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DECISIONS 2002: SERVICE: Getting a grip on the potential for change in JIT delivery strategies

Are we witnessing the beginning of the end of Just-In-Time (JIT) delivery?The supply chain strategy designed to reduce inventory holding costs for the manufacturing sector has proved particularly bene...

Are we witnessing the beginning of the end of Just-In-Time (JIT) delivery?The supply chain strategy designed to reduce inventory holding costs for the manufacturing sector has proved particularly beneficial for trucking, playing right into its superior on-time performance over competing modes.But since September 11, the effectiveness of a system based on keeping as little supply of material on hand as possible has come into serious question when the threat of future terrorist attacks could shut down supply lines for days or weeks.

Many automotive plants and automotive parts suppliers, which generally keep on hand as little as a few hours worth of components, were forced to shut down when those components couldn’t be delivered following the road and border closures sparked by the recent terrorist attacks in the US. Electronics makers found themselves in the same predicament. The resulting losses are likely in the millions and manufacturers are asking themselves if the considerable savings offered by JIT delivery are worth risking the closure of an entire assembly line because a few parts can’t get through.

Dennis Gaztman, a US-based market analyst who recently wrote a column about the death of JIT, said that although predicting the death of JIT delivery may have been overzealous, we are perhaps looking at “the good solid maiming of JIT.”

“No one will argue that we will go back to the inventory levels of the 70s. But the reliance of manufacturers on JIT has changed. The psychology of the game has changed. Any businessman is going to be saying I’m not feeling as comfortable as I was a few months ago so I want to have a little more inventory on hand,” Gaztman told fleet managers attending the recent Ontario Trucking Association annual convention in Toronto. Gaztman was part of a panel of experts debating the future of JIT at the convention.

Lisa MacGillivray, president of the Canadian Industrial Transportation Association, one of the largest shipper organizations in the country says her members were already looking at JIT and starting to tweak it to avoid some of the obvious delays that were occurring in the system prior to September 11.

“We have been having trouble for quite some time, not only with the border situation but with such things as (independent trucker) blockades,” MacGillivray said. “The fact of the matter is that the infrastructure Canada has for facilitating trade was already becoming inadequate. What September 11 did was focus everyone’s attention on these inadequacies and the cost of having these inadequacies. The question my members are asking is what exactly do we mean by JIT and how just-in-time do we need to be? They could be looking at expanding somewhat some of their onsite inventory. They could be looking at different modal options, trying to combine trucks with rail a little more.”

“JIT is definitely a concept that is under construction and is being tweaked, with or without September 11,” she added.

She didn’t get an argument from Allan Cocksedge, associate consultant with Global Public Affairs. “I don’t think September 11 changed all that much in terms of customs and trade. The delays were bad and getting worse. Business was complaining about costs being too high and trade was already being disrupted by slowdowns,” he told the fleet managers in attendance.

To David Bradley, CEO of the Canadian Trucking Alliance and president of the Ontario Trucking Association, the real long term threat of not being able to solve our border delay issues is that US business will start to believe the border is going to impede supply and will turn to domestic suppliers in response.

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