just-in-time logistics support for the automobile …¬¼류소식/just-in-time logistics support...

JIT LOGISTICS SUPPORT FOR THE AUTOMOBILE INDUSTRY 5 9

JUST-IN-TIME LOGISTICS SUPPORT FOR THEAUTOMOBILE INDUSTRY *

KEN ALTERNBURGDEBBIE GRISCOMJACK HARTFRANK SMITHGARY WOHLERBloomfield State College, Bloomfield, NJ 07003

When Henry Ford’s book Today and Tomorrow waspublished in 1926, it was embraced, not by Americans,but by the Japanese. The principles found in Ford’sbook are the basis for Just-In-Time (JIT).With a philosophy that calls for eliminating all

sources of waste, including unnecessary inventory andscrap in production, Just-In-Time has a significant ef-fect on inventory control, purchasing, and suppliers.For JIT to be most effective, a total quality manage-ment (TQM) program must be adopted. The systemcannot function with a high rate of defective items; itssuccess requires detailed attention to quality both inpurchasing and production.Supplier partnerships, “players on the same side,”

are optimal for JIT. These partnerships are long-termrelationships with single-source suppliers who providecertified quality material while continuously reducingcosts. Suppliers are even encouraged to locate theirplants as close as possible to the automobile assemblyplants so that assembly lines can receive frequent de-liveries of small lots of parts.JIT drastically reduces investment as well as the to-

tal cost of operation. In the early 1980s the U.S. auto-mobile industry realized the advantage adopting JITwould bring. U.S. automakers were carrying $775worth of work-in-process inventory for each car theybuilt, while the Japanese carried only $150 [8]. The veryexistence of the U.S. auto industry depended on adopt-ing the JIT philosophy.In this article we will cover (1) conditions before JIT,

including transportation, supplier relationships, andpurchasing methods; (2) the period of change knownas the “Japanese Revolution,” including how qualitywas affected; (3) JIT’s role in today’s environment of

transportation, supplier relationships, and quality; (4) thedisadvantages of JIT; and (5) prospects for the future.

CONDITIONS BEFORE JIT

Transportation

Key issues of transportation before JIT include plantlocations, the role of transportation, deregulation, andtransportation regulation. The placement of plantschanged as a result of the implementation of JIT. Dur-ing the 1970s, first-tier suppliers as well as major au-tomobile factories were all centrally located. As a resultof the proximity between suppliers and factories, trans-portation was not a vital concern in terms of time andcost [8, p. 161]; however, as factories gradually relo-cated, logistics became an important factor in the au-tomotive industry’s success.Efficient transportation methods were critical to the

effective JIT process. For years, the automotive indus-try relied internally for functions such as purchasingand transportation. Society assumed that productswould move from their production site to the consumerwith little difficulty [8]. What began as a concentra-tion of automobile assembly plants located in and nearMichigan quickly changed to assembly plants locatedthroughout the United States, Mexico, and Canada. Itwas during the 1980s that this decentralized approachproved to be very expensive and ineffective with less-than-truckload shipments. Plants were experiencingbacklogs of trucks at their docks for several hours.These delays caused a diversion of key resources awayfrom the automobile assembly plants’ car business.Deregulation of the major modes of transportation

drastically affected motor, rail, airline, and water car-riers. Deregulation removed constraints on motor car-riers’ products, services, and prices, resulting in anincreased number of motor carriers, thus providing ahigher level of competition.

* This is an edited version of the prize-winning part-time undergradu-ate submission in the 1998 International Student Awards Programsponsored by the APICS Educational and Research Foundation.

PRODUCTION AND INVENTORY MANAGEMENT JOURNAL—Second Quarter, 1999, ©APICS6 0

Along with improved economic savings came im-proved safety. The safety regulations included laborstandards, working conditions for transportation em-ployees, hazardous materials shipments, vehicle main-tenance and insurance [8, p. 184]. The logisticsexecutive was responsible for remaining knowledge-able about regulatory changes because of their poten-tial impact on a firm’s logistics operation [8, p. 187].

