IJOPM
15,9
220
International Journal of Operations
& Production Management, Vol. 15
No. 9 1995, pp. 220-236. © MCB
University Press, 0144-3577
Just-in-time purchasing and
supply: a review of the
literature
Niall Waters-Fuller
Department of Management Studies, Napier Business School, Napier
University, Edinburgh, UK
Introduction
Most authors agree that the objectives of just-in-time ( JIT) are to eliminate
waste and to improve the flow of materials, so value is added throughout the
transformation process. Once this is achieved, costs can be reduced, quality
improved and the firm becomes more flexible: in short, JIT implementation,
according to its supporters, results in competitive advantage.
Since the pioneering article by Sugimori et al.[l] there has been a plethora of
literature on the subject, describing the principles, objectives and techniques of
JIT. The interest generated in the subject may be explained by the radically
different approach taken by JIT compared to traditional production
management trade-off analysis[2]. Nevertheless, much of the literature relating
to JIT, according to St John and Heriot[3] focuses on the manufacturer and the
implications for the manufacturer. There are consequently many case studies of
known adopters such as Toyota, Kawasaki USA, Hewlett-Packard, and General
Electric[4-9].
To date there have been a number of literature reviews which have tended to
concentrate on the background and principles of JIT as well as the operational
changes required[10-13]. However, one of the operational changes that has
received scant attention to date is that of JIT purchasing and supply. This
article seeks to provide such a review. There is some literature on the subject of
“Co-makership”, “Partnership” and “World class suppliers” which overlaps the
JIT purchasing/supply literature[14-16]. The basis for co-makership is much the
same as for JIT sourcing, but may or may not involve the small lot delivery
concept[14]. However, this review will concentrate on JIT sourcing only.
Authors[l 7-19] estimate that purchased materials and services account for
between 50 per cent and 80 per cent of the total cost of a manufactured product,
and it is further estimated that suppliers account for 30 per cent of the quality
problems and 80 per cent of the product lead time[19-20]. Not only does
this provide considerable scope for cost reduction, but, according to
Manoochehri[21] successful application of JIT depends to a great extent on
suppliers, since with little or no safety stock in the system, the timing, quality
and quantity of deliveries are vital. Also, Ansari and Modarress[22] suggest
that JIT efficiency is primarily achieved through the complete support and
co-operation of suppliers, while De Treville[23] places much of the blame of the JIT:
JIT implementation failure at General Electric’s Wilmington plant (one of the purchasing and
few published accounts of a JIT implementation “failure”) on vendor problems. supply
JIT delivery has also been described as a crucial route to survival for companies
in the 1990s[24].
This article initially categorizes the literature and outlines the main schools
of thought. Next, the major JIT sourcing practices are reviewed in light of the 221
different schools of thought. The next section outlines the potential benefits
achieved through JIT sourcing implementation, the suggested movements in
power and responsibilities and the problems associated with it. Finally, future
avenues for research are explored.

