the effect of jit on supply chain responsiveness

Bachelor Thesis Organization & Strategy

Lean Management

11-6-2010

The effect of JIT on supply chain responsiveness

Joost de Veth

613766

Supervisor:

Drs. M.A. Overboom Word count: 6222

2 Bachelor Thesis J.C.J. de Veth

Management Summary

Today, customers value high responsiveness (both delivery time and flexibility of product

delivery) (Davis, Aquilano, & Chase, 2003). Knowing that, one can assume that high efficiency

to achieve low prices alone is not enough. Many customers will value the ability of a supplier to,

for example provide additional supplies quickly, even when delivery is scheduled later, or not at

all. The ability to cope with rapid changes in demand may also be important. In this thesis the

consequences of suppliers adopting just in time (JIT) to their ability to respond to the changing

wishes of customers are elaborated.

The problem statement which is investigated is „How does JIT production affect the

responsiveness of a supply chain?‟

Main characteristics of JIT are defined to be able to form a clear working definition. JIT is seen

as the main bundle of a total of four bundles of lean management, as postulated by Shah &

Ward (2007). The main characteristics of JIT are zero inventory, a continuous flow of

production, defect free production, batch size one, perfect quality, high simplicity of production

flow, and producing only when needed. This is realized by kanban planning and control, which

facilitates pull scheduling. Furthermore, reducing variability is important to ensure the optimal

functioning of JIT.

The definitions for a responsive supply chain used are those of Gunasekaran, Lai, & Cheng

(2008): “a network of firms that is capable of creating wealth to its stakeholders in a competitive

environment by reacting quickly and cost effectively to changing market requirements”, and of

Reichhart & Holweg (2007): “the speed with which the system can adjust its output within the

available range of the four external flexibility types: product, mix, volume, and delivery, in

response to an external stimulus, e.g. a customer order.” Two models by the mentioned authors

are used to determine how a supply chain can become responsive. Gunasekaran et al. focus on

information and communication throughout the supply chain, while Reichhart & Holweg use the

response dimension of four external flexibility types as a basis.

Findings include that there are requirements for an environment in which JIT can function

properly, and that the pursuit of responsiveness maximization tends to force companies to cross

these boundaries. However, staying within these boundaries JIT companies do have

possibilities to enhance responsiveness, to a certain extent. This can be done by enhancing the

responsiveness of external flexibility, as well as optimizing information and knowledge sharing.


Table of Contents

Management Summary .............................................................................................................. 2

1. Introduction ......................................................................................................................... 5

1.1 Problem indication ....................................................................................................... 5

1.2 Problem statement ....................................................................................................... 5

1.3 Research Questions .................................................................................................... 5

1.4 Relevance .................................................................................................................... 6

1.5 Research design and data collection ........................................................................... 6

1.6 Structure ...................................................................................................................... 7

2. Just in time (JIT) ................................................................................................................. 8

2.1 JIT and Lean ................................................................................................................ 8

2.2 Pull scheduling ............................................................................................................10

2.3 Flexibility .....................................................................................................................10

2.4 Kanban .......................................................................................................................11

2.5 Environment................................................................................................................11

2.6 Conclusion ..................................................................................................................11

3. Responsive Supply Chain (RSC) .......................................................................................12

3.1 Reichhart & Holweg: Flexibility as a basis for responsiveness ....................................12

3.2 Gunasekaran, Lai, & Cheng: Information as a basis for responsiveness .....................13

3.3.1 Network of partnering firms ..................................................................................14

3.3.2 Knowledge management .....................................................................................15

3.3.3 Information technology and systems ....................................................................15

3.4 Conclusion ..................................................................................................................15

4. The results of JIT on responsiveness .................................................................................17

4.1 Flexibility .....................................................................................................................17

4.1.1 Delivery flexibility .................................................................................................17


4.1.2 Volume flexibility ..................................................................................................18

4.1.3 Mix flexibility.........................................................................................................18

4.1.4 Product flexibility ..................................................................................................19

4.2 Network of partnering firms .........................................................................................19

4.3 Information Technology & Systems .............................................................................19

4.4 Knowledge management ............................................................................................19

4.5 Characteristics of the industry .....................................................................................20

4.6 Conclusion ..................................................................................................................20

5. Conclusions and recommendations ...................................................................................22

5.1 Conclusion ..................................................................................................................22

5.2 Discussion ..................................................................................................................23

5.3 Recommendations ......................................................................................................23

6. References ........................................................................................................................24


1. Introduction

1.1 Problem indication

Ever since the introduction of lean thinking by Toyota, the lean philosophy has become more

and more popular throughout the world. This method of achieving extreme efficiency in business

processes has proven to be successful in many different industries. Along with lean, also just in

time (JIT) became popular. As an important part of the broader lean philosophy, JIT manages

the company‟s primary processes (Haan, Overboom, & Naus, 2009).