Supplier Relationships and Purchasing Methods

Before JIT, methods of purchasing and inventorymanagement were in many ways different from thosenow practiced. Before JIT was implemented, purchas-ing was considered a transaction of immediate need.Supplier relationships lasted no longer than the timerequired to fulfill a given purchasing contract. A long-term relationship was considered by many companiesto be an annual buy with periodic releases to the sup-plier. Multi-year buys were commonly seen only in theaerospace and defense industries [16, p. 300]. Avendor’s history of service and product quality wereimportant considerations when reviewing contractbids, but when it came time to issue a new contract,the bottom line was very often the bottom line.Contract bidding was traditionally considered the

method of choice for fostering competition and thuskeeping prices at their lowest. Multiple bids were so-licited to customer-prepared specifications with littleor no input to those specifications from the potentialsuppliers. As a result, specifications may have beenunnecessarily limiting by excluding commercially stan-dard items or were more likely to have been inflexiblein the selection of materials, tolerances, finishes, andmanufacturing methods [3, p. 132-133]. When supplierexperience was utilized, it was typically in relation tothe contract at hand and did not necessarily extend tothe finished product as a whole [16, p. 301]. Addition-ally, it was not unusual for bids to result in contractsbeing awarded to multiple suppliers to protect againstunreliable quality or delivery [3, p. 9].Before JIT a significant portion of the parts and ma-

terials purchased were for inventory. Inventories weremaintained to achieve economies of scale in purchas-ing, transportation, and manufacturing as well as tobalance supply and demand (internal examples in-cluded the in-process inventories used to equalizemanufacturing operation flows and to hedge againstequipment breakdowns) [3, p. 400-401; 16, p. 300]. In-ventories also served to act as a buffer at various inter-faces in the channel of distribution and to protectagainst price increases in an unstable market [3, p. 402,495]. Disadvantages associated with inventories in-

cluded both the risk of price decreases while inven-tory stocks were high and the risk associated with car-rying costs, including the cost of money invested aswell as indirect costs such as bid tracking and evalua-tion, invoice management, receiving and inspectionactivities, and cycle counting [8, p. 302, 495-496].Typically, materials were ordered in infrequent large-

lot shipments to obtain economies of scale in the pur-chase of raw materials and the subsequent manufacturingof finished products. Large orders provided supplierswith assured income and simplified scheduling. Theassociated reduction in costs encouraged suppliers toinvest in improved processes and equipment, furtherimproving efficiencies and lowering prices. Similarly,the transport of full truckloads or railcars of raw mate-rials and finished goods was cheaper since larger, moreefficient transport equipment was used. For less thanfull truckloads, freight forwarders or shipping associa-tions provided another avenue to reduce transport costsby combining loads from different companies when theyhad similar destinations, thus utilizing any given modeof transport more efficiently. Where large lot sizes ex-cluded the need for the break-bulk services of freightforwarders, their elimination further streamlined theshipping process and reduced costs.

PERIOD OF CHANGE

The Japanese quality movement led the automobileindustry in making changes necessary to support JITprograms. These changes forced the U.S. automobileindustry to implement its own quality programs tocompete with the high quality of Japanese cars.

The Japanese Revolution

The Japanese revolution started with an awarenessof quality on the part of the consumer. First imple-mented in Japan, W. Edwards Deming’s philosophyof quality management was instrumental in develop-ing that awareness.At one time the “Made In Japan” label was associated

with inferior products. Americans purchased automo-biles manufactured in the United States and accepted theirquality without question. But with the new quality aware-ness, changes were initiated in both the U.S. and foreignautomobile industries. As foreign automobile companiesdeveloped better quality standards, consumers began toexamine U.S. manufactured cars more closely and de-manded higher quality and reliability. To meet their de-mands, management replaced traditional manufacturingapproaches to quality control with improved manage-rial tools and techniques. Japan’s own efforts in improv-


ing quality over several decades gave them a significantshare of the U.S. auto market [2, p. 6].W. Edwards Deming began teaching statistical qual-

ity control to the Japanese following World War II. Hewas so influential in their quality improvement pro-grams that the Japanese named their highest awardfor quality improvement the Deming Prize.Deming built his philosophy of quality on 14 points of

