Jit Production in Toyota
Case Study – JIT Failure at Sony Ericsson
Once one of the world's leading cell-phone manufacturers, Ericsson knows only too well how painful a disruption in the supply chain can be. It is a story that has become something of a legend in supplychain circles. In March 2000, a lightning bolt struck a Philips Electronics semiconductor plant in Albuquerque, N.M., triggering a small fire in a chip-processing machine that took the plant offline for months. Although the plant was Ericsson's sole supplier of chips for use in its cell phones, the company responded slowly to the problem and then found itself unable to secure an alternate source for the chips. Without the chips, the Swedish company was unable to keep up with the demand for its products, and ended up losing more than $2 billion in connection with the incident. In October 2001, less than two years after the fire, Ericsson cut its cellphone business exposure by entering into a joint venture with Sony. Considering Ericsson's tale of woe, it hardly comes as a surprise that supply-chain risks rank high on the list of corporate concerns in today's global marketplace. RISK RANKS HIGH Operational risk was identified as the most important risk that executives face today in a study titled "A Study of Corporate ERM in the U.S.," released by Towers Perrin last November. While the specific nature of a firm's operational risk varies, supply-chain risk emerged in the study as a particularly important issue across industries. One of the reasons for such a high level of concern is that supply-chain disruptions can have a profound impact on a manufacturer's sales and market share. Toyota, for example, lost production of 20,000 cars--at a cost estimated at $200 million in revenue-after the 1995 Kobe earthquake disrupted production at a plant that was the automaker's sole source supplier of brake shoes for domestic cars. While the stakes are high, the risk of a disruption has been escalating, as well, as a result of efforts to
Once one of the world's leading cell-phone manufacturers, Ericsson knows only too well how painful a disruption in the supply chain can be. It is a story that has become something of a legend in supplychain circles. In March 2000, a lightning bolt struck a Philips Electronics semiconductor plant in Albuquerque, N.M., triggering a small fire in a chip-processing machine that took the plant offline for months. Although the plant was Ericsson's sole supplier of chips for use in its cell phones, the company responded slowly to the problem and then found itself unable to secure an alternate source for the chips. Without the chips, the Swedish company was unable to keep up with the demand for its products, and ended up losing more than $2 billion in connection with the incident. In October 2001, less than two years after the fire, Ericsson cut its cellphone business exposure by entering into a joint venture with Sony. Considering Ericsson's tale of woe, it hardly comes as a surprise that supply-chain risks rank high on the list of corporate concerns in today's global marketplace. RISK RANKS HIGH Operational risk was identified as the most important risk that executives face today in a study titled "A Study of Corporate ERM in the U.S.," released by Towers Perrin last November. While the specific nature of a firm's operational risk varies, supply-chain risk emerged in the study as a particularly important issue across industries. One of the reasons for such a high level of concern is that supply-chain disruptions can have a profound impact on a manufacturer's sales and market share. Toyota, for example, lost production of 20,000 cars--at a cost estimated at $200 million in revenue-after the 1995 Kobe earthquake disrupted production at a plant that was the automaker's sole source supplier of brake shoes for domestic cars. While the stakes are high, the risk of a disruption has been escalating, as well, as a result of efforts to