Even though JIT aims to meet demand instantaneously (Slack, Chambers, & Johnston, 2007),

the question is whether it possible to remain a responsive supplier to customers, while having a

minimal inventory. When demand is fluctuating, is it possible to be responsive enough to satisfy

changing demand, just as a company would be before it implemented JIT? Pull scheduling and

the lack of buffer could cause JIT suppliers to be unable to respond to changing market

requirements. As an example, producer VDL ETG has announced that a recent change in their

planning system involves a decrease in degree of leanness. This way the company hopes to

increase delivery reliability (Beerens, 2007).

Today, customers value high responsiveness (both delivery time and flexibility of product

delivery) (Davis, Aquilano, & Chase, 2003). Knowing that, one can assume that high efficiency

to achieve low prices alone is not enough. Many customers will value the ability of a supplier to,

for example provide additional supplies quickly, even when delivery is not scheduled, or the

ability to cope with rapid changes in demand. The object of this thesis is to elaborate the

consequences of suppliers adopting JIT to their ability to satisfy this wish of customers.

1.2 Problem statement

How does JIT production affect the responsiveness of a supply chain?

1.3 Research Questions

What are the main characteristics of JIT?

A clear definition and detailed description of JIT will be required to be able to assess its impact

on responsiveness.

What are the factors involved in achieving a customer responsive supply chain?

To measure the effect of lean on the responsiveness of a supply chain, it is first key to identify

the factors that make distribution reliable. In order to do so, a literature study will be performed.


How does JIT affect those factors?

The next step is to determine whether the characteristics of the JIT philosophy are positively or

negatively affecting responsiveness.

1.4 Relevance

In the last decades lean has become a well-known and widely adopted management

philosophy, efficient in eliminating all possible waste, including failure to deliver (Harrison & van

Hoek, 2008). JIT is also said to have been a solution to many companies in the past that

required high responsiveness (Vokurka, Lummus, & Krumwiede, 2007). However, the Dutch

company VDL ETG recently rejected lean principles to increase delivery reliability. Could this be

a reason to question the responsiveness of lean and JIT? This research will attempt to clarify

the consequences of JIT on the responsiveness of a supply chain.

1.5 Research design and data collection

This research is a descriptive study, performed by means of a literature review. All data that will

be used will be existing literature. Available literature will be accessed through article databases

such as ABI/Inform, JSTOR, Science Direct and Web of Science. Initial keywords are „JIT‟ or

„Just in time‟, „lean‟, and „responsiveness‟. However, as the snowball-effect describes, more

keywords will be added as the research progresses. Furthermore, books on operations

management and supply chain management will be consulted.

The impact factor of a specific journal from the Journal Citation Reports will be considered when

a journal article is used, to assess the reliability of the source. Furthermore, the amount of times

an article has been cited will also provide information on the quality of the article.

The relevant variables in this study are JIT thinking and responsiveness to demand.

JIT philosophy

Responsiveness

to demand


1.6 Structure

The chapters in the research report are structured based on the research questions, preceded

by an introduction and followed by a conclusion and recommendations.

The second chapter discusses JIT and its characteristics. In the third chapter, important issues

involved in achieving a responsive supply chain are discussed (research question 1). The fourth

chapter will elaborate how the JIT philosophy affects these issues. Finally, chapter five contains

the conclusion to this thesis, presenting the answer to the problem statement and further

recommendations.


