“Just-in-time” manufacturing model challenged by COVID-19
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The manufacturing fallout from COVID-19, the expanding coronavirus disease, continues. Microsoft, which makes software installed in computers made in China, warned its sales will fall. And large manufacturers in Korea, including Samsung, now say their supply chain problems will stall output, too.
At issue here is a global manufacturing model that focuses on low costs and lean inventory at every step in the chain, a model where all the parts arrive at the plant just in time.
The just-in-time model comes from Toyota, which in the ’70s started having car parts arrive at the plant at the moment of assembly.
“You try to organize your delivery of them, just as you need them,” said Adam Slater, lead economist with Oxford Economics. “The final product goes out, and then you get a new set of inputs coming in, just as they’re needed for the next product to go out.”
It became global manufacturing gospel.
Thing is, the quest for leanness and cost-cutting led many companies to put all their eggs in one supplier, in one country. And they got burned when some disaster hit — earthquake, terror attack, pandemic, whatever.
“Back then, something went wrong, Toyota went down,” said Barry Lynn, executive director of the Open Markets Institute, which does research on markets and monopolies. “But every other company continued to manufacture cars. Today if that happens, if one of those suppliers goes down, all the manufacturing companies go down.”
That happened in the car business nine years ago, when the tsunami hit Japan. Now it’s electronics, and the virus from China.
Supply-chain economist Susan Helper at Case Western Reserve University said manufacturers have tried to build in safeguards. But there’s a lot of cost cutting inertia to overcome.
“Purchasing managers are intensely measured on how low their costs are. So that doesn’t leave a lot of room to spend extra money because there might be some contingency in which everything falls apart,” Helper said.
This time around, she thinks the pain of overreliance on Chinese suppliers could speed up change to make supply chains more visible and bring back some redundancies and slack that the just-in-time model shaved away a generation ago.
COVID-19 Economy FAQs
What’s going on with extra COVID-19 unemployment benefits?
The latest: President Donald Trump signed an executive action directing $400 extra a week in unemployment benefits. But will that aid actually reach people? It’s still unclear. Trump directed federal agencies to send $300 dollars in weekly aid, taken from the federal disaster relief fund, and called on states to provide an additional $100. But states’ budgets are stretched thin as it is.
What’s the latest on evictions?
For millions of Americans, things are looking grim. Unemployment is high, and pandemic eviction moratoriums have expired in states across the country. And as many people already know, eviction is something that can haunt a person’s life for years. For instance, getting evicted can make it hard to rent again. And that can lead to spiraling poverty.
Which retailers are requiring that people wear masks when shopping? And how are they enforcing those rules?
Walmart, Target, Lowe’s, CVS, Home Depot, Costco — they all have policies that say shoppers are required to wear a mask. When an employee confronts a customer who refuses, the interaction can spin out of control, so many of these retailers are telling their workers to not enforce these mandates. But, just having them will actually get more people to wear masks.
You can find answers to more questions on unemployment benefits and COVID-19 here.
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