The literature
Zipkin[25] describes two schools of thought within the JIT literature, which he
calls romantic JIT and pragmatic JIT. Romantic JIT uses more rhetoric, and
“promises a factory where workers and suppliers will be in harmony and ‘goods
will flow like water”’[25, p. 42]. Pragmatic JIT concentrates on the production
processes and provides “tools” to overcome problems. The literature pertaining
to JIT sourcing contains the two schools of thought suggested by Zipkin, as well
as a third: those totally opposed to the strategy.
The first group of authors advocate the use of JIT sourcing and suggest that
it is a better strategy for making sourcing decisions than the traditional forms
of purchasing. This group have been labelled the advocate school. The second
group take a more pragmatic view and suggest that JIT sourcing, in theory,
provides many benefits to the buyer, although many buyers are not
implementing the practices generally considered to be essential, which creates a
number of problems for the supplier, which in turn affect the buyer.
Consequently, they have been labelled the pragmatist school. The final category
take the opposite view and suggest that JIT sourcing practices leave the firm
open to supply disruption and non-competitive prices. These authors have been
labelled as the sceptical school.
The advocates are by far the most popular school, and this literature contains
many accounts of either success in implementation (in the form of survey
evidence or case evidence) or conceptual models. These articles outline the basis
for JIT sourcing, namely to streamline material flows, reduce manufacturer and
supplier costs, increase quality and service and to create long-term
relationships with chosen suppliers[17]. There is little disagreement within this
literature over how these objectives are met and what exactly JIT purchasing
activities are. Ansari and Modarress[26] list the following activities as major
JIT purchasing practices:
● small purchase lot sizes, delivered in exact quantities compared to
traditional large batch delivery within 5 per cent volume either way;
● few suppliers, ideally one per component or family of parts rather than
multi-sourcing;
IJOPM ● supplier selection and evaluation based on quality and delivery
15,9 performance as well as price, rather than solely a price decision;
● quality inspection is performed at the supplier’s facility unlike
traditional incoming inspection practices;
● design specifications are looser and more freedom is given to the supplier
222 in meeting the specifications;
● no annual rebidding compared to traditional frequent retendering;
● packaging is changed to encompass standard containers;
● paperwork reduces and becomes more informal.
Other authors have suggested that, in addition to the above, there are other
practices which are labelled as being JIT purchasing techniques. These include:
● deliveries synchronized with buyer’s production schedule[21,27];
● geographically close suppliers[21,27-29];
● improved data exchange[21,27,28].
The pragmatists sit between the other two schools. The benefits of JIT sourcing
are acknowledged, although the authors are more sceptical of the scale and
scope of benefits. The scepticism is based first on the means of measurement of
the benefits, both in terms of causality and a uniform means of comparison. The
second issue is that of shifted responsibilities (and hence costs) from the buyer
to the supplier. However, this responsibility shift is countered by authors
suggesting that this is due to either poor implementation by buyers or suppliers
failing to adapt their strategies to the new relationship. This issue will be dealt
with in more detail later in the article.
The sceptical school is relatively small, and bases its arguments on the basis
that JIT sourcing encourages closer, more long-term relationships with
suppliers, which is seen as an inefficient form of sourcing, and can lead to the
supplier charging prices which are not competitive. The sourcing decision is not
based on the free market, and is therefore less efficient than traditional market-
based sourcing strategies[30]. By utilizing short-term contracts and multiple
sources of supply, the buying firm can ensure that they are paying the lowest
price for their materials and components. This view however, is countered by a
number of authors. Ansari and Modarress[22] cite empirical evidence indicating
both tangible and intangible benefits derived from JIT sourcing, while Sako[31]
provides a detailed defence of co-operative relationships, concluding that they
are in fact more efficient than the more adversarial approaches of traditional
strategies. However, these authors present a number of more specific
arguments, primarily concerned with the issues of sole sourcing and long-term
contracts, which will be addressed later in this article
The next section deals with the main aspects of JIT sourcing. The main
points of debate are not over which practices constitute JIT sourcing, but which
practices are effective in contributing to the firm’s competitive position. The
more prevalent purchasing practices are discussed in more detail below.
Single sourcing JIT:
Single sourcing is an area of debate within the literature. Ansari and purchasing and
Modarress[26] suggest that the ideal number of suppliers for each material, or supply
class of materials is one. Therefore, according to the advocate school the use of
sole sources eliminates waste and improves quality. Single sourcing
concentrates on reducing the supply base by using fewer but more capable
suppliers[17], thereby ensuring that the buying company becomes an important 223
customer to the supplier, reinforcing good buyer/supplier relationships.
Manoochehri[21] argues that utilizing multiple sources of supply increases the
difficulty of managing the co-ordination of production schedules and
relationships, and that more suppliers result in increased cost and time spent in
development and training as well as being less practical for small lot delivery.
Further, Arnold and Bernard[32] state that single sourcing allows the supplier
to achieve internal scale effects, enter into long-term contracts and also achieve
synergy effects through organizational co-ordination.
The sceptical school comment that sole sourcing increases the risks of supply
disruption and further leaves the buyer open to paying non-competitive
prices[33]. Ramsey[34] and Quayle[35] both conclude that the combination of
single sourcing and inventory reduction throughout the supply chain is highly
risky for the UK because firms become more vulnerable to supply disruption,
even though it may be a rational model for the Japanese (due to differences in
business culture and the state of labour relations). Newman[36] suggests that
the single sourcing policy may be creating long-term problems through loss of
technological thrust, loss of supplier identity and excess control.
In practice, some firms compromize by utilizing a second source. However,
the policy of dual sourcing can cause some supply problems if there are
fluctuations in the delivery schedule. Harrison and Voss[37] describe just such
a case, where dual sourcing led to an increase in demand variability for the
supplier and hence increased costs.
There are two approaches commonly used:
(1) The second source may be an existing supplier who receives some split
in the volume requirements or it may involve setting up a completely new
source[36]. Westbrook[38] comments that a Japanese firm studied has a
policy of having two suppliers for each part, each supplying 50 per cent
of the volume.
(2) The other approach to reduce the supply disruption risk is to cross
source, whereby the customer utilizes duplicate or potential capacity on
the part of the suppliers. This reduces the risk of single sourcing while
maintaining all the advantages of a small supply base[36].
A further debate exists over the extent to which a supplier should dedicate
capacity to a single customer. Research findings by Rainnie[39] indicate that
customers generally limited themselves to taking no more than 30-50 per cent of
a sub-contractor’s business for fear that the dependency would limit the
efficiency of the relationship. This is backed up by a survey of suppliers to
IJOPM Japanese car assemblers in the UK, which found that none had more than 25 per
15,9 cent of output going to Japanese firms[40]. This runs contradictory to the view
proposed by Schonberger[6] that the supplier should ideally be dedicated to one
customer.

