No, efficient inventory management is not to blame for supply chain problems
Some commentators who are somewhat hostile to free-market economics have blamed a focus on efficient management of inventory by businesses using the “Just in Time” (JIT) method of inventory management for our recent supply chain problems. The truth is that the Just in Time inventory approach, when part of an overall context of what is called “Lean” management, is the solution to, not the cause of, supply chain problems.
The lean business model embodies biblical principles on many fronts, if it is properly applied. But first let’s do a bit of definition. What we mean by lean business model?
So what is the lean business model? Is it Just in Time (JIT)? Well, no and yes. While JIT does play a role in the lean business model it is not the model, it is only an aspect or functionality of the model. One way to describe the lean business model is: creating a business which flows (production and information) as effectively and efficiently as possible (and always improving this flow) to the customer, exactly what the customer wants (function and features) in as short a time as possible (again, always striving to reduce this time) at the lowest possible cost (the lowest possible market price and highest possible margin).
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Using continuous improvement methods and principles, in all aspects and functions of the business, is what is needed to best achieve the previous statement. The lean business model will be unique to each organization for their specific circumstance. The principles and practices used are the same; but vary (and can vary greatly) in scope, magnitude, and prioritization depending on the organization’s circumstances. So JIT, pull systems, kanban, continuous improvement or kaizen, training within industry, and many other techniques do play an impactful role in this business model; again, the organization’s unique needs determines the level in which these techniques are used.
With the present circumstances in mind in the supply chain today, each organization’s application of JIT would and should be unique to their market and organizational needs. This is the very reason, when asking an experienced lean leader what should be done, they would probably answer, “It depends.” They will require information to understand the circumstances, gathered with many questions, in order to even begin addressing the needs. It is not one lean size fits all. One must understand the circumstances of the organization and the market it is operating within. To simply blame the supply chain issues on JIT is uninformed and not beneficial. It may or may not be – it depends.
Finally, a further discussion around supply chain would be appropriate. With current issues with the supply chain, many have questioned the effectiveness of the lean business model, and specifically the Just in Time aspect of it. With the disruptions in the supply chain currently timely deliveries have suffered greatly. Is this the result of Just in Time? No, it is not. Companies truly practicing and working toward an effective lean business model, as generally described above, including Just in Time patterns would have already worked towards and met for most supplies being supplied on property. By on property, it is meant within the region where their operations are located which also would mean within the region they are selling their product. A region could be considered local, for example within a State, or perhaps the Midwest or Southeast. A region could be an area like the United States, or North America.
Unfortunately, too many organizations have not worked to pursue this important aspect of a lean enterprise; therefore, they have suffered, and pundits have criticized the lean business model. So the countermeasure is to truly work toward being a lean enterprise, not just using some of the tools and practices – fully embracing what it means, and actuating towards, the lean enterprise. This is also notwithstanding that 100 percent of your supplies can be within your “region.” All will probably not, and it certainly takes time to work towards this aspect. But this is where the correlation of biblical principles comes directly into play.
While humans are fallen and can never become perfect, we are nonetheless required to work every day towards perfection. Jesus Christ is our living example of being and behaving in perfection towards God and being obedient to His laws. We must work toward this perfection by following Jesus’s example and teachings even though we can never achieve His perfection. But we try regardless. The lean business model is no different. We can never reach perfection but we work every day – with each other, our business brothers and sisters – towards the goal of the perfect lean enterprise; that is the perfect business.
The companies that have worked diligently to achieve this get tremendous results. They become incredible competitors and they also build competent, capable, and happy people. They will still have ups and downs but strongly tend to have more ups than downs and handle the downs with greater competency. The same holds true for churches and individuals who work diligently towards emulating Jesus’s behavior and obedience to God’s Law given to us in scripture. In either case – pursuing perfection in the lean business model or in our lives for Christ our King – we receive many positive improvements and build our character and capabilities. Perhaps this is one of the underlying reasons the lean business model is so successful, it is business management imitating the Christian life.
Jim Huntzinger is the President and Founder of Lean Frontiers, Inc., which develops knowledge and learning communities on the Lean Enterprise for business and industry. With a background and experience in manufacturing and operations, he has also extensively researched the history and development of American manufacturing and also published several books on the lean business model, manufacturing history, and economics.