management. “Learn the New Philosophy” is one. Man-agement methods that were in place, such as numbers-driven production, work measurement-based quotas,a bottom-line mentality, and adversarial work relation-ships, created mistrust, fear, and anxiety. They focusedmore on “satisfying” Father than on “optimizing.”Deming’s new philosophy called for developing a qual-ity consciousness and fostering a new attitude that“good enough” is just not enough. A never-ending cycleof improvement and changes in managerial and workerattitudes were needed to do so.Management turned to a focus on customer-driven

quality. Consumers would not purchase automobilesif they were dissatisfied because of poor quality or poorfitness for use. U.S. automobile companies were forcedto catch up with the Japanese in quality conformancewhile the Japanese were shifting their emphasis tobetter design quality [2, p. 82-97].The key to Japanese competitive success is the kaizen

strategy. Kaizen, the Japanese term for improvement, isthe single most important concept in Japanese manage-ment. Its philosophy encompasses cost, meeting deliv-ery schedules, employee safety and skill development,supplier relations, and new product development andproductivity. Kaizen focuses on small, frequent, andgradual improvements over the long term; the financialinvestment is minimal. Everyone from top managementto line workers is involved. People, in lieu of technolo-gies, are the main focus. Quality improvement in thekaizen philosophy is primarily concerned with the qual-ity of people. When the quality of people is improved,the quality of the product will follow [2, p. 233].In the 1980s, a period of remarkable change, con-

sumers, industry, and government became increasinglyaware of quality. Consumers noticed the obvious dif-ference between Japanese- and U.S.-made automobiles.At Chrysler, for instance, after five cars were pulled atrandom from a production line and compared with anew Toyota, it was not long before Chrysler foremenwere saying their cars were of poor quality [4, p. 175].U.S. automobile companies were forced to change tocompete in the market.Extensive product recalls in the early 1980s were

mandated by the Consumer Product Safety Commis-sion, and the Challenger space shuttle disaster in 1986

increased awareness of the U.S. quality gap with theJapanese. Earlier, in 1980, NBC had aired “If Japan Can... Why Can’t We?” The program revealed the key rolethat Deming played in the development of Japanesequality and made his name a household word amongcorporate executives. As a result he led U.S. compa-nies, including Ford Motor Company, in a program torevolutionize their approach to quality [2, p. 5].

Quality Revolution

A new quality dynamic emerged during this periodof change. The quality revolution that resulted wassupported by a program of incoming material controland the use of JIT as a quality control method.In the late 1980s it was clear that the only constant

in the quality area was change. That was the essenceof the quality revolution as U.S. automobile compa-nies worked to develop new approaches to quality.Customers were invited into plants for inspection toursand team meetings.New approaches were being implemented in regard

to employees. There was a new focus on quality, ser-vice, and responsiveness, resulting in an increased em-phasis on the importance of people in an organization’ssuccess. These approaches led to the development ofindividual and team participation programs, elimi-nated layers of supervision, and resulted in morepeople involvement in day-to-day problem solvingand quality monitoring.New approaches were also developed in the area of

leadership. This was a decentralized leadership, withquality values set from the top. Top managers and staffwere in touch with customers and operations [2, p. 16].Incoming material control is also an important part

of the quality function. Many companies require thattheir suppliers provide proof that their processes areunder statistical control; they then provide preferen-tial treatment for those who maintain a high level ofquality performance over time. The quality of incom-ing materials became more and more critical as auto-mation increased and JIT material flow was used inthe manufacturing environment.JIT, a program consisting of material management

and control, is “more than a new way of handlingmaterial management; it represents a philosophywhose objective is to eliminate all sources of waste,including unnecessary inventory and scrap in produc-tion. The basic philosophy is to reduce inventories toas close to zero as possible by producing only enoughunits to keep the next work station in a productionprocess in operation. In manufacturing operations,Japanese automobile manufacturers in both Japan and


the United States routinely encourage their suppliersto locate plants as close as possible to their factories sothat frequent deliveries of small lots of parts can bemade to the assembly lines.” [2, p. 220-221]JIT will not function properly if there is a high rate

of material defects. Careful attention to quality bothin purchasing and production is required. Since lotsizes are small and plants carry no safety stock to backup nonconforming items, a quality problem will dis-rupt the flow of materials.The Ford Motor Company recognizes plants that

have achieved a level of excellence and have in place aprogram for continuous improvement to meet thecustomer’s needs and expectations. The award is calledthe “Q1 Award” and is the basis for Ford’s vendor cer-tification program. The criteria used to determinewhether a supplier is to receive the award are basedon the following five categories: adequacy of the qual-ity system, process capability review, internal qualityindicators, customer satisfaction, and managementcommitment [2, p. 226].