2. Just in time (JIT)

2.1 JIT and Lean

„Just-in-time‟ or „JIT‟ is a management philosophy developed by Toyota in 1937, as part of the

bigger „Toyota Production System‟ or „TPS‟ (Shah & Ward, 2007). According to Monden (as

cited in Shah & Ward, 2007), TPS (later called „lean management‟) consists of four main

concepts, of which JIT is one. Shah & Ward (2003) postulate four lean „bundles‟ of inter-related

and internally consistent practices:

- Just in time (JIT)

- Total quality management (TQM)

- Total preventive maintenance (TPM)

- Human resource management (HRM)

JIT deals with the content of the primary processes of a firm, whereas the other three provide

conditions to facilitate it (Haan, Overboom, & Naus, 2009). TQM enables quality throughout the

system and manages process improvements to control defects. TPM manages the availability

and functioning of equipment as intended to facilitate the production flow. One waste lean aims

to eliminate is machine downtime due to malfunction. Preventive maintenance is applied

primarily to maximize equipment effectiveness through planned predictive and preventive

maintenance of the equipment (Shah & Ward, 2007). HRM takes care of a properly functioning

staff (Haan, Overboom, & Naus, 2009). In lean, an important function of HRM is realizing high

employee involvement, cross-training of employees, etcetera (Shah & Ward, 2007).

JIT production is applicable throughout many departments within a company, but is also applied

inter-organizationally, as a means of minimizing costs for cooperating buyers and suppliers. The

JIT production approach aims to produce defect free goods in the required amount at the right

time mainly through eliminating wastes, improving capabilities and establishing a continuous

flow of production (Monden, 1993). In a perfect JIT environment, demand is met

instantaneously, only produced as requested by the customer, with perfect quality (Slack,

Chambers, & Johnston, 2007).


The main techniques for JIT, as defined by Slack, Chambers, & Johnston (2007, p.489), are the

following:

Developing „basic working practices‟ which support waste elimination and continuous

improvement;

Design for manufacturing;

Focused operations which reduce complexity;

Using simple, small machines which are robust and flexible;

Rearranging layout and flow to enhance simplicity of flow;

Employing total productive maintenance to encourage reliability;

Reducing setup and changeover times to enhance flexibility;

Involving staff in the improvement of the operation;

Making problems visible to all staff.

In addition, several techniques are presented specifically for planning and control (Slack,

Chambers, & Johnston, 2007, p.489):

Pull scheduling;

Kanban control;

Levelled scheduling;

Synchronization of flow;

Mixed-model scheduling.

In this paper, lean characteristics will be presented and used. However, since JIT is the main

bundle in lean and the other three exist merely to support it (Haan, Overboom, & Naus, 2009), it

can be assumed that these characteristics also apply for JIT.


2.2 Pull scheduling

The P:D ratio is the total production time (P-time, lead time, or cycle time) divided by the time a

customer is willing to wait for a product (D-time). When P:D is greater than one, a company will

be forced to produce on speculation. This can be done either by assembling to order (ATO), or

making to stock (MTS). However, the latter is completely against JIT policy, as it implies push

rather than pull scheduling. ATO is also „not JIT‟, because for this method an inventory of half-

finished products is required. However, if these half-finished parts of the company‟s product are

produced externally and then delivered JIT, this type of production could fit into JIT

manufacturing.

Pull-based production types, such as engineer to order (ETO), but mainly make to order (MTO),

are used in JIT processes. To cope with the lack of inventory, in order to prevent delivery issues

such as late delivery, resources have to be readily available through supplier selection and the

company must have to capabilities to produce efficiently, in order to minimize lead times.

2.3 Flexibility

Lean management as a whole has been praised for its flexibility in the production process. Lean

car manufacturers manufacture a set amount of different models, but every specific car can be

produced exactly as specified by the customer. To enhance flexibility, workers are cross-trained

to be able to fill in for colleagues and to have to ability to re-assign them to another department

if capacity must be reassigned (de Treville & Antonakis, 2006). Furthermore, ideally the batch

size should be 1 to increase flexibility even further (Haan, Overboom, & Naus, 2009).

Furthermore, small machines are used that work independently to increase flexibility and

robustness, and the insulation of production stages from each other insulates and therefore

limits problems. (Slack, Chambers, & Johnston, 2007). Furthermore, machines can easily be

rearranged to rearrange production layout as the situation demands.

