Due to the Corona pandemic, critical supply chain shortages have occurred. Many have looked for the problem and pointed at the Just-In-time principle of Lean as one of the evils. This calls for clarification. Lean is not to blame, but part of the solution.

The Just-In-Time (JIT) principle is a key pillar of lean and the Toyota Production System. According to critics, JIT has been a driver of supply chain shortages during the Covid-19 pandemic. But the lean concept is not about zero stocks¹. When your demand implode and suppliers struggle, excess inventory is of little help anyway. The key differentiators of lean are customer focus, short lead times, and a culture of continuous improvement. The paradox is that lowering inventory levels will help you get there!

Lowering, not eliminating, inventory

It’s not the JIT concept that leads to shortages in supply chains. It’s the spread of activity that is increasing the inflexibility and dependencies in supply chains. JIT prefers short supply chains. That’s why car manufacturers have their suppliers immediately next to, or within a few hours’ drive from, their assembly factories. To fix supply chain shortages, we should not point fingers at lean, but rethink how we design more flexible and resilient global supply chains.

My argument is not obvious. When consumers meet empty toilet paper shelves in the supermarket, it is common sense that more inventory would fix the(ir) problem. But it’s not necessarily the correct thing to have high inventory. Toilet paper is one thing, but consider complex products like ventilators and computers, or fresh goods like milk and meat. Products made of many different parts would need to stock goods everywhere in the supply chain. Having your cupboards full of sugar does not help you make pancakes if you’re out of eggs. Stocking up everything would be extremely inefficient, costly and, in a normal world, we wouldn’t buy these products. Actually, we already stock far too much meat in the supply chains; so much that one third ends up as landfill. That means one out of every three cows, pigs, ducks, chicken, etc. is fed and slaughtered just to be thrown away!

Instead of thinking that the issue is that we have too low inventory, we should aim to be able to produce faster. The world should be able to quickly produce what is needed when it is needed. That would effectively solve the shortage. In fact, that is exactly what JIT is about.

Rethinking global supply chains

The world will not be the same after Corona. Due to the pandemic, the pause button may have been pressed, but not the reset key. Some critical industries will have to be rethought. But, generally, we got the global supply chains we have for a reason. Water always seeks the easiest path, and so does economic activity. Globalization of supply chains will continue for most products. But that is a completely different issue than lean. Lean is not about moving production to low-cost locations.

Should we then blame globalization for the shortages? It is true that globalization has made us dependent on global flows of individual parts that are shipped and assembled across the entire world. Many supply chains have become so long and intransparent that they become inflexible and sluggish.  There is nothing lean about that! But blaming globalization for shortages is also short-sighted. If it wasn’t for it, we would not have had many of these products—certainly not at the same price, variety, and quality level.

So if we should neither blame lean nor globalization, what should we do? A good start would be to use the lean principle of kaizen to continue improving the supply chains we have and the principle of kaikaku to rethink manufacturing and supply chains altogether. For both, new digital technologies can be breakthrough enablers. Some studies show that those companies that had invested more in digital technologies, did better through the pandemic than competitors.² In particular, technologies that build end-to-end transparency in supply chains can help enable the ultimate lean objective: Deliver the product the customer wants when (s)he wants it.

Conclusion: Speed up and stock down

In conclusion, lean is not to blame for supply chain shortages. Lean has more to do with the speed of production than inventory reduction. Lean is about the ability to efficiently and quickly manufacture to meet market demand. In this perspective, lean is needed more than ever.³

Endnotes

1. The lean community is much to blame for the misconception. For example, some influential early books on JIT was titled “Zero inventories” (Hall, 1983) and “Non-stock production” (Shingo, 1988), and many academics have equated lean with reduction of inventory or inventory turns only. Consultants with a skin-deep understanding of lean are also often quick to look at inventory as pure “non-value-adding waste”, while some inventory is in fact something customers are willing to pay for.
2. World Manufacturing Forum (2020) Back to the Future: Manufacturing Beyond Covid-19, https://worldmanufacturing.org/wp-content/uploads/Back-to-the-Future-Key-Findings.pdf [Accessed, 25-12-2020]
3. Parts of this post was first published as an interview I gave to STAUFEN AG on April 21, 2020: Consequences of the Corona Pandemic.