THE PRESENT ENVIRONMENT

This section describes the importance of JIT and howindustry leaders are dealing with the present and thefuture for transportation. Supplier relationships andhow purchasing and quality will play a leading role inthe future will also be discussed.

Transportation

Transport innovation is the execution portion of JITpurchasing. It is the physical linkage between the in-side and the outside processes. Of all the aspects ofJIT, transportation is probably the one most subject tomisconceptions. Typically, transportation has beenviewed by manufacturing industries as “putting prod-ucts on a truck, train, plane, or bus.” But JIT transportissues include every step required to move materialfrom the hand of the last value adder at a supplier lo-cation to the hand of the first value adder at a cus-tomer location. JIT transport is a process that starts ata supplier location and ends at a customer location.Transport innovation requires that all three parties, the

supplier, the carrier, and the customer, work togethermore closely than ever before. That means transport part-nerships have to be forged, just like supplier partnerships.There will be fewer carriers than there are today; eachwill be a single source for a “family” of businesses thatwill be treated as a part of the operation, as though theywere “in-house” carriers [16, p. 317-320].Advancements in technology have fostered many

changes in transportation logistics. One example oftransport innovation resulting from these advance-ments is global positioning systems (GPS). By synthe-sizing satellite tracking, computer, communications,wireless and Internet technologies, GPS offers fleetmanagers a powerful tool to increase productivity andachieve major cost savings and operating efficiencies.Global positioning systems provide fleet operatorswith the ability to display the location of vehicles ontheir PC screens using high-quality, street-level detailmaps, cargo and vehicle security, route optimization,and driver monitoring. GPS providers are utilizing theInternet as a communication medium, offering low-cost solutions for companies wishing to monitor ve-hicle fleets around the country from a central location.A basic GPS functions with a compact vehicle-

mounted remote unit that picks up GPS signals fromorbiting satellites and tracks the vehicle position towithin 10 meters. This remote unit relays its positionto the fleet office computer via cellular phone or digi-tal radio signal. With a message display unit in thecab, interactive messaging capability is also provided.Fleet managers can track any vehicle’s location on azoomable map display on their personal computerscreens. This display gives them remote control andmonitoring over functions such as locking and unlock-ing cargo doors, turning alarms on or off, and moni-toring sensors such as temperature. These systems canalso provide extensive reporting, including idle time,delivery/stop, speeding, event history, route anima-tion, and other tracking reports [10].A brief study of the modern transportation system

follows, with highlights of three industry leaders.

Federal Express

Federal Express (FedEx) began in 1973 as an over-night delivery service. With a fleet of 14 Falcon busi-ness jets, it shipped 186 packages on its first night ofoperation. Headquartered in Memphis, Tennessee,FedEx is now the world’s largest express transporta-tion company, employing approximately 140,000people and serving 212 countries. The company main-tains 605 aircraft and a fleet of more than 39,500 ve-hicles worldwide. It averages more than 600,000 callsdaily and ships over 3 million packages a day. Its 1997revenues were $11.5 billion.Federal Express has evolved into a business that not

only moves parcels, but also manages the supply chainfrom end to end. Its packages are controlled with elec-tronic communications from order to delivery. The com-pany has committed approximately $1 billion for newtechnology to ensure it remains a leader in electronic


communications. Of the 2.5 million packages moved ev-ery day, 1.5 million move electronically without air-bills.With Internet connectivity for tracking and service trans-actions on the World Wide Web, FedEx claims air-billswill soon be obsolete. The company has 350,000 cus-tomers on line with a proprietary network of 79,000 elec-tronic data interchange accounts [14, p. 1-5; 9].