Long-term contracts
224 The debate over long-term contracts includes all three schools of thought. The
advocate school suggests that JIT purchasing seeks to cement the relationship
with its chosen suppliers by awarding long-term contracts in return for the
demands the buyer makes on the supplier. The long-term relationship with the
supplier encourages loyalty and reduces the risk of an interruption to
supply[41]. The contract will usually be extended unless the supplier fails to
keep the exacting standards set by the buyer, and, barring a complete
relationship breakdown, the vendor will continue to supply the customer for
future products[40]. The long-term contract eliminates the re-tendering costs,
promotes reclaiming capital over an extended period, helps build the
relationship and ensures that costs are reduced in the long-term through
repetition. Suppliers help customers to grow and succeed in the marketplace in
order that all members of the supply chain (including themselves) benefit[21].
The sceptics suggest that the award of long-term contracts can lead to the
buyer becoming out of touch with market prices, losing creativity and
enterprise and increasing switching costs associated with changing an
unsatisfactory supplier[30,33 ].
The pragmatists argue that there are few long-term contracts being
awarded[42], although there is some survey evidence suggesting that OEMs are
beginning to increase the number of multiyear contracts awarded[43,44].

Total quality suppliers

There is little debate over the need for total quality suppliers: all three schools
of thought agree on the need for quality parts, as poor quality parts can halt the
manufacturer’s line as there are no buffer stocks held by the customer. Instead,
the debate centres on the means for assuring that suppliers deliver quality
products to the manufacturer. The vendor must deliver total quality products
and responsibility is placed on the supplier to achieve and sustain total quality
through quality at source for all parts delivered JIT. Raia[45] points out that
some companies count missed delivery windows, missing paperwork, incorrect
labels etc. as defects or quality faults. Suppliers who fail the quality
requirements will not supply JIT manufacturers: quality is no longer an order-
winning criteria, rather an order-qualifying criteria[3,46].
In order to ensure quality many firms certify their suppliers. Most supplier
evaluation schemes possess two features: a quantitative measure of quality,
usually based on the number of accepted lots; and a qualitative evaluation
conducted at the supplier’s plant[41]. Frequently, selected suppliers will be
quality certified by the customer, as long as they attain and maintain set quality
standards, although this can cause suppliers problems, especially if there is
more than one certification programme being carried out[47]. Certification JIT:
programmes of vendors eliminates the need for incoming inspection[48], purchasing and
thereby reducing cost.
General criteria used to select and evaluate suppliers emphasize quality, long-
supply
term relationships and co-operation, delivery performance, geographical
location and price structure. More specifically, according to Carr and
Truesdale[40], the certification process at the supplier’s facility will look at 225
planning, tidiness, appearance, level of activity, how machines are running and
workforce professionalism. It will also look at the number, influence and calibre
of engineers; as well as management attitudes, technical capabilities and
delivery reliability.

