Impact of just‐in‐time inventory systems on OEM suppliers

Abstract

Purpose -To analyze the impact of the adoption of just-in-time (JIT) production systems by different equipment manufacturers (OEMs) on the inventory profiles of their suppliers. Design/methodology/approach -The research is designed to examine five financial measures of inventory management performance over the years 1994-2004. Three specific industry sectors where OEMs have adopted and implemented JIT principles are studied. These sectors include the automotive, electronics, and aircraft industries. A one factor analysis of variance is employed to the five hypotheses and Tukey's post-hoc test is used to interpret statistical pairwise differences between level means. Findings -Overall, the research finds that OEM suppliers in the automotive, electronics, and aircraft sectors have shown mixed results in the impact JIT implementation has had on inventory performance measures.Research limitations/implications -The research focuses on three industrial sectors over approximately a ten year time frame that may limit its generalizability. Practical implications -The processes that influence the reduction in inventory levels may be in fact more complex and strategic in nature than an OEM adopting a JIT inventory policy. In general, strategic changes within the supplier organization would have to drive process improvements that lead to inventory reductions. Originality/value -The paper provides focused research in an area that has received little attention in the current literature and is very topical to all academics and business professionals interested or involved in the area of JIT systems.

The Impact of Contract Manufacturing on Inventory Performance: An Examination of U.S. Manufacturing Industries

“…In this regard, using Compustat firm-level data, Biggart and Gargeya (2002) found that raw materials and total inventories decreased significantly after JIT implementation. In a study using data on the automotive, electronics, and aircraft industries, Kros, Falasca, and Nadler (2006) also discovered potential inventory reductions for suppliers of OEMs through the use of JIT. Along similar lines, Cachon (2001) and Lyons, Coleman, Kehoe, and Coronado (2004) suggested that supply chain information systems and buyer-supplier coordination programs (e.g., vendor-managed inventory) could be key drivers in the reduction of inventories.…”

The Role of Raw Material Management in Production Operations

“…Every organisation has inventories of some type and the economics and techniques of inventory management are critical for efficient operation, profitability and survival; especially in a highly competitive environment (Kros, Falasca & Nadler, 2006). …”

“…There should also be training and retraining of employees to ensure that they are kept abreast of developments in the field. 5. The use of electronic data processing devices will go a long way in removing the problem of inability to use inventory models.…”

Just in time implementation issues in Indian Corrugated Packaging Industries an empirical study in natioanl capital region (NCR)

“…The result of a survey in manufacturing industries indicated JIT implementation had significant positive effects on the set of standard financial ratios [10]. JIT adoption leads to improvement in firm performance as measured by Return on Investment [11] The automotive industry it appears that some manufacturers may be forcing suppliers to hold inventories that they have traditionally held and that the location of inventories has simply shifted as is suggested by the lump in the snake analogy [12]. Customer service requirements of time and accuracy, delivered against a backdrop of cost control, flexibility and agility, fleet utilization and human capital resource utilization are the key factors for an effective and efficient logistics system [13].…”