However, de Treville & Antonakis (2006) also state that all variability must be buffered by some

combination of capacity and inventory. A sudden increase in demand requires either available

capacity or an inventory of finished products to satisfy demand. Since lean intends to use no

more capacity than needed to fulfill demand, and minimize buffer inventories, variability can

cause problems in JIT production systems. Lean production is a manufacturing system that is

intended to achieve its goals by minimizing system variability (related to arrival rates, processing

times, and process conformance to specifications) (de Treville & Antonakis, 2006).


To shelter the production line from its inherent variability, demand must be smoothed. This way

the capacity utilization level remains stable. (de Treville & Antonakis, 2006). According to Slack

et al. (2007), JIT may be unable to cope with demand if it is suddenly far greater than expected.

2.4 Kanban

The Japanese invented a very simple but effective method to facilitate pull-based planning and

control, named „kanban‟ (Slack et al., 2007). Using tools as simple as cards (kanban is

Japanese for „card‟ or „signal‟), signals are sent to trigger actions.

Planning and control help a supply chain to function properly. However, uncertainty makes both

planning and control more difficult (Slack et al., 2007).

2.5 Environment

As described by Harrison & van Hoek (2008), the lean philosophy typically works well for

companies that produce commodity products with a predictable demand, low product variety,

and a long product life cycle. Customer drivers are cost rather than availability, and the profit

margins are low. Lean and JIT can be effective if the characteristics of the industry in which a

company operates are in accordance with the above factors.

2.6 Conclusion

In conclusion, the main techniques characterizing JIT are zero inventory, a continuous flow of

production, defect free production, batch size one, perfect quality, high simplicity of production

flow, and producing only when needed. This is realized by kanban planning and control, which

facilitates pull scheduling. Furthermore, reducing variability is important to ensure the optimal

functioning of JIT. The JIT production system is designed to function well in an industry where

demand is stable and product life cycles are long.


3. Responsive Supply Chain (RSC)

Gunasekaran, Lai, & Cheng (2008) consider a responsive supply chain to be “a network of firms

that is capable of creating wealth to its stakeholders in a competitive environment by reacting

quickly and cost effectively to changing market requirements”. Reichhart & Holweg (2007) apply

the following definition: “The responsiveness of a manufacturing or supply chain system is

defined by the speed with which the system can adjust its output within the available range of

the four external flexibility types: product, mix, volume, and delivery, in response to an external

stimulus, e.g. a customer order.” A third definition by McCutcheon, Raturi, & Meredith (1994) is

to regard responsiveness as equal to the delivery lead time for a certain product. Therefore,

according to this definition a manufacturing system would become more responsive as the lead

time of a product is reduced. The main similarities between all three definitions come down to

speed. Responding quickly to demand or change in demand seems to be the main objective.

In this chapter the definitions of a responsive supply chain by Reichhart & Holweg and by

Gunasekaran et al. will be presented.

3.1 Reichhart & Holweg: Flexibility as a basis for responsiveness

Reichhart & Holweg (2007) seek to increase the speed in which output can adjusted within the

available range of the four external flexibility types: product, mix, volume, and delivery, in

response to an external stimulus, e.g. a customer order. They also claim that responsiveness

should be considered solely customer focused. This definition still shows a strong relationship to

lead times (the speed in which output can be adjusted in response to customer demand).

However, Reichhart & Holweg based it on the four external flexibility types as distinguished by

Slack (1987), which are then divided in the three dimensions range, response (Slack, 1987),

and uniformity (Upton, 1994). The response dimension refers to the ease in terms of time and

cost with which different values within a range can be achieved (for example setup time and

cost switching between products). A company which can move its production system quickly,

smoothly and cost efficiently from one state to another is considered to be more flexible than a

company which requires more effort and costs to achieve the same (Reichhart & Holweg, 2007).

It is this dimension of the four flexibility types that represent responsiveness of a manufacturing

or supply chain. This is clarified graphically in figure 1.


Figure 1: Types of flexibility and how responsiveness is defined (Reichhart & Holweg, 2007)

Delivery flexibility refers to the ability to change planned or assumed delivery dates (Slack N. ,

1987). According to Reichhart & Holweg (2007), if there are in-sequence delivery arrangements

this also includes the ability to make changes to the agreed delivery sequence. Batch and

especially jobbing companies are very much concerned with this type of flexibility (Reichhart &

Holweg, 2007). Volume flexibility is the ability to change the level of aggregated output. (Slack,

1987). According to Reichhart & Holweg (2007), this flexibility type is found important by

process and mass producers, rather than batch and jobbing companies. The ability to change

the range of products made within a given time period is called mix flexibility (Slack, 1987).