Dependable deliveries
Again there is no debate over the need for dependable deliveries. There is wide
agreement that dependable deliveries are vital in a system where buffer stocks
have been removed because the failure of a supplier to keep to a delivery
schedule could close a line. Rather, the debate focuses on the logistics of the
buyer-supplier interface and the need for, and size of, buffer inventories.
The customer is able to reduce buffer stocks when there is sufficient
confidence in the supply relationship with vendors[29], although Hay[49] points
to the use of “strategic inventory” until both supplier and customer approach
perfection regarding defects, variation, lead time and flexibility. Das and
Goyal[50] comment that reducing the delivery lot size results in an increase in
the frequency of delivery and therefore having a dependable source of transport
is essential for the JIT supplier. This may include increasing the size of the
supplier-owned fleet (the need for excess capacity is a common occurrence
within all JIT systems) or engaging the services of a dependable carrier.
There are two forms of integrating suppliers into JIT supply, directly or via a
warehouse[51]:
(1) Directly. This is the ideal solution, where the supplier delivers directly to
the customer’s plant. The precondition for this is that suppliers must
receive comprehensive planning and scheduling data before production
commences.
(2) An interposed warehouse. This is the second best option and involves
interposing a warehouse between the supplier and the customer, thus
providing buffer stock. The warehouse may be owned and financed by
either party or by a contract carrier and may be located on the buyer’s
site[52]. Fieten[51] recommends that the inventory is jointly financed
although it is normally maintained at the supplier’s cost.
However, deliveries can be subject to unforeseen delays such as traffic
congestion, poor weather conditions or vehicle breakdown which can cause
delivery problems for suppliers through slowing down the delivery or causing
the delivery to be late, although a survey of US JIT purchasers[22] indicated
that suppliers are willing and able to hit delivery windows set by the buyer.
IJOPM Kant and Grenoble[53] provide a model which determines the required buffer
15,9 stock to be held in case of delayed delivery.

Small lot sizes

There is no debate over small lot delivery, because, as Schonberger and
Ansari[41] state, small lot sizes, whether manufactured or purchased, is a
226 hallmark of JIT. The literature concentrates instead on the logistics of getting
small frequent batches to the manufacturer at least cost. As a consequence of
small lot delivery, frequency will increase and therefore transportation costs
will increase. A number of solutions have been suggested to get round the
problem of increased transportation costs. The first concept is that JIT
suppliers be located close to the customer. Second, that an interposed
warehouse be constructed, as described above. Another scheme is the milk
round collection where a contract carrier visits a number of supplier sites and
collects small quantities from each. The end result is a full load from a number
of suppliers[15]. A fourth scheme is that the supplier company supplies a
number of components to the customer. The supplier can therefore still send a
truckload (and therefore reduce the transportation costs) of small quantities (of
different part numbers). Finally, it is possible to trade-off between the expected
costs of small lot delivery (increased transportation costs) and the savings
(reduced inventory carrying costs), which is reflected in Ramashesh’s[54] lot
sizing model.
Higginson and Bookbinder[55] comment that JIT systems require precision in
terms of timing and quantity, and go on to state that under certain
circumstances rail transportation would be preferable to road. O’Neal[43]
agrees with Higginson and Bookbinder regarding the need for precision and
control over the mode of transport used although the results of his survey
indicate rail freight is being phased down in favour of motor freight. He also
notes a shift from utilizing common carriers to using contract carriers.

