabrina Tavernise understands what they are talking about. Just in Time is not the root cause for this chaos we're experiencing in supply chains. Their comments and blaming only reflect and explain why, after so many years, most companies and in general, people in the west, still don't understand Lean. 

To start Just in Time never requires or recommends getting rid of all inventory to rely solely on the supply chain. Lean uses kanbans or buffers strategically located at the resources where it is critical to have inventory. The purpose is precisely to have enough inventory to be able to run efficiently. The idea that to apply Lean or JIT, you need to get rid of all inventory and be "lean" is completely wrong. One of the requirements to start practicing JIT is to have a stable, regular process. To be able to deal with a known variation that, yes you guessed it, does not disrupt the flow in the process, and create shortages. This means that first, a company, a production line, that needs to go Lean, needs to figure out what is causing disruptions in the process and fix the root causes.  Of course, there will be situations where having too much inventory doesn't make sense and might be ok to remove or relocate that inventory where it will protect more to the process and the customer. In Lean, one of the priorities is to protect the customer from disruptions in quality, delivery, and safety at the best possible cost. A disruption so big, like the one we went through in the last 2.5 years due to the pandemic, would be really difficult to contain. What Goodman is suggesting is that every manufacturer would have needed 2.5 years of inventory, at least, to be able to keep the supply chain running. Even though, he briefly spoke about the lack of truck drivers, he jumped right at JIT that forgot to further explain, that in many cases, the lack of drivers, the start of production and Asia and sudden stops, the fact that we have built complex supply chains where it is fine to have suppliers far away from where the products are needed, those are in reality what has caused many products not hitting the shelves, factories, warehouses on time. Lean never states that you must have a supplier as far as possible, just because the product, labor, or raw materials are super cheap. Those are decisions that companies take because they simply believe it is the best they can do to maximize the costs, without compromising the quality and delivery of products. But as stated before, those are decisions made under the belief that it is the best for the companies, aside from Lean or JIT.

Listen to the episode here:

I would like to hear if you agree with The Daily, or if you believe that JIT is not to blame here.