Reichhart & Holweg (2007) add that this change is within the existing product range. Finally,

product flexibility is defined as the ability to introduce new products, or to modify existing

products (Slack, 1987).

3.2 Gunasekaran, Lai, & Cheng: Information as a basis for responsiveness

A responsive supply chain (RSC) can be defined as “A network of firms that is capable of

creating wealth to its stakeholders in a competitive environment by reacting quickly and cost

effectively to changing market requirements” (Gunasekaran et al., 2008).


Gunasekaran et al. (2008) present a graphical representation of a responsive supply chain

(figure 2). They state that important factors in achieve a responsive supply chain are a network

of partnering firms, information technology and systems, and knowledge management.

Figure 2: Responsive Supply Chain (Gunasekaran, Lai, & Cheng, 2008)

3.3.1 Network of partnering firms

Gunasekaran et al. claim a network of partnering companies is important in achieving

responsiveness in a supply chain. This network of firms involves the relationship with suppliers,

but involving the customer is also important. An example of what may happen due to poor client

involvement is the bullwhip-effect. According to Lee, Padmanabhan, & Whang (1997) this effect

increases demand variability as it moves up the chain, and by doing so causes excessive

inventory, poor capacity utilization, uncertain production planning, poor service, and extra costs

due to expedited shipments and overtime. Information sharing and involving the supplier can

keep this variability low, and therefore decrease costs and enhance the accuracy with which

supplies are delivered.

Information lead times must be minimized, which together with the slashing of process lead

times and costs throughout the chain has the goal of establishing an „information enriched‟

competitive and responsive supply chain (Gunasekaran et al., 2008).


The application of internet in a supply chain will reduce service costs and most importantly lower

response times to customer requirements by the use of internet platforms such as the WWW

and e-mail. Information technologies such as Electronic Data Interchange (EDI) and Radio

Frequency Identification (RFID) improve the communication among partners to make it easier to

trace material flows (Gunasekaran et al., 2008). EDI is an extranet that facilitates a network of

information sharing between companies. Using RFID, items are tagged with unique numbers in

a memory chip or smart tag which provide the possibility to electronically track an item at all

time during its manufacture, distribution and storage (Slack et al., 2007).

3.3.2 Knowledge management

“The key point of knowledge management is to harvest the tacit knowledge residing in

individuals and make it a firm asset, rather than to only leave it in the heads of the particular

individuals” (Yang, 2010, p. 216). Intense information sharing and harvesting tacit knowledge

will result in flexible workers who know what is going on in the company, rather than workers

who can only work within their own job description. According to Gunasekaran et al., in a

responsive supply chain workers have to be trained and educated to operate in a global

environment.

3.3.3 Information technology and systems

Information technology (IT) and systems are important enablers of knowledge management and

a cooperating network of partnering firms. Internet-based shared information platforms are

applied in supply chains to improve communication among partners along the supply chain and

to make it easier to trace material flows (Gunasekaran et al., 2008).

3.4 Conclusion

When comparing the theory of Reichhart & Holweg with that of Gunasekaran et al., a noticable

difference is the fact that Gukasekaran et al. focus on information sharing and communication,

whereas Reichhart & Holweg are concerned with the flexibility of the production process.

Reichhart & Holweg focus on achieving operational excellence by being flexible, and using the

other partners of the supply chain to achieve that state. The main focus is on the

repsonsiveness dimensions of delivery, volume, product and mix flexibility.

Gunasekaran et al. want to achieve responsiveness by maximizing the sharing of information

and knowledge and optimizing cooperation across the entire network of companies that form the

supply chain, rather than by focusing on the flexbility of the processes of one company. Focal

factors are the network of partnering firms, information technology and systems, and knowledge


management. The interaction between these three will lead to a responsive and flexible supply

chain.

Although the theories have a different focus, they are not contradicting, and when they are

combined the result could be a more responsive supply chain due to a flexible production

system reinforced by intensive information sharing which enables quick response to situations

in the environment.