Exchange of data
The debate over data exchange concentrates on the issue of implementation.
The advocate school suggest that to make JIT purchasing more effective there
needs to be a full exchange of data between the supplier and the customer and
vice versa. The exchange of data can include schedule changes, design
modifications, engineering changes, quality or delivery problems or costings,
thereby increasing supplier responsiveness to change[37]. Waller[56] describes
Electronic Data Interchange (EDI) as a key to successful JIT in that it aids in
pushing inventory back up the supply chain. Carter and Frendenhall[57] define
EDI as direct electronic transmission, computer to computer of standard
business forms (such as purchase orders, advanced shipping notes, invoices
etc.) between two organizations.
The pragmatic camp suggest that the promised improvement in
communication has not occurred. A study by Millen[58] has suggested there is
no direct link between EDI implementation and JIT, and Rainnie[39] concludes
that even though the number of suppliers has fallen as manufacturers rationalize JIT:
the supply base, communication between the remaining ones and the customer purchasing and
have not improved. supply
Reduce supplier costs
The debate over reducing supplier costs centres on the issue of implementation
rather than the principle. The advocate camp point out that JIT purchasing 227
relies on one or a small number of suppliers for any part hence the volume of
business to each supplier will increase. The customer expects to benefit from
this increase in volume through reduced prices over time and the absorption of
inflationary increases by the supplier. Nevertheless, the pragmatic school note
that the customer is supposed to aid the supplier in implementing cost
reduction schemes, which will result in lower prices being passed onto the
customer. However, in practice, many suppliers feel that they “…do not receive
much assistance in reducing costs or adopting new techniques”[59].

Stable schedules
The issue of stable schedules is critical to waste elimination, and is another area
of debate over implementation. Both the advocate and pragmatic camps note
that the JIT manufacturer should be progressing towards level, mixed model
assembly[6], and once this is achieved a level schedule can be provided for
suppliers. Manufacturers cannot expect suppliers to meet delivery date
requirements without a stable schedule[60], otherwise the increased burden of
holding costs is incurred.
The pragmatic school report instances of non-level schedules and the
implications for upstream suppliers. Harrison and Voss[37] studied a JIT supply
relationship within the UK automotive industry and found that the supplier was
carrying excess stock due to the customer operating within a volatile market
which resulted in schedule instability. Turnbull[61] suggests that suppliers bear
the brunt of demand instability through labour changes or stocking policies,
while the manufacturer suffers little disruption. Further, survey evidence[27]
indicates that less than one fifth (17 per cent) of OEMs had frozen the schedule
while over a quarter (26 per cent) had no frozen period at all.
According to Forrester[62], the factory production rate fluctuates more
widely than actual sales rate, hence the disturbance is amplified further up the
supply chain. There is therefore a need to reduce demand amplification for the
total chain and to this end, Wikner et al.[63] propose five methods of damping
the supply chain, the most effective of which is information flow requiring the
supply chain to be operating as an integrated flow. The authors conclude that
with effective design only one level of the supply chain need provide buffer
stock which will fluctuate with the market. On the basis of this model therefore,
it would not be possible to have an entire supply chain operating JIT. This,
however, contradicts Lovell’s simulation model[64] which concluded that an
economy running on a JIT basis may be more stable than a conventional
inventory economy.
IJOPM JIT purchasing benefits
15,9 JIT purchasing is an important part of the overall JIT programme and can
produce benefits of reduced lead times, reduced inventories, improved quality,
improved lead time reliability, reduced material costs and improved
flexibility[19]. According to Ansari and Modarress[26], product quality and
productivity have substantially improved through JIT purchasing, although
228 these vary with the period of implementation.
The pragmatic school note that most of the benefits cited within the literature
have been achieved by the purchaser and all quantified benefits have been at
the purchasers’ side of the supply relationship. There is no literature
quantifying benefits achieved by JIT suppliers, although some authors note
normative advantages. Nevertheless, the advocate school suggest that both
parties benefit from the JIT exchange. Martell[65] claims the benefits to
suppliers are increased profits through improvements in product and process
design, increased capacity utilization, long-term contracts, favourable payment
terms, greater visibility and access to the customers’ expertise. Others[66] cite
benefits for suppliers as increased R&D effectiveness through closer ties with
the OEM; allowing a better focus on the R&D effort, increased buyer support
through more assistance from buyers and a closer relationship resulting in
better information flows and more influence. Other supply side benefits alluded
to include reductions in finished goods and WIP carrying costs and increased
control of finished goods inventory through steady and predictable
shipments[29]. Studies[22,26,41,45,67] have shown that JIT purchasing has
achieved the following benefits for the buyer:
● reduced raw material stocks by 50 per cent;
● increased inventory turnover by 97 per cent;
● reduced scrap by 40 per cent;
● increased supplier quality 26 per cent;
● reduced supplier costs 11 per cent.
Further benefits include drastic improvements in delivery promises met, design
and productivity improvements, reductions in delivery lead time and reductions
in the administrative burden. According to Turnbull[61], the move towards JIT
sourcing offers all the advantages of vertical integration but with the added
advantage of flexibility and without the cost disadvantages. Romero[68]
comments that the benefits of JIT purchasing are instantly obtained and
maintained over a long term with relatively little investment. Zipkin[25] and
Inman and Mehra[69], however, warn of taking these improvement figures
without accounting for factors such as business cycles, mergers, time frames
and the state of the firm prior to implementation.

