Thomas L. Friedman\'s book The World Is Flat: A Brief History of the Twenty-Firs

Question

Thomas L. Friedman's book The World Is Flat: A Brief History of the Twenty-First Century postulates that globalized supply chains and the Internet have flattened the world and leveled the playing field for companies and countries of all sizes. In such a scenario, what are the implications for Just-in-Time as an inventory control program when suppliers are on the other side of the globe? In addition, do globalized, extended supply chains and operations management chains impact Just-in-Time favorably, or do they lead to more stockpiles of supplies and materials that are counter to Just-in-Time?

Explanation / Answer

JIT or Just In Time approach of inventory management focuses on manufacturing or received a material just in time for its need in the company, to reduce the inventory management costs and overall wastages in the company, for instance, in a garment manufacturing company, the packing material received from the supplier once the final garment is about to reach packaging, that is garment reaches the finishing department.

In a scenario where the globalization ahs levelled the playing field for companies and countries of all sizes, supply chains often have suppliers that basically on the other side of the globe or are operating on a geographically long distance from the company. For example, automobile manufacturing firms in USA often source the automobile parts from Japan. In such cases JIT approach can pose both advantages and disadvantages for the company. JIT will reduce the inventory, free up resources and reduce overall costs. But following JIT can also be a cause of issue, as any problem in the transit or some calamities or factors, can cause the supply chain continuity to break, and delay in material delivery, which might stop the operations of the company all together. For instance, the tsunami and earthquake in Japan closed the operations of many automobile part providers. This affected automobile companies across the globe, especially the companies following JIT because they don’t have any inventory stored for continuing the operations. Such situations force the company to source the material in emergency, which might affect the quality of the material along with temporary halt in operations.

Globalized, extended supply chains and operations management chains often negatively impact JIT, leading to more stockpiles of inventory countering the JIT practice. Hence, continuous monitoring of inventory and totally transparent information sharing system within the supply chain, are key to the success of JIT in extended supply chains. Companies should ensure that they following JIT don’t impact their supplier’s inventory, and should help the supplier by providing real time or fast and accurate information to the supplier, so that there is time for the supplier to produce and ship the material to the company.

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