Purchasing in a JIT Environment:
from Buyer’s and
Supplier’s Perspectives
Instructor: Asst. Prof. Alper Şen
Student Name: Gökhan METAN
Student ID#: 98034700
Submission Date: 16/05/2003
1. Introduction
After the successes of many Japanese firms, JIT philosophy and practices have gained much
attention from both the researchers and the practitioners. In a broader sense, JIT philosophy
seeks for the elimination of wastes. Today, there are many firms employing the JIT
philosophy in their manufacturing practices. However, there is a distinction between the JIT
manufacturing and JIT purchasing [1]. JIT manufacturing composed of Japanese Kanban
production techniques, such as reduced manufacturing lot sizes, reduced manufacturing lead
times, and enhanced quality assurance programs, required to implement flexible
manufacturing processes. On the other hand, JIT purchasing refers to the frequent deliveries
of small lot sizes that facilitate inventory reduction of raw materials. The two JIT practices are
distinguished by many authors as it is defined above; however, there is a high level of
dependency between two JIT practices. That is, the success of any firm that employs the JIT
manufacturing strategies highly depends on the success achieved in JIT purchasing activities.
Thus, these two JIT practices are intertwined and since there are many firms that involve JIT
manufacturing activities, JIT purchasing is an important area for investigation.
There exist two aspects of JIT purchasing: from the buyers’ point of view and from the
suppliers’ point of view. In the literature some authors define the suppliers’ point of view as
JIT selling activities and JIT purchasing as the buyers’ point of view. However, in most of the
studies JIT purchasing stand for both of the parties’ perspectives and it is the case in this
report.
The characteristics of JIT purchasing differ from the traditional purchasing strategies and they
are summarized in Table 1. By utilizing the JIT purchasing principles, the main objectives are
to achieve reduced inventory holding costs, increased quality levels and increased utilization
among many others [2]. These are the most important potential benefits of the JIT purchasing
activities and researchers try to investigate these benefits from both the suppliers’ and buyers’
point of views. There is a debate between the researchers however, and the conflicts arose
from the sharing of the benefits and the costs of JIT purchasing activities. One group of the
researchers, called as the advocate school, defend the JIT purchasing strategy as opposed to
the traditional purchasing activities and propose that both of the parties, buyer and the
supplier, are better off if they implement the JIT concepts fully. The second group of
researchers, on the other hand, is called as the pragmatic school, suggest that JIT sourcing, in
theory, provides many benefits to the buyer, but many buyers in practice are not
implementing the requisites that are generally considered to be essential and resulting in a
number of problems for their suppliers, which in turn affect the buyer. They also propose that
the JIT purchasing philosophy only leads to increased costs for the suppliers due to the fact
that buyers tend to move the problems to the upstream of the supply chain. In other words, the
gain of some parties is a result of redistribution of costs among the members. The problem is
therefore to examine the benefits and the costs of JIT purchasing from both the suppliers’ and
buyers’ point of views. Unfortunately, most of the benefits that JIT purchasing promises are
hard to quantify and there is a lack of researches in the literature that examines these benefits
quantitatively. Most of the relevant literature is either descriptive in nature or depends on the
subjective measures such as the surveys conducted for the managers of the firms. Therefore,
there is no clear cut for the successful implementations of the concepts as well as their
benefits and costs.
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Table 1. Characteristics and differences of JIT purchasing & Traditional purchasing activities
Characteristics
JIT purchasing
Traditional Purchasing
Small and in exact quantities
Large
Lot Sizes
Number of Suppliers Single-sourcing (ideally one for Multi-sourcing
component or family of parts)
Supplier selection & Based on Quality and Delivery Based on solely on Price
Performance as well as Price
decision
evaluation
Performed at supplier’s facility
Incoming material inspection
Quality inspection
Design Specifications More freedom given to the Concrete specifications given
supplier
by the buyer
Short term relations and
Relations & Bidding Long term relations
frequent retendering
Standard Containers & low High packaging costs
Packaging
packaging costs
Reduced and informal
High level & formal
Paper work
The rest of this paper is organized as follows. In Section 2 the literature is reviewed. Section 3
is dedicated to the future research questions and intuitive answers to those questions based on
the previous knowledge gained. This section also includes some solution methodologies to the
proposed research questions. Section 4 concludes the research.
2. Literature
The paper by Schonberger and Gilbert [10] constitutes an important research in JIT
purchasing area. The paper is descriptive in nature but it fully explains the JIT purchasing
practices and their benefits for both the buyer and the supplier. Authors discussed the JIT
tactics and its strategic benefits as well as the applicability and the trends in US firms. It is
also an important point in the paper that the authors compare the traditional US tendencies in
purchasing activities with the JIT purchasing.
Lyons et. al. [7] stated the advantages and the disadvantages of JIT purchasing from both the
buyer’s and supplier’s perspectives based on the results of interviews performed with both
sides. Authors pointed out that buyers generally tend to neglect to mention about the
disadvantages of JIT purchasing and suppliers, on the other hand, marginally focus on the
advantages. They also discussed the potential benefits and risks of JIT sourcing from the
buyer’s and supplier’s perspectives. The benefits of the buyer include the reduced costs due to
the inventory and economies of scale, since there is a single supplier for an item purchased,
and improved quality. The risks of buyer, on the other hand, includes high level of
dependency to its suppliers, less supplier competition, loss of channel coordination with its
secondary suppliers and new sources of costs because of the responsibility to manage its
suppliers. Supplier’s benefits include R&D effectiveness, increased buyer support and closer
working relationships. Supplier’s risks mainly caused because of the pressures to improve and
expand the services and its associated costs.
