The impact of Just-In-Time manufacturing philosophies on a firm's logistics system

Abstract

The ability of foreign competitors to exploit efficiencies in productive processes has stimulated reexamination of manufacturing philosophies among American producers. As a result, several U.S. organizations have successfully implemented the Just-In-Time (JIT) manufacturing philosophy as practiced by many Japanese firms. Many advantages accrue to the manufacturing process when JIT is implemented. Less clear, however, is the impact on the firm's logistics system. The objective of this research is to identify the impact of a JIT strategy on a firm's logistics system, and to identify operating conditions where JIT implementation does not adversely affect the logistics system. Annual logistics cost of a JIT strategy is compared to that of a theoretical optimal strategy and consolidation of inbound shipments is considered as a means of achieving transportation economies of scale in a JIT strategy. Fifteen parameters are used to identify inventory and transportation conditions of manufacturers and vendors. Using simulated data representing alternative business scenarios, paried t-tests are used to identify differences in annual costs between the strategies. Once the annual logistics cost impact of a JIT strategy is established, correlations are used to identify which cost components, transportation, inventory carrying, ordering, or expected stockout, are related to the differences between the annual logistics cost of the strategies. Those cost components that are correlated with the difference in costs between the strategies are then further partitioned to determine the cause of the cost differences. Next, correlations are used to identify the relationships between the fifteen inventory and transportation characteristics and the cost differences between the strategies. This will provide information for logistics decision-makers considering the potential impact of a JIT strategy. Finally, regression is used to develop equations that predict the effects of the fifteen inventory and transportation factors on the annual logistics cost differences between the strategies.