Thursday, December 23, 1999

Just-in-Time Systems Said Y2K Ready

By JUSTIN HYDE, AP Auto Writer
Los Angeles Times

DETROIT--"Just-in-time" manufacturing has become one of the bedrock techniques of American industry -a system where plants keep as few spare parts as possible in stock, instead ordering them just as they're needed, like a bucket brigade fighting a fire.

But with the year 2000 on the horizon, some experts are concerned about the weakness of just-in-time systems: Problems at one small supplier can ripple through the chain, creating tie-ups for dozens of other businesses.

Officials with several large manufacturers say they're fairly confident all such bugs have been found and fixed, and that any problems that do pop up will be minor. But some large companies may sock away a few spare parts in case of emergency. Other forecasters say it might not be enough.

"Most manufacturers in the United States are saying they are ready and they feel fairly comfortable with their supply chain," said Ed Yardeni, chief economist for Deutsche Bank Securities in New York and a Y2K commentator. "I still have my concerns ... Many manufacturing supply chains are extremely long and may still have some weak links."

Just-in-time manufacturing, developed in Japan, came into vogue as a way for companies to save money by not keeping large inventories. The National Association of Manufacturers estimates that 75 percent of the nation's factories used the system in 1994, and the share has grown since.

Inventories in some plants are growing closer and closer to zero. For example, some parts for the average Dell Computer Corp. desktop machine spend little more than eight hours at the company's Texas manufacturing plant before they are assembled and shipped off to the buyer. One auto factory uses radio transmitters to automatically order seats for a vehicle as the frame enters a paint shop. Two hours later, the seats arrive from a nearby plant.

Several large manufacturers say they've made massive efforts over the past few years to ensure their suppliers would get through Jan. 1, 2000 without a hitch. Perhaps the largest effort has been among automakers, who have the most complex supply chains: General Motors Corp. has about 70,000 suppliers around the world, including 25,000 direct suppliers. [and, as I recollect, just one week's supply of fuel for the generators in their company 'Y2K command centre'...]

GM, Ford Motor Co. and the Chrysler division of DaimlerChrysler AG began working in 1997 to make sure their suppliers were Y2K-ready. GM says under its Y2K program, started in 1996, it visited some 4,800 supplier sites, working in 50 countries and 12 languages.

"The just-in-time suppliers were on top of the list," said Don Costantino, GM's corporate Y2K program director. "But we have very carefully watched all of our suppliers for compliance."

Costantino and his counterpart at Ford said they believe their North American suppliers are ready for Y2K. The companies are less certain about foreign suppliers' ability to make it without a Y2K glitch due to power outages or other infrastructure problems, but say they've taken steps to minimize any snags, such as keeping a few extra days' supply on hand for a small number of essential parts.

"I've been at this for three and a half years and I'm not losing sleep any longer," said George Surdu, the director of technology services for Ford.

Other major manufacturers say they've taken similar steps. About 30 technology companies -including Intel Corp., Dell Computer Corp., Hewlett Packard and others -formed the High-Tech Consortium to perform Y2K checks on their suppliers.

Peter de Jager, a spokesman for the consortium and a Y2K expert, said the companies had surveyed about 200 suppliers worldwide. He said while the companies felt good about their efforts and most were loathe to mess with just-in-time systems, a few were adding inventory of crucial parts.

"The bottom line is where it was appropriate, everyone has made some adjustments" de Jager said.

Boeing Co. started surveying its 32,000 suppliers in 1998 for Y2K readiness; only about three dozen had not been deemed acceptable by July. By Nov. 1, all had made the grade.

"We knew if we were ready but we couldn't get parts from our suppliers it wouldn't help," said Boeing spokesman Bob Jorgensen. "While we can't guarantee nothing will happen, we can guarantee we checked them out."

Jorgensen said Boeing would pay special attention during the first part of the new year to about 10 critical suppliers "where we don't have any options."

"If we have any hesitation at all, primarily because of just-in-time, we have brought in a couple extra parts in those situations," he said. "When you're building planes with millions of pieces, they're all interdependent. You don't have the luxury of sliding the schedule."

Still, there doesn't appear to be any trend by manufacturers toward stocking up for Y2K; federal data show inventory levels at factories have remained essentially flat all year.

Yardeni said he would like to believe predictions that Y2K will cause no serious problems, but worries that one or two weak spots in supply chains that stretch around the globe could create trouble.

"It's the second and third level where they have no good accounting (for Y2K readiness), other than to assume the first-line vendors have done their homework," he said. "No one knows for sure how interdependent we are, but we may find out in a few weeks."

[ENDS] Search the archives of the Los Angeles Times

-- John Whitley (jwhitley@inforamp.net), December 23, 1999

Answers

"keeping a few extra days' supply on hand for a small number of essential parts"

And which parts of a production line would be "non- essential"?

Pop quiz: if 1% of the parts are delayed or unavailable, how much of the normal output does the line produce?

A) 100%

B) 99%

C) 0%

Well all C soon.

-- Servant (public_service@yahoo.com), December 23, 1999.

And the effect on the stock market?.....

Don't forget to grab a copy of "Extraordinary Popular Delusions and the Madness of Crowds" by Charles Mackay, originally published in 1841. Read it to your kids by candle-light.

-- cgbg jr (cgbgjr@webtv.net), December 23, 1999.

Suppliers have inventory at their plants. US JIT is not the same as Japanese JIT. Even Japanese companies with production facilities in the US do not practice Japanese style JIT where shortages of critical parts can shut down production in hours. In the US, shortgaes of critical parts can shut down production in days (not hours) -- an this has already happened to GM. Thousands of cars are assembled each year where some parts are added later -- after the cars leave the assembly plant and are parked outside. But shortages of some key parts, (such as floor pan stampings from a stamping plant next to an auto assembly plant that are manufactured when needed and often shipped to the assembly plant via conveyor belt) could halt auto assembly plant production in hours.

-- Richard Greene (Rgreene2@ford.com), December 23, 1999.