Running Header: JIT after a Catastrophe
Case Study: JIT after a Catastrophe
Christopher A. Smiley
OMGT410 – Operations Management II
December 1, 2012
Instructor - Bruce Stephens
Southwestern College Professional Studies
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JIT after a Catastrophe
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The Situation
In this case study, we learn that JIT has been tested through many catastrophes. Toyota
Motor Corporation lost its primary source of brake valves when its partner, Aisin Seiki, lost its
factory to a fire. Toyota, again, took a hit to their JIT system when a earthquake destroyed their
transmission supplier, Riken, factor.
Chrysler had its JIT system put to the test on September
11, 2001, when all air transportation was closed. Their state-of-the-art air delivery system was
crippled for the weeks to follow with the grounding of many aircraft and the congested air ports.
Caterpillar’s Oxford, Mississippi plant was all but destroyed by an earthquake. This plant made
a one of a kind high pressure hydraulic coupling that is used by most Caterpillar machines.
Despite these unfortunate catastrophic events, JIT practices enabled each of these
companies to make the rapid changes required to keep business going. The JIT way of
conducting business can be very risky, but the cost savings experienced make it all worth it in the
long run.
The Problem(s)
Assuming the role of Mr. Greg Folley of Caterpillar, I need to come up with a plan of
action, in response to the earthquake that took out the manufacturing plant that was responsible
for creating those one of a kind high pressure hydraulic couplings. I must also determine why I
believe JIT has survived, regardless the numerous catastrophic incidents faced in the past. I must
also provide a recommended change in policy for Caterpillar to prevent a similar situation from
reoccurring.
JIT after a Catastrophe
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The Critical Factor(s) Bearing on the Problem(s)
Without critical components, an operation will find itself at a stand still. This is what
happened to Caterpillar Inc. when a tornado destroyed the Oxford, Mississippi plant that was the
sole producer of their highly unique high pressure hydraulic couplings. Caterpillar Inc. is one of
the World’s largest providers of heavy machinery, engines and specialized construction
equipment. Most of their equipment operated on hydraulics in one form or another. For these
specialized couplings to no long be available, puts Caterpillar’s manufacturing on hold. Also,
because Caterpillar utilized the JIT practices, they maintain a very low inventory of these parts
on hand.
The Discussion of Possible Solutions
I believe Hard Rock Café is doing the right thing in paying close attention to historical
data and local events when forecasting future diner figures. The scheduling issue appears to be
working for Hard Rock Café as far as maintaining high levels of profitability, but they are having
trouble keeping employees. The current employee priority rating scale sounds good, but if
employees are still leaving after only a year of work, how effective is it in maintaining high
levels of moral. Current scheduling is done on a computer program. Employees are given sheets
to fill in their preferred work hours. Once all the data from the employees is put into the system,
the computer program creates a schedule for the following week. The shifts and positions are
distributed based on the priority number each employee holds.
JIT after a Catastrophe
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The Recommended Solution
Being that Caterpillar specializes in the construction equipment needed to help rebuild a
factory, they could definitely start by providing all the machinery needed to get the Oxford
factory back to its operating condition. This could also be a great opportunity for Caterpillar to
enhance their long term profits through discounted parts. If they were to front the money and
resources needed to get the Oxford factory back up and running, they may be able to get a price
discount on their future orders. If the deal is done correctly, they could make out in the long run.
Since these specialized parts are patented by Caterpillar, they could easily find a new factory to
handle the order. The only problem is that they would have to re-establish a new relationship.
The relationship they had with the Oxford factory may be strong enough to hold on to. A third
option would be to split the manufacturing and receiving between two factories, one being the
old Oxford factory. This will give them a back-up, but this starts t go away from the principle
behind JIT.
The Reason(s) for the Recommended Solution
I recommend that Caterpillar stays with the Oxford factory in Mississippi. I think they
should invest the time and equipment to speed-up the rebuilding process. This will strengthen
their ties with the Oxford factory and ensure a long, happy relationship. This will also relieve
them from walking into an ethical trap.
If they leave the Oxford Company following a
JIT after a Catastrophe
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catastrophe, they may receive some lash back from critics that could bring about unnecessary
bad publicity, which can negatively affect profit.
The action(s) required
Many companies have chosen to adopt the JIT practices. Even through the catastrophic
events we discussed today have not stopped any of these companies from continuing with a JIT
plan for operational management. I believe the reason for the continuous support for the JIT
practice is the strength of relationships that are formed with the suppliers, each company
experiences.
When the semiotic bond between two companies gets so strong that both
companies are reaping from the benefiting of the relationship, then they feel more inclined to
assist when times are tough, just like a catastrophic emergency.
JIT after a Catastrophe
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References
Heizer J., Render B. (2008). Operations management w/CD & student DVD, 10th edition.
Upper Saddle River, NJ: Prentice Hall.