4. The results of JIT on responsiveness

In the previous chapter the important factors to achieve a responsive supply chain were

identified. More important for this thesis is to assess how supply chain responsiveness behaves

when JIT characteristics are present. In this chapter, the results of JIT implementation on the

important factors for responsiveness will be evaluated, resulting in an identification of possible

problems caused by conflicts of characteristics. The models of Reichhart & Holweg (2007) and

Gunasekaran et al. (2008) are the basis of this chapter.

4.1 Flexibility

4.1.1 Delivery flexibility

Delivery flexibility is the ability to alter agreed delivery agreements by for example shortening

lead times, or by even changing the products destination. Sometime it also includes making

changes to the agreed delivery sequence. Altering delivery agreements can cause problems in

a JIT company. Delaying a scheduled delivery after the production for a product has started

would cause inventory to arise, whereas requesting an earlier delivery than scheduled would

require a buffer, since the product should not be scheduled to be completed before the originally

scheduled delivery date. Lead times are supposed to be minimized, so speeding up production

even further is not an option. The disadvantage of wanting to be „just in time‟ is that production

starts as requested by the customer, at a certain point in time which results in the product being

finished and delivered at the scheduled delivery date. For the delivery date to be rescheduled,

the production sequence has to start earlier than scheduled originally, or later than scheduled

originally. Therefore, the last moment at which delivery agreements can be altered is the

scheduled delivery date minus lead time. The fact that lead times are minimal carries the

advantage that rescheduling is possible until a relatively short time before planned delivery,

depending on to what extent the management succeeded in reducing lead times.

However, even though delivery flexibility is limited, the responsiveness of delivery flexibility

before the production has started is adequate, since batch sizes are small and starting

production later than planned does carry severe consequences for the system as a whole. JIT

production is driven by demand and production is not planned according to a schedule (Harrison

& van Hoek, 2008), therefore altering the production initiation time is simple.

Reducing lead times will help in reducing the total amount of time a customer has to wait for his

product. This is because since production is demand-driven in a JIT process, the total time-to-


customer will ideally be equal to, but never less than the lead time. This means that short lead

times will help delivering faster and with more accurate delivery times. According to Harrison &

van Hoek (2008), this will result in higher speed with which is responded to customer needs.

In a JIT environment with short lead times, the customer can determine when he wants the

product, but the length of the lead time must be considered. However, when a product is made

to stock, lead times can become even lower and the ability to deliver an „emergency order‟

within the customer‟s time frame or alter delivery agreements will be less dependent on the

length of lead times, due to the buffer.

4.1.2 Volume flexibility

The ability to change the level of output is referred to as volume flexibility. According to Slack

(1987) this type of flexibility and delivery flexibility are interchangeable to some extent. Husseini,

O‟Brien, & Hosseini (2006) determine four system characteristics that are important for

achieving volume flexibility. These are (1) production flow (improve layout, flow of work), (2)

production control (improve control system capability), (3) lead time (reduce lead time), (4)

batch size (reduce batch size). As for these four characteristics, they all match basic JIT

principles. According to Monden (1993), JIT aims to realize a continuous production flow.

Furthermore, when JIT is implemented successfully, lead times should be reduced to a

minimum (Shah & Ward, 2003). Batch sizes are also ideally supposed to be 1 in a JIT

production system (Haan, Overboom, & Naus, 2009), which is as small a batch can get.

However, Husseini et al. (2006) found that there is a need for a more flexible kanban system to

facilitate higher volume flexibility, since regular kanbans do not provide sufficient volume

flexibility.

4.1.3 Mix flexibility

Mix flexibility is a type of flexibility in which JIT excels. In the car manufacturing industry where

the lean philosophy is implemented, one of the requirements of the production system was that

every car could be produced as specified by the customer. One Toyota car model, for example,

would have the same chassis for every car that leaves the production plant. However, if one

would pick two random finished cars, the chances are big that they will both have different paint

colors, different interior colors, different engines, different audio or navigation devices, etc. The

ability to do this is mix flexibility (Slack, Chambers, & Johnston, 2007). The responsiveness for

this flexibility type is high in JIT companies. Due to using many small machines, set up in a way

that they can be rearranged quickly, only a small amount of effort is required to alter the product

mix (Slack et al., 2007).


4.1.4 Product flexibility

Product flexibility takes goes a step further than mix flexibility, and refers to the ability to

introduce new products or change current products. Taking a car manufacturer as an example,

this would mean altering the production system to manufacture a new, revised version of an

older model or to manufacture an entirely new model. JIT is optimized to function in markets

with long product life cycles, and not prepared for rapid changes from the production of one

product to another.

