It is difficult to see how ultra-efficient supply chains can surviveby David Bailey , Philip McCann, Raquel Ortega-Argilés / April 5, 2018 / Leave a comment
We all know that Brexit poses challenges, but the technical detail is often poorly understood. One problem you may not have heard of relates to “just in time” production. And it’s a big one.
Throughout the UK, industries are deeply interconnected with those in the rest of the European Union through complex cross-border supply chains. Such supply chains comprise intricate processes of value-adding by firms in different countries, with component goods and services crisscrossing borders multiple times before reaching the consumer.
The most deeply embedded and integrated of all supply chains are those which are known as just-in-time (JIT) supply chains. These production systems first originated in the Japanese automotive and electronics sectors, and are now widespread across whole areas of UK manufacturing, engineering, retail and consumer goods markets, and especially those sectors highly integrated with the rest of Europe.
In JIT supply chains, firms hold little or no inventories. Supplies are delivered in very small quantities at very high frequencies from suppliers which are located in nearby regions or countries. As well as reducing costs, a key advantage of such JIT systems is maximising product and service quality. JIT systems allow for errors in production or machining to be identified immediately and for problems to be rectified as they arise, thereby ensuring maximum quality and ultra cost-efficiency. Many thousands of UK firms depend critically on JIT systems to ensure their products and services are competitive on global markets. But for JIT to work, the whole delivery system has to be seamless or frictionless.
The frictionless trade enabled by the EU’s customs union and single market allow such pan-European JIT supply systems to operate smoothly, and today these systems are almost ubiquitous in many areas of UK and EU manufacturing, engineering, logistics and retail. They are especially important in those regions of the UK with strong manufacturing bases such as the Midlands and the North of England—more on that later.
One example of JIT in operation is the Swindon assembly plant of Honda UK. In evidence to the Business Select Committee late last year, Honda said that it retained just an hour’s worth of parts at the Swindon production line, and it required 350 trucks’ worth of components to be delivered every day from Europe.
The Japanese-owned firm stated that every 15 minutes of…