Ep#63 Overcoming limitations of JIT in Indian auto supply chain with an agile pull-based system

Welcome to today's episode of Counterpoint Podcast, where we don't just accept industry norms, we challenge them. We dissect trends, question the status quo and bring you fresh perspectives that will change the way you see the world. Today we are diving into a concept every manufacturing company dreams of achieving, just in time or JIT. For years, JIT has been hailed as the goal standard of supply chain management, cutting waste, streamlining production and optimizing costs. But is it really that simple? A recent survey reveals otherwise. When unpredictability creeps in, JIT quickly transforms from a supply chain dream into an operational nightmare. Here's a surprising fact. Toyota, the company credited with pioneering JIT, spent nearly two decades relentlessly perfecting it. If it took Toyota that long, can other companies realistically expect overnight success? Let's break it down, step by step. At its core, a true JIT system aims for two things. First, a pool-based inventory using a car van system. Materials move only when needed. No excess, no waste, just timely replenishment. Second, minimal inventory levels, ideally minimal raw materials, work in progress and finished goods. This is facilitated by significant reductions in setup times in manufacturing lines, captured by the concept single-minute exchange of dies, SMED. Reduced setup times enable low-batch manufacturing, even approaching single-piece flow in manufacturing lines, allowing greater product variety without excess inventory. And third, frequent deliveries. Low inventory levels mean small and frequent deliveries become essential. Some plants even receive supplies twice a day from their vendors. OEMs proudly boasts inventories as low as one to two-days production at a component level. However, the critical aspect is a well-level production plan, maintaining a defined rhythm and variety on assembly lines. Despite demand fluctuations, typically for a month, sounds ideal, right? But have Indian manufacturers, especially an automotive, implemented a true end-to-end JIT implementation, right from vendors to dealers? But here's the reality, results have been far from ideal. A recent survey by Vector Consulting Group covering leading OEMs, suppliers, vendors, and dealers reveals a very different story. None of the supply chains surveyed had fully implemented JIT across their entire value stream. 75% of OEMs claim to follow JIT, but only partially. They are unable to implement a leveled and a frozen assembly plan due to demand on predictability and intense market competition. Most OEMs can't maintain consistent assembly schedules, forcing them to make last-minute production changes. Suppliers and dealers bear the burden, components often sit in vendor warehouses or with transport of go-downs, waiting for last-minute pickups, accumulating hidden costs. Meanwhile, dealer inventories fluctuates significantly as OEMs push inventories without any regards to the secondary sales off-take. In reality, OEMs boasts their JIT ready, but the burden of hidden costs shifts to their suppliers and dealers. Here's the critical insight. JIT is extremely challenging to implement end-to-end in an environment where demand stability cannot be guaranteed. Once demand fluctuates, everything spirals into chaos. This is exactly what India's automotive sector faces repeatedly. Disrupted assembly schedules lead to uneven model production, creating further instability in components, availability, adding to more disruptions. Market does not get what it wants, leading to more requests for change in assembly schedules. There is a core issue here. JIT requires minimal demand fluctuations. Companies need to force a leveled production plan onto the market. For this condition, an end-to-end implementation is not possible. So most JIT implementation is restricted to component dispatch to assembly lines of OEM. The inefficiencies are actually hidden in books of the vendors and the dealers. So what's the solution? One thing is clear. A pool-based system is superior to a forecast driven one, aligning production with actual demand and preventing over-stocking. Here's a realistic approach. OEMs should maintain central warehouses with finished goods inventory. Instead of reacting to forecast, production should focus on replenishing these warehouses as per consumption. Dealers should be served from central warehouse only as per secondary sales rather than based on primary sales target. This creates a decoupled, stable system where fluctuations at the dealer level do not disrupt factory operations. And two, prioritized production planning. In situations where total demand exceeds capacity, manufacturers need a method of prioritization, ensuring that the plant produces the most critical SKUs first rather than reacting randomly to incoming orders. The priority should be based on level of actual inventory as compared to the inventory norm. Solution three, components suppliers should not only supply as per consumption, which is mostly done by many players, but they should also produce based on off-take from the norm. Solution four, norms needs to be periodically adjusted based, sensing for large changes in demand in near future. What do you think should businesses still swear by just in time or is it time to remodel the solution for Indian environment? Let's keep this conversation going. That's it for today's episode of Counterpoint Podcast. If today's discussion got you thinking, don't forget to subscribe, share and stay tuned for more conversations that challenge the norm. Until next time, keep questioning, keep innovating and most importantly, stay curious.