The shifting of responsibilities and power

The pragmatic school suggest that JIT sourcing pushes responsibilities and
costs from the manufacturer to the supplier[39]. Specifically, the supplier
becomes responsible for quality, delivery, packaging, design and inventory. It is JIT:
the final area which seems to cause most distress to suppliers, but, in general, it purchasing and
seems that most of the costs are the suppliers’ and most of the benefits are the supply
customers’[50]. This may well endanger the spread of JIT applications because
the supplier has to bear increased set up, holding and distribution costs[70]. Not
only are there increased quality, design, transportation and inventory costs for
the supplier, but there is also an increase in the transaction costs, especially in 229
the early stages as the participants adapt to the new relationship[71]. There will
also be costs associated with personnel training and development as well as the
purchase of specialist equipment (by the supplier).
As well as there being a shift in responsibilities, there is also a shift in power
through the implementation of JIT. Wilkinson and Oliver[72] adapted
Marchington’s[73] model of strategic positions within organizations, which he
claims are dependent on pervasiveness, immediacy and substitutability, i.e.
how far through the organization any disruption will be felt, how quickly it will
be felt and the ease of substituting resources. Within JIT environments there is
little in process buffers, therefore, should there be a disruption in supply, it
would result in a complete and fast disruption of the line. Further, sole sourcing
reduces the ease of substituting suppliers: the buyer becomes less powerful
while the power of the supplier is enhanced. Therefore, according to Vail[2] the
system is at the mercy of the goodwill of resource suppliers. To overcome this
Wilkinson and Oliver suggest creating mutual dependency, resource abundance
and homogeneity of goals and interests; reducing the motivation rather than the
ability of suppliers to exercise their power. Frazier et al.[71] comment that the
supplier may well have to invest in new plant, new warehousing facilities or
new delivery vehicles thereby increasing the switching costs and ensuring
dependence on the buyer.