4.2 Network of partnering firms

An important objective of JIT is to make goods flow through the supply chain smoothly, with

minimal inventory (preferably none), and right on time. Key in this situation is transparency and

intensive information sharing between buyers and sellers. Careful selection of suppliers and a

good relationship with customers is therefore important. When inter-company information

sharing is limited, JIT between internal and external organizations can never be optimal, as

transparency in planning is crucial (Harrison & van Hoek, 2008). Knowing this, JIT could be

considered to be a philosophy which positively affects the responsiveness of a supply chain,

since a well-cooperating network of partnering firms is something any JIT company will require.

In a JIT environment where the need for responsiveness exists, giving priority to the

establishment of a well-connection network of partnering firms is a must.

4.3 Information Technology & Systems

Gunasekaran et al. (2008) mention information technology & systems as a driver for supply

chain responsiveness. A part of this overlaps with the requirement of a network of partnering

firms, as the information system is intended to function throughout the entire supply chain,

including multiple companies. In addition to this, IT systems are needed to manage information

flows and minimize information lead times. However, Slack et al. (2007) argue that in JIT

planning and control do not rely on computer-based processing. Instead, kanban is used to

coordinate information flows. Although, they also state that, based on Lamming‟s (1993)

concept of lean supply, lean does depend on electronic data exchange between supplier and

customer (inter-company).

4.4 Knowledge management

As stated by Shah & Ward (2007), HRM is another bundle of lean management, and it is used

to facilitate JIT. They also say that some of the most commonly cited HRM practices are cross-

training programs, employee involvement, and job rotation. These are practices which aim to

share knowledge and skills between workers (cross-training and job rotation), which according


to Vairaktarakis & Winch; Ortega (as cited in Ragar, Rajan, & Saouma, 2009) can lead to

increased productivity by facilitating an information flow and collaborative problem solving.

Employee involvement aims to involve all workers in many company processes, which concerns

amongst others involving the staff in activities such as selection of recruits, ensuring high

quality, dealing directly with suppliers and customers, spending improvement budgets and

planning and reviewing work through meetings (Slack et al., 2007). The result is a bottom-up

structured organization, in which everyone contributes to a high quality final product and makes

sure the production process is working efficiently.

4.5 Characteristics of the industry

There are certain market condition requirements for JIT to function well in a specific industry,

among which are low product variety, long product life cycle, and cost as the main competitive

tool (Harrison & van Hoek, 2008). According to Storey, Emberson, & Reade (2005), Fast-

moving, volatile market conditions with short product life cycles have great implications for

production processes, the way companies are organized and the way supply-chains operate.

Functional products with predictable demand benefit from efficient supply chain processes, such

as lean, while products with a more volatile demand require more market responsive supply

chain processes that are focused more on speed and flexibility rather than cost (Fisher, 1997;

Aitken, Christopher, & Towill (2002), as cited in Storey et al., (2005).

JIT pull scheduling is good at handling stable demand, but not at predicting requirements for the

future. Especially for parts and products that are in irregular or sporadic demand (Harrison &

van Hoek, 2008). From this can be concluded, that when demand is more unstable, JIT

becomes more inaccurate in achieving supply goals and supply chain disruptions can occur. If

an industry does not meet the above requirements, JIT (or lean as a whole) may fall behind on

maintaining an adequate level of responsiveness. However, these requirements are no discrete

variables. Every industry is different and every customer may have different wishes.

4.6 Conclusion

In conclusion can be said that the „lean toolset‟ contains tools to provide a JIT production facility

with a certain degree of responsiveness. When considering the model by Reichhart & Holweg,

JIT philosophy provides a company with high mix flexibility. However, delivery, product, and

volume flexibility are only just sufficient for a JIT-suitable industry with stable demand and long

product life cycles. As these kinds of industries do not require high delivery, product, and

volume flexibility JIT does not need to provide it in most situations.


When considering the model for a responsive supply chain by Gunasekaran et al. (2008), the

conclusion is that JIT fits the requirements set in this model well. In order to prevent inventory

before and after production, JIT companies are used to intensive information sharing and EDI

with partnering companies. For this requirement for a responsive supply chain set by

Gunasekaran et al., no additional practices that could clash with JIT procedures are required.

