![]() Toyota adopted this approach after the 2011 earthquake in Japan’s Fukushima Prefecture. It entails creating stockpiles or manufacturing capacity to protect your operation from supply chain disruptions. A better option is to embrace a modified form of JIT - something that companies such as Toyota and Volkswagen are doing. Especially with interest rates rising, throwing it out and adding inventory willy-nilly would mean hurting performance without necessarily improving resilience. JIT remains the most efficient production system. These disruptions are tempting companies to throw out JIT and revert to “just-in-case” systems that maintain lots of inventory at various locations in the global supply chain to ensure business continuity. Now, turbulence and uncertainty resulting from the Covid-19 pandemic, climate-related disruptions, geopolitical tensions between the United States and China, and the war between Russia and Ukraine have called into question the wisdom of continuing to operate factories on a just-in-time basis that are dependent on global supply chains. Still, the system continued to work, thanks to stable trade conditions and logistics capabilities worldwide, which made the delivery of items highly dependable and predictable. Over the decades, companies extended the JIT concept to global supply chains. Their proximity eliminated “wastes” like transit time and excessive inventory and enhanced collaboration at all levels. When Toyota initially created the just-in-time (JIT) approach to inventories, its factories and those of its suppliers were located near each other.
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