The effect of JIT on supply chain responsiveness
Transcript of 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
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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.
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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
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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
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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.
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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
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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.
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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).
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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.
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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).
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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.
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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.
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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).
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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).
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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
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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.
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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-
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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).
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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
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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.
21 Bachelor Thesis J.C.J. de Veth
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.
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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.
23 Bachelor Thesis J.C.J. de Veth
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.
24 Bachelor Thesis J.C.J. de Veth
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