As described in the relevant model, information technology and systems are present to facilitate

communication internally and externally. Furthermore, JIT uses the involvement of every worker

in the company as a basis for its implementation. Cross-training and sharing of common

practices is adopted in JIT companies, but also contributes to the knowledge management

requirement for the responsive supply chain.


5. Conclusions and recommendations

5.1 Conclusion

The adoption JIT provides several constraints regarding responsiveness maximization in a

supply chain. In situations where responsiveness is of strategic importance, JIT may limit the

company in achieving competitive advantage. The characteristics of the industry in which a

company operates proved to be restricting JIT companies in becoming very responsive. JIT is a

way of focusing on low cost by producing efficiently, in a market where demand is stable (and

smoothed if required) and product life cycles are long. The philosophy originated from an

industry with those characteristics, and developed itself in such a way that it functions very well

in the type of environment it belongs. JIT attempts to smoothen demand to enable the

production system to function better. Therefore, applying JIT in an industry where demand is

unstable and cannot me smoothed, and then attempting to become highly responsive makes no

sense.

When a JIT supply chain is required to become a highly responsive supply chain, there will be

conflicts. The power of JIT is efficiency, doing nothing more than needed with nothing more than

needed, with a high degree of mix flexibility. If a JIT company requires high responsiveness,

severe sacrifices have to be made. A responsive supply chain relies partly on delivery, mix,

product, and volume flexibility. For example, high delivery flexibility requires products to be

made to stock. This means one of the most „sacred‟ JIT principles has to be given up, because

buffer inventory is needed to make it possible to deliver within the lead time of one product.

However, certain characteristics of JIT are in line with the requirements of a responsive supply

chain. These characteristics refer to the network of partnering firms in which a JIT company

operates. There is a high visibility throughout the supply chain, which enables the company to

fine-tune incoming and outgoing logistics, minimizing chances of delays occurring in the

production process. The partnerships between companies are facilitated by information

technology and systems, which provides fast communication. Knowledge management, the

third enabler of the responsive supply chain according to the model by Gunasekaran et al., is

found important for JIT implementation in any company. The cross-training and involvement of

workers, as well as the partnerships and communication between companies in the supply

chain, functions as an enabler for a responsive supply chain.


JIT allows companies to have a responsive supply chain, but within boundaries. In markets

where demand is stable, JIT can provide a highly sufficient level of responsiveness by for

example quickly fulfilling customer wishes in terms of product specification. However, if volatility

in demand is causing complications concerning responsiveness, and as a result prevents the

company from delivering products exactly when they are required, JIT will not suffice. The need

for higher responsiveness will force companies to abandon JIT principles. In that case, JIT (or

lean as a whole) will probably not be the right choice for a particular company. Even if it may

accomplish other benefits from JIT production (such as a reduction in costs), maximum

responsiveness is probably achieved by another production system.

5.2 Discussion

The findings in this research are based on models for responsive supply chains which are

extracted from earlier research. Two models were used for this. The sources for these models

are high quality journals and the models themselves are based on high quality research from

the past. However, during literature review a conclusion was that there are many slightly

different definitions for responsive supply chain. Although many of these definitions focus on the

speed with which a supply chain can respond to market requirements, the opinions for the main

conditions for a responsive supply chain differ. This research is based upon two models, in

order to include multiple approaches. This is, however, no guarantee that no other relevant

factors are left out.

5.3 Recommendations

A recommendation to „JIT-companies‟ with a need for more responsiveness is to have a good

look at the situation. Priorities must be determined (low cost, high responsiveness) and review

the industry in which the company finds itself. If the market prioritizes high responsiveness over

low cost, it is worth considering abandoning JIT. In that situation, it may limit the ability of the

company to acquire a competitive advantage. However, if the customers in a market are mainly

driven by low prices but desire responsiveness as an additional benefit, a company should have

a critical look at how it scores on points which have been presented as relevant in this paper. It

is important to make sure responsiveness is maximized within the boundaries of JIT. Enhancing

these variables provides additional responsiveness. However, if low prices are priority JIT

principles must be respected and cannot suffer under the desire for a responsive supply chain,

as it would harm the efficiency of production. With low cost as the main driver for customers,

this is not allowed to happen.


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