United Parcel Service

United Parcel Service (UPS), now the world’s larg-est package distribution company, was founded in1907. Headquartered in Atlanta, it transports more than3.1 billion parcels and documents worldwide each year.UPS employs 338,000 people and has more than 500aircraft, 147,000 vehicles, and 2,400 facilities provid-ing service in more than 200 countries. Currently, UPSmoves 12 million parcels and documents daily, pro-viding fast, convenient delivery service coast-to-coastand around the world.United Parcel Service Airline is among the 10 largest

airlines in the United States. It features some of the mostadvanced information systems in the world. The com-puterized operations monitoring, planning and sched-uling system (COMPASS), for example, is unique in theindustry. It provides information for flight planning,scheduling, and load handling and can be used to planoptimum flight schedules up to six years in advance.Technology at UPS spans an incredible range, from

specially designed package-delivery vehicles, to glo-bal computer and communications systems. UPSnetis a global electronic data communications networkthat provides an information processing pipeline forinternational package processing and delivery. It hasmore than 500,000 miles of communications lines, in-cluding a UPS satellite, and links more than 1,300 UPSdistribution sites in 46 countries. The system also tracks821,000 packages daily.Using a hand-held computer device called a delivery

information acquisition device (DIAD), the UPS drivercan electronically capture information about each pack-age, including the time of delivery and even the signa-ture of the person receiving the package. This informationis transmitted via cellular telephone directly from thepackage car to UPS computers, where it is available toallow customers to trace their packages or to verify proofof delivery. Between 1986 and 1991, UPS spent $1.5 bil-lion on technology improvements, and plans to spendan additional $3.2 billion during the next five years.Today, UPS provides many customer information ser-

vices, including TotalTrack and MaxiShip. TotalTrack,based on a nationwide cellular mobile data system, caninstantly provide customers with tracking information

for all bar-coded air and ground packages. MaxiShipis a computer-based system that lets customers man-age the entire distribution process, from the rating andzoning of packages, to preparing user-defined man-agement reports.Another service that UPS offers is Inventory Express.

It is a contract logistics management service in whichUPS stores the customer’s merchandise, then ships itas needed ... “just in time.”Even more far-reaching is UPS Worldwide Logis-

tics, a comprehensive consulting service in which UPSassembles services based on the customer’s individualneeds, which might include freight payment, customsclearance, warehousing, carrier selection, rate nego-tiation, tracking, information systems, electronic datainterchange (EDI), fleet management, order process-ing, and inventory control.The highest priorities for UPS over the next five years

will be to deploy technology that will allow UPS tocontinue introducing new services, to provide custom-ers with comprehensive information about their ship-ments, and to provide training so that all employeeswill clearly understand UPS services and the technolo-gies that make them possible and will be able to com-municate that information to the customer. [12]

Roberts Express

Based in Akron, Ohio, Roberts Express is a trans-portation company specializing in emergency ship-ments and those that require special care and handling.It is the largest surface-expedited carrier in the world,handling thousands of critical-needs shipments everyweek throughout the United States and Canada. Anoperating company of Caliber System, Inc., it is a lead-ing provider of value-added transportation, logistics,and related information services.To stay close to its customers, Roberts Express uses

state-of-the-art AT&T network technology to identifycallers and route them to the proper customer assis-tance team (CAT) member. This technology gives CATmembers instant access to critical information aboutthe caller and enables them to get a vehicle to thepickup location as fast as possible. Constant monitor-ing of the communications equipment and lines en-sures that customer calls are answered quickly.In addition, 24-hour two-way Qualcomm satellite com-

munications are combined to link CAT members to eachdriver. They can immediately locate an available vehiclesized to a customer’s needs and get all necessary infor-mation to the driver, who can be enroute to the pickupwithin minutes. Two Sun computers tie the network tech-nology and satellite communications together.


Using the computer-monitored two-way satellitecommunications system and the latest in integratedsoftware and hardware, Roberts Express can, in min-utes, pinpoint a shipment to within 300 yards, accessits on-board computer, and communicate vital infor-mation about a customer’s shipment. If a shipment ismore than 15 minutes late, both the shipper and theconsignee can be called. Problems caused by any de-lay can be immediately addressed and solved [11].

