JIT is one of the most controversial continuous improvement methodologies – more controversial than Six Sigma and a lot more controversial than Lean.
Environmental impact
For example, the jury is still out on whether JIT is good or bad for the environment – this is because quicker, smaller, and more flexible deliveries essentially require a larger number of smaller vehicles to take control of the ‘last mile’ of delivery journeys. Research1 has shown that some supply chains managed on a JIT basis have significantly larger carbon footprints than more traditional supply chains:
| Dimension | Outcome | Paradox |
|---|---|---|
| Costs | Reduction of costs through packaging improvement and reduction in waste. Benefits accrue to distributors | Environmental costs often externalized |
| Time/flexibility | Integrated supply chains. JIT and DTD provide flexibility and efficiency for the customer | Extended production, distribution and retailing structures consume more space, energy and produce more emissions (CO2, particulates, NOx etc) |
| Network | Increasing system-wide efficiency of distribution system through network changes ('hub-and-spoke' structure) | Concentration of environmental impacts next to major hubs and along corridors. Pressure on local communities |
| Reliability | Reliable and on-time distribution of freight and passengers | Modes used (trucking and air transport) are the least environmentally efficient |
| Warehousing | Reducing the needs for private warehousing facilities and attendant costs | Inventory partly shifted to public roads (or in containers), contributing to space consumption and congestion |
| E-commerce | Increased business opportunities, customer convenience and diversification of supply chain | Changes in physical distribution systems towards higher levels of energy consumption |
Customers vs shareholders
The mathematics of supply do not always agree with JIT practice: there is a very practical methodology for running inventory within supply chains called the ‘economic order quantity’ (EOQ). JIT prioritizes flexibility and avoidance of waste above the EOQ, and some economists have criticized it because it therefore elevates the interests of a company’s customers over its shareholders. As early as 1992, operations researchers were modelling JIT against traditional supply chain practices and raising the objection that JIT only reduced total supply chain costs to the firm under certain specialized conditions.2
This is very much a criticism originating from the Anglosphere and the corporate model of capitalism: those Japanese and German companies which use JIT tend to be operationally funded through debt rather than equity, and do not have to appease institutional and private shareholders to the extent which British and American corporations do.
The perceived dangers of sharing
JIT practice requires a close relationship orientation between organizations in a supply chain. Sharing common IT platforms for supply chain management, as well as significant mutual involvement in internal continuous improvement projects, requires companies to work together to an extent which is unusual in the Western conception of capitalism: many Western companies see this as a risk to their intellectual property and therefore to their competitiveness. The relationship orientation also implies that organizations will develop deeper relationships with fewer suppliers. Research undertaken in the mid-2000s in the complicated supply chain of the American aerospace industry confirms some of the risks of platform-sharing and close allegiances between supplier and customer.3
Risk is risky
This can have critical consequences, as the UK National Health Service discovered in 2012 when its single supplier of filter tubing for kidney dialysis machines had its manufacturing facilities in Italy put out of commission for several weeks by an earthquake.4
JIT can have risk consequences which are more significant than traditional supply chain management methods, although this is really an argument for using them intelligently, rather than avoiding them altogether.
- Table adapted from Rodrigue, J. P., Slack, B., and Comtois, C. 2001. Green logistics (the paradoxes of). The Handbook of Logistics and Supply-Chain Management, 2. ↩
- Golhar, D.Y., Sarker, B.R., 1992. Economic manufacturing quantity in a just-in-time delivery system. International Journal of Production Research 30, 961–972. ↩
- Rossetti, C., Choi, T.Y., 2005. On the Dark Side of Strategic Sourcing: Experiences from the Aerospace Industry. The Academy of Management Executive 19, 46–60. ↩
- Unknown. 2012. ‘Shortage of dialysis tubes’ after earthquake hits factories. Daily Telegraph, 30 July 2012. ↩