JIT purchasing problems

The greatest problem encountered by the customer, according to Ansari and
Modarress[67] is lack of support from suppliers. The authors go on to list the
major problems of JIT sourcing:
● lack of support from suppliers;
● lack of top management support;
● low product quality;
● lack of employee readiness and support;
● lack of support from carrier companies;
● lack of engineering support;
● lack of communication.
A number of authors suggest that the lack of supplier support is due to poor
implementation of JIT purchasing. A survey of US automotive suppliers
IJOPM conducted by Helper[59], indicated that most suppliers had implemented JIT
15,9 delivery “mainly because our customers demand it”; less than a third of
suppliers thought JIT does anything other than “transfer responsibility for
inventory from customers to the suppliers”; and customers rarely provided
level schedules. The survey also showed that most suppliers were
manufacturing in lot sizes greater than the JIT delivery batch and were
230 stockpiling thereby increasing inventory levels. Helper also states that US auto
makers have reacted in one of two ways to the demands of JIT delivery. First,
they cut off suppliers who fail to provide the new terms for free or second, they
seek to establish a long-term relationship and hence cost reduction. These
actions are a far cry from the win-win relationship promised by the advocate
school.
According to Schonberger and Gilbert[29], JIT purchasing provides benefits
to both the customer and supplier in terms of lower material costs, higher
productivity and improved quality. Under traditional practices the supplier
produces over time and stores the product. Large lots are then shipped to the
customer who stores them until use. By implementing small lot production
both buyer and supplier can reduce inventory costs. However, a popular view
held by OEMs, and promoted by Schonberger is “The most apparent benefit of
JIT buying is, as one Kawasaki buyer put it ‘working off someone else’s
inventory”’[29]. Not surprisingly therefore, there are many reports of JIT
suppliers being forced to hold inventory for their customers[21,27,37,50,60,
61,64,68,70,75,76]. A supplier to the UK automotive industry[77] claims “JIT
has been used as a myth on which to hang the transfer of the responsibility for
stockholding to another point in the supply chain – anywhere so long as it
doesn’t cost the assemblers money”. This inventory shift occurs if there are
fluctuating schedules or if the lot size required is less than the suppliers’ EOQ
in which case the supplier will have increased costs either in the form of
increased production costs or increased inventories.
However, Hall[7] argues that this is a misconception; inventories may
temporarily be shifted to suppliers but the long-term goal is inventory
reduction throughout the supply chain. Schonberger and Gilbert[29] state that
the supplying plant does not need to carry much buffer stock unless they sell
capacity to other plants, in which case buffer stocks would be necessary to
maintain JIT deliveries and therefore JIT purchasing works best if the vendor
supplies to one customer.
O’Neal[43] provides some evidence of shifting costs. He found a marginally
significant difference in answer to a survey question on the subject of
suppliers’ inventory levels. Twenty-two per cent of OEMs considered that
suppliers held a higher level of finished goods, 30 per cent held the same level
of finished goods and 48 per cent held a reduced level of finished goods. O’Neal
agrees with Hall and explains it by suggesting that it is simply an intermediate
event needed while the suppliers come to terms with their new responsibilities.
The OEMs surveyed suggested that supplier levels of finished goods would be
lower within five years (82 per cent). However, it must be noted that the survey
was conducted with OEMs and not the suppliers themselves, so the data can be JIT:
considered secondary and the OEMs have an interest in suggesting that purchasing and
inventory levels will diminish. supply
In order to gain the full benefits of JIT supply, the supplier should extend JIT
up the supply chain, so that the costs can be passed on; in some cases the OEM
is persuading second tier suppliers to implement JIT[78]. It is not always
possible for small firms to ensure their vendors supply JIT and they often find 231
themselves caught between giant customers and giant suppliers[77]and
therefore squeezed by both, or they find that the extra cost of small lot
delivery is prohibitive[79]. Arnold and Bernard[32] note that suppliers who
remain in business may not share in the overall benefit subsumed by the
dominant member of the chain owing to lack of influence. The pragmatists
therefore suggest that the customer should bear some of the increased expense
and reduce the planning uncertainty by increasing data flow[70] or the
manufacturer should try to assess the extra costs incurred by the vendor[50].
Further problems arise as a result of OEMs not implementing all aspects of
the philosophy. Rainnie suggests that purchase decisions are still based mainly
on price, there are too few long-term contracts, and competitive bidding is still
common.