Supplier Relationships and Purchasing Methods

Just as the JIT environment has affected transporta-tion providers, requiring them to change and streamlinetheir methods of operation, and make long-term invest-ments in technology, JIT purchasing in today’s automo-tive industry requires that manufacturers and suppliersform long-term relationships with the intent that theybecome permanent. Simultaneously, the number of sup-pliers is streamlined so that each is the sole provider of aparticular item or items, with purchase agreements is-sued with durations of years. These changes result instrong bonds between the manufacturers and suppliers,with each becoming thoroughly dependent on the otherfor survival and prosperity. Each supplier recognizes thatany failure on its part in quality, quantity, or timelinesscould potentially result in the shutdown of the customerand thus all suppliers, itself included. However, with thatlarge responsibility comes the benefit of stable produc-tion and assured income. In this environment, major au-tomobile manufacturers team with logistics specialiststo manage material flow. This move results in reducedless-than-truckload costs and reduced transit times andit eliminates the receiving function at the dock. All theseactions combine to reduce inventories.As a result of JIT implementation, the quality of de-

livered goods has improved to near 100%, as no extrasare available to replace defective items. Typically, sta-tistical process controls are implemented by the sup-plier thereby drastically reducing the number ofunacceptable parts produced and effectively eliminat-ing final inspections [16, p. 303]. Quality standards areset by the customer’s quality engineers, who also workwith the supplier to resolve quality concerns [8, p. 501].Shipping damage is nearly eliminated. Materials comedirectly from the supplier to the customer and are notrepeatedly transferred between transport mediums,greatly reducing the opportunity for damage to occur.The quantities of parts delivered to the customer

must be exact. Shipments of plus or minus 10% are nolonger acceptable because the parts are ordered on astrict as-needed basis with little or no buffer stocks [8].Delivery of finished goods to the customer must be on

a strict schedule to ensure their availability for assem-bly operations. Again, because buffer stocks have beeneliminated or reduced dramatically, these deliveriesmust be of small quantities arriving within hours orminutes of the need for final assembly. Timing is justas important as the quality and quantity; there is littleor no margin for error.Methods used to meet those requirements are var-

ied. In some cases the parts manufacturing facility isconstructed at or near the final assembly plant, allow-ing small deliveries of parts to be made in smaller,cheaper vehicles, with greater control over timeliness.Where local manufacturing is not feasible, other meth-ods are used including dedicated trucks or closed looptransportation in which delivery trucks make stops atvarious suppliers on a predetermined schedule, simul-taneously returning empty shipping containers and tak-ing on new loads for scheduled delivery to the assemblyplant. Disposable packaging can be replaced with reus-able containers and racking compatible with assembly-line use, eliminating the costs of removing and disposingof packaging materials and simplifying and speedingthe loading and unloading processes [16, p. 321-323].With no receipt inspections required, materials are nowunloaded at or near the final point of use in the assem-bly plant, eliminating the additional steps required fordistribution from a centralized receiving point [16, p.328]. Costs associated with equipment used to speedthe delivery process, such as specially configured trucks,containerization, and unloading equipment, are offsetby the associated improvements in efficiency.The stringent demands of the JIT manufacturing

process require maintaining communication betweenthe supplier and customer at the highest levels. Noti-fications of disruptions, quality problems, or engineer-ing changes are immediate, and resources are sharedto resolve technical difficulties [16, p. 311].That improved communication gives suppliers in-

formation about future needs and improves their abil-ity to plan, process, and implement capital equipmentimprovements. With the stability that the JIT environ-ment provides, suppliers can more confidently makethese investments, thereby increasing efficiency andreducing costs [16]. Other areas of cost reduction asso-ciated with JIT include the customer’s reduced over-head due to the smaller number of suppliers, reducedexpediters on invoice processing and bid tracking,fewer contract negotiations, elimination of expediting,near elimination of costs associated with inventoryincluding carrying costs and costs associated with themovement of materials, elimination of cycle counting,and reduction of incoming inspection activities andtracking and handling of defective parts [8, p. 502-503].


Streamlining the shipping process will also decreaseexpenditures by reducing damage and simplifyingpackaging and containerization as much as possible.That reduces or eliminates expendable costs and thetime and effort required to deal with them [8, p. 321].

