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Just in time delivery has its downfalls when vendors have issues, but this is a known trade-off to that model. If a company keeps inventory on hand, then they h
by kyrra 6y ago
Just in time delivery has its downfalls when vendors have issues, but this is a known trade-off to that model. If a company keeps inventory on hand, then they have the worry of owning excess parts that they can never use and is a sink cost later. So these companies can lose money with either, it just depends on the circumstances that cause it.
I'd be interested to learn more about the order cancellation you were saying that fabs were doing to non car manufacturers. Shouldn't contracts prevent that sort of behavior (without proper compensation)? And if they did that, they are burning bridges that would make people less likely to do business with them in the future. Maybe the car chip business is enough money to warrant such moves, but seems potentially sort sighted depending on exactly all what you said happened.
- bkor 6y ago> Shouldn't contracts prevent that sort of behavior (without proper compensation)? That depends on how big the customer/order is, no? If (as a manufacturer) you could get away with not having it in a contract, why include it? Similarly, instead of actually cancelling they could also "lie". Say that there are capacity issues, etc. That the capacity issue is mostly because they resold the existing manufacturing capacity, is left out. > Just in time delivery The well-known example of this is Toyota. Interestingly, they've started ensuring they do have stocks. See e.g. https://www.reuters.com/article/us-japan-fukushima-anniversary-toyota-in-idUSKBN2B1005 https://www.reuters.com/article/us-japan-fukushima-anniversa.... I found that rather interesting.
- ethbr0 6y agoAs with all things, an optimization (e.g. agile, JIT/lean manufacturing) is predicated on certain assumptions. In this instance, "we exist in an ecosystem where our suppliers can rapidly respond to volatile demand from us." If the assumptions fail, then it's not a failure of the optimization, but an incorrect application of it. Maybe we don't currently live in a world in which elastic semiconductor availability at scale can be assumed.
- tehjoker 6y agoNearly all industries have moved to Just-In-Time to reduce costs, at the cost of making the entire economy more fragile. We saw this highlighted in the pandemic as suddenly there were no reserves of hospital capacity due to JIT optimization.
- to11mtm 6y agoHeck even consumer goods like toilet paper were impacted. JIT is useful when the end-product has a high depreciation rate and/or you forsee yourself frequently changing the part out for a newer version. Another tendril on the issue; modern accounting practices tend to prefer JIT instead of the costs/overhead mechanics of storing inventory.
- lenkite 6y agoWhen I first studied about JIT in college, I asked my professor: Doesn't this manufacturing methodology lack fault-tolerance and isn't it deeply susceptible to natural calamities or economic failures ? He replied that it was proven, adaptable and reliable. Other suppliers would come in if some suppliers failed. JIT (aka lean manufacturing) today has now permeated pretty much most of the global supply chain. Human civilisation is far more fragile at the moment than in the last few. hundred years.
- ethbr0 6y agoThe true argument should have been that it's more efficient (for everyone involved). Which would have invited the honest debate between the relative merits of resilience vs efficiency.
- georgeecollins 6y agoThat reminds me of Taleb's idea of comparing certain investment strategies to "picking up pennies in front of a steam roller" (or insuring mortgage backed securities). It's easy money until it isn't. But when it isn't, it is really bad.
- 6y ago
- MangoCoffee 6y ago>fabs were doing to non car manufacturers fabless design house sign wafer agreement with Fab like TSMC. I'm guessing they didn't sign the agreement thus cancel their slot.
- MomoXenosaga 6y agoPeople forget why "just in time" was invented and why it became a religion... I do not fault companies for not planning for a worldwide pandemic.
- ReptileMan 6y agoThere is no such thing as excess part since you can always offer extended warranty or something to buyers to sell them at least at cost.