Further research
There is considerable scope for further research within the broad area of JIT
sourcing, particularly on system wide benefits and supplier-perspective
benefits. This research would benefit from utilizing a number of research
methodologies from modelling to quantitative and qualitative approaches.
There are areas of potential research in taking a system-wide perspective of
the JIT exchange. In theory, inventory is removed from the supply chain,
although some suppliers suggest that their inventory levels have increased.
Future research could investigate whether inventory has indeed been removed
from the chain, or simply re-distributed to other, upstream members of the
chain. These suppliers will be able to hold inventory more cheaply than the
manufacturer, hence the system-wide inventory cost may be reduced. However,
some authors suggest that the further upstream in the supply chain, the
greater the fluctuations will be following market changes. Suppliers may
therefore be holding a greater quantity of inventory, leading to an overall
increase in the inventory cost within the supply chain. The result of this is that
either the members of the supply chain absorb the increased costs through
reduced margins, with the long-term implications of reduced investment, or
pass the costs on to customers through higher prices. Further, the response
time to changes in demand would be expected to increase the further upstream
the inventory is held.
There are further avenues of research which could concentrate on supplier
benefits of entering into the JIT exchange. There have been few studies
conducted on the supplier perspective of the exchange, and those which have
been done cite a number of problems. These problems could be either due to
IJOPM poor implementation by buyer and supplier, or a more fundamental flaw within
15,9 the theory. Research by Baxter et al.[42], Rainnie[39], Helper[59], Turnbull[61]
and Karlsson and Norr[80] suggest that it is more a matter of poor
implementation than theory flaw. The former four studies suggest more
negative outcomes, although the latter study outlines the benefits achieved by a
supplier delivering JIT. This approach could be broadened to the entire supply
232 chain in order to first assess the extent to which JIT has been diffused within
the supply chain and second to assess the benefits attained by each echelon.

Conclusion
There is little, if any, disagreement over exactly what JIT purchasing practices
are. Principally, JIT purchasing requires small but frequent deliveries of total
quality parts from single sourced, local suppliers, with whom there is a close
relationship rounded on mutual dependency and frequent communication.
There is some disagreement within the literature on a number of issues.
First, there is a body of literature which suggests that traditional purchasing
practices of short-term contracts and multiple sources of supply is a more
effective form of purchasing for the manufacturer. Firms which engage in long
term, sole source relationships, open themselves to purchasing at above market
prices, increase the risk of supply disruption, may fall behind the competition
in terms of technological innovation and will incur expense should a switch of
suppliers become necessary. These arguments are countered by other authors,
who suggest that the closer form of relationship which is formed through JIT
sourcing is more rather than less efficient. There are operational criteria cited
indicating improvements in inventory turns, supplier responsiveness and
quality, while others point to the strategic implications of JIT sourcing
achieved through the long-term mutual dependency relationship forged
between customers and reliable suppliers[29].
The second source of disagreement stems from implementation problems.
Some authors note that a number of OEMs claim to embrace the JIT
philosophy, but fail to implement the more difficult aspects, such as long-term
contracts, sole sourcing, data exchange and levelling schedules. This confirms
an earlier study by Voss and Robinson[81] who concluded that firms tended to
implement the easier aspects of JIT, rather than those which would produce the
greater return. There is also a body of literature which highlights the problems
caused by JIT sourcing. Predominately these are caused by lack of supplier co-
operation, which may be due in part to the shifting of responsibilities (and
costs) from the buyer to the supplier, especially in terms of inventories.
Inventory is shifted due to widely fluctuating schedules, inability of the
supplier to change to small lot production or the inability to implement JIT
purchasing themselves. Further problems are caused by a lack of
communication and a resistance by buyers to abandon competitive bidding
and price first selection criteria.
JIT purchasing is an important aspect of any firm’s overall JIT programme
and it is therefore vital to address the problems preventing successful
implementation. Consequently, there is a need for further research within the JIT:
field to identify the benefits attained by the supplier and the factors affecting purchasing and
those benefits. A number of potential avenues for such research have been supply
presented above. This will encourage more suppliers to offer JIT supply and
will further promote internal changes in both the OEM and the supplier’s
organizations. Once these problems have been addressed, all members of the
supply chain can benefit through reduced costs, improved quality and 233
increased flexibility, i.e. competitive advantage.

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