The Current Quality Approach

Today’s approach to quality is identified as total qual-ity management (TQM). TQM is supported by the useof quality circles and qualified sources and requires em-ployee involvement to be successful. It is “both a phi-losophy and a guiding set of principles that representthe foundation of a continuously improving organiza-tion. TQM integrates fundamental management tech-niques, existing improvement efforts, and technical toolsunder a disciplined approach focused on continuousimprovement. The TQM approach stresses long-termbenefits resulting from continuous improvements tosystems, programs, products and people [8, p. 457].”Quality circles are small groups of volunteer employ-

ees who meet on company time to identify, analyzeand solve problems of their choice. Their solutions arethen presented to management for implementationauthorization. Management must actively react to therecommendations in order to provide an environmentfor continued employee involvement [16, p. 107].The automobile industry uses quality circles to in-

volve employees in the quality program. It’s a way toimplement the people policies and practices necessaryto obtain continuous improvement in the workplace.The objectives of quality circles are to improve the en-terprise, build a better workplace, and develop indi-vidual abilities. Although not an objective of a qualitycircle, a by-product of the process is “saving money.”Another current quality management tool is the use

of qualified sources. Qualified sources are developedto allow material to be supplied to the manufacturingplants without performing incoming inspections.Automobile manufacturers negotiate with suppliers tolock in a quality system and the quality of the part be-fore a product is started. As a result, nonconformancesare worked out with suppliers before mass production.This program of developing and using qualified

sources then allows parts to be delivered directly tothe assembly lines in lots small enough to completeonly the current task, leaving no excess inventory toclutter up the shop floor or cover up part defects orassembly mistakes [6].“Quality benefits to the buyer include:

• Fast detection of defects, since deliveries are frequent.• Fast correction of defects, since supplier setups arefrequent and lots are small.

• Less need for inspection, since process control isimplemented.

• High quality of parts purchased, including the prod-ucts they go into.

Quality benefits to the supplier include:

• Avoids production of large lots of defective material.• Improves coordination on quality assurance matters.”[8, p. 502-503]

DISADVANTAGES OF JIT

For more than a decade, JIT manufacturing has beentouted as a prime way to keep costs down and assem-bly lines running smoothly. But because JIT requiresplants to keep trim inventories, even the smallest glitchin the supply chain can bring production to a stand-still. JIT systems are designed so that parts and com-ponents arrive at factories just as they are needed forassembly, reducing and sometimes eliminating theneed for warehousing expensive parts. Billions aresaved on inventory, but when a plant making a criticalpart shuts down, there is little buffer stock from whichto draw [7, p. 1B-3].General Motors Corporation (GM), for example, re-

ceived recognition for its highly integrated JIT system.The system required reduced inventories because partswere delivered to vehicle assembly lines daily and some-times in one-hour or 30-minute time windows. How-ever, the system’s Achilles heel was apparent when a17-day labor strike at two part suppliers forced GM toclose 22 of its 29 car and truck plants in North America.Analysts estimated that shutdown cost GM between$600 million and $800 million in lost profits [1, p. 28].Reliable suppliers seem to be at the heart of the prob-

lem. Most firms are still struggling to develop the criti-cal mass of reliable, cost-effective, lead-time-stablesuppliers that will allow them to operate their produc-tion lines on a JIT or demand-pull basis. It also ap-pears that most companies continue to rely on forecast(often from sales and marketing departments); only ahandful have begun to provide suppliers with consis-tent real-time access to their ever-changing productionschedules. Another difficulty is the removal of the “hu-man element” from the systems that generate require-ments. Because computer algorithms are limited, thereis still a need for good people with experience in read-ing the ups and downs of the industry [13, p. 18].

THE FUTURE

The technology that will control the future of trans-portation is efficient information flow and automateddata collection. Forget about trucks, trains, ships, and


jets. The key issue in the future will be providing in-formation on a shipment: its location, where it needsto go, and when it will get there. As cycle times shrinkand inventory-lean manufacturing processes becomethe norm, transportation buyers will need to be focusedon where a shipment is in the distribution pipeline,rather than with the physical shipment itself.A carrier will be more an information management

company than a transportation company. Shippers willdemand more information on their shipments thanever before. That need for more information will bedriven by change. Manufacturers will no longer be ableto afford to stockpile parts and finished goods in ware-houses. Instead, they will rapidly adopt JIT and leanmanufacturing strategies, which operate with little orno inventory. That will have a profound impact onshipping and the information associated with it.Carriers will respond to the challenge by investing

in a wide array of technology, including on-board com-puters and communications equipment for trucks,scanning technologies for containers, equipment loca-tor tags, and roadside and satellite tracking systems.GPS technology and wireless communications systemswill be the norm.Paper, including the shipping label, the bill of lad-

ing, and the freight bill, will be replaced with electronicdata interchange and the Internet to transfer shippingdocuments. Advanced two-dimensional bar code willplay a large role, allowing a great amount of informa-tion to be attached to packages.To make the process better, information such as pro-

duction, supply, and cycle times data will have to becontinually shared with suppliers and carriers. Thissharing of information will become increasingly im-portant as more and more companies adopt supplychain management practices that aim to link opera-tions from the supplier’s supplier to the customer’scustomer.Companies will recognize the importance of infor-

mation to supply chain management. Microsoft Cor-poration has already done so. The company recentlylaunched the Value Chain Initiative, which paired morethan 50 transportation providers, software companies,and computer makers in an effort to develop a stan-dard software tool kit to enable the flow of data fromraw material suppliers to the ultimate customer.The launch of the World Wide Web introduced a low-

cost platform for customers and information owners tomake information more accessible worldwide. In the in-formation age, savvy shippers will know not only whereto get accurate data on their shipments but also how toleverage that data to improve operations along their com-panies’ supply chains [15, p.38]. It is apparent that JIT

has not been taken to its limits, and it would appear thatwith the advanced technology coming to the marketplace,the future for JIT is very bright [5, p. 76].

S U M M A R Y

So far, JIT implementation has resulted in the devel-opment of supplier relations, reductions in inventoryinvestment, and improved efficiencies in manufactur-ing and transportation. However, like any other evolv-ing process, JIT logistics support may still requirechange. Improved technology including computers,communications equipment, and satellite tracking willhave a major effect on JIT in the future. These changeswill be predicated on consumer wants and needs. Anideal process is one that is flexible enough to allow forquick change. This has been the case within the auto-mobile industry.JIT has served as a useful tool in the automobile in-

dustry and a very effective method for managing func-tions such as production, purchasing, inventorycontrol, warehousing and transportation. Its potentialbenefits are limitless [8, p. 471].

REFERENCES

1. “Did the GM Strike Prove that JIT Doesn’t Work?” Purchasing(9 May 1996).

2. Evans, J.R., and W.M. Lindsay. The Management and Control ofQuality, 2nd ed. St. Paul: West Publishing, 1993.

3. Heinritz, S., P.V. Farrell, L. Giunipero, and M. Kolchin. Purchas-ing Principles and Applications, 8th ed. Englewood Cliffs: PrenticeHall, 1991.

4. Iacocca, L., and W. Novail. Iacocca: An Autobiography. New York:Bantam Books, 1984.

5. “Information Emerges on Transportation’s Fifth Modes.” Pur-chasing (17 July 1997).

6. “JIT: A Process with Many Faces; JIT.” Purchasing (04 Sept. 1997).7. Johnson, G.S. “JIT Makes Big Three Vulnerable to Strikes.” Jour-nal of Commerce (18 Sept. 1997).

8. Lambert, D.M., and J.R. Stock. Strategic Logistics Management,3rd ed. New York: McGraw-Hill, 1993.

9. Online, Internet: WWW address: http://fedwx.com/us/about/facts.html/ (01 Mar. 1998).

10. Online, Internet: WWW address: http://miras.com/html/products.html/ (16 Feb. 1998).

11. Online, Internet: WWW address: http://roberts.com/technology.htm/ (02 Mar. 1998).

12. Online, Internet: WWW address: http://ups.com/about/glance.html/ (01 Mar. 1998).

13. Porter, A.M. “The Problem with JIT; JIT Inventory Systems.”Purchasing (18 Sept., 1997).

14. Rosenfeld, I. “Fedex Number One and Climbing.” Journal ofCommerce (26 Aug. 1996).

15. “Top Trends and Developments of 1997.” Modern MaterialsHandling (December 1997).

16. Wantuck, K.A. Just In Time for America. Southfield, Michigan:KWA Media, 1996.

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