Another research, which is descriptive in nature, is the work of Lummus and Duclos-Wilson
[12]. In this paper, important characteristics of JIT philosophy are discussed and JIT
purchasing activities are investigated. Authors proposed that most of the firms do not employ
the requisites of JIT, but they thought they implement JIT. They provide clues to managers in
this paper, which are important to achieve a successful implementation of JIT. One of the
most important observations of the authors is that if a supplier of a JIT buyer does not
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implement JIT in its manufacturing, supplier’s cost increases due to the shifted inventory to
the vendor’s side and this, in reaction, increases the purchasing cost of the manufacturer.
Hence, this will not be a JIT purchasing strategy, but rather it will only hide the physical
inventory of the buyer by shifting to the up-streams of the supply chain but not eliminate its
costs.
Ansari and Modarress [3] conducted interviews with four major US firms, GM, HP, Nissan
and Kawasaki, and identified the major activities of JIT purchasing that have significant
effects on product quality and productivity. According to the interviews, both managers
pointed out that small lot-size, smaller number of suppliers, supplier selection and evaluation
strategies (quality, delivery performance etc.), quality inspections performed at the suppliers’
plant, more freedom given to suppliers in the design specifications and no annual rebidding
are the most important activities of JIT purchasing that improves the performance of the buyer
in terms of quality and productivity. The study depends on subjective interviews and only
considers the buyers’ point of views. The importance of the study comes from the fact that it
highlights the vital activities of a JIT purchasing strategy.
Inman and Mehra [4] conducted a cross-sectional survey from 114 firms that employ JIT
purchasing activities and perform a statistical analysis (exploratory factor analysis, Pearson
correlation etc.) on the data obtained. Results indicate that the successful JIT implementations
also results in financial successes of that firms and authors concluded that the firms should
justify their JIT implementations and investments with their financial successes.
Karlsson and Norr [5] discussed the effects of JIT purchasing system from both the buyer’s
and supplier’s perspectives and provided two case studies from the Swedish industry, Saab
and Volvo. The case studies indicate that the suppliers benefit from the implementation of JIT
purchasing, as well as their buyers, Saab and Volvo. Authors suggest that in order to make
implementation of JIT a success, it is important that a close and long term cooperation is
developed throughout the whole chain, which is the case in the two case studies discussed.
Dong et. al. [6] proposed a model based on statistical hypothesis testing in order to investigate
the benefits of JIT purchasing for the buyer and the supplier. They performed a large survey
including the JIT buyers and the suppliers and tested five hypotheses where the hypotheses
relate the concepts of supply chain integration, JIT purchasing, supplier’s JIT manufacturing
activities and the logistics costs. Mainly the hypotheses investigate the influence of these
concepts on one another. Their results indicated that the JIT purchasing has direct benefits
only for buyers in terms of cost reduction. In addition to this, if suppliers adopt JIT
manufacturing techniques to them, suppliers too can benefit from the JIT purchasing activities
indirectly.
One of the other important researches in the literature investigates the inventory relationships
of supplier and the customer in a JIT environment [8]. Researchers performed a hypothesis
testing by employing customer (buyer) and supplier data from real world companies in order
to investigate the relationships between the supplier inventory (and buyer inventory) and the
other JIT independent variables such as delivery lot size, supplier manufacturing lot size etc.
Results indicate that there is a significant positive relationship with the supplier inventory and
the supplier manufacturing lot size. Also, significant positive relationship between the
customer inventory level and the delivery lot size as well as the manufacturing lead time of
the supplier is found.
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In the empirical study of Srinivasan et. al. [17], the impact of vertical integration via EDI on
the discrepancies of JIT shipments is investigated. Data is obtained from the suppliers of
Chrysler Motors. Among the 1600 vendors, 193 are randomly selected and information
containing 2746 shipments is utilized. Three different hypotheses aiming the examination of
the impact of EDI on the performance of supplier’s shipment are tested by different statistical
tools. Based on the results, it is found that the impact of EDI on the performance of supplier’s
shipments is highly significant under the JIT purchasing environment. According to this
result, authors suggested that firms employing the JIT purchasing activities should invest on
an EDI technology in order to prevent the possible discrepancies in the JIT shipments.
Another empirical study by Kekre et. al. [18] investigates the relationship between the quality
and the supplier availability. Data is obtained from the PIMS (Profit Impact on Marketing
Strategies) on 1078 businesses and relevant hypotheses are tested. According to the results
obtained, authors concluded that dealing with few suppliers significantly improves the quality
levels. Moreover, they said that single sourcing strategy is not appropriate for all firms and
products. Firms that face lower levels of competition, offer wider product lines, or undertake
frequent product changes are more likely to reduce their supplier base.
Another research by Freeland [13] depends on the subjective survey results from 60 firms.
Statistical tests are performed on the data obtained with a specific significance level.
Interesting results are reported in the paper and some of the important ones are the following:
(1) companies not implementing JIT purchasing activities are tended to be more job-shop,
make-to-order oriented, have less competition and experience lower inventory levels; (2) the
longer the JIT purchasing had been in place, the greater the benefits achieved; (3) quality is
the most important criterion in selecting the parts to be purchased on a JIT basis; (4) vendors
are required to carry more safety stock for items purchased on a JIT basis than for items not
purchased on a JIT basis. As it is also pointed out by [12], Freeland also pointed out this 4th
result due to the fact that suppliers, in general, do not implement the JIT techniques in their
manufacturing activities.
Other empirical studies include the Buvik and Halskau [19], Benito et. al. [20]. In [19], the
influence of the buyer on its suppliers is investigated based on the duration of the relationship
between these parties. According to the results, authors concluded that buyer has more control
on its suppliers if the duration of their relationship is not long enough. Furthermore, when the
duration of their relationship gets large, JIT-relationships develop over time and the influence
exerted by each partner becomes more balanced. Moreover, it is found in this research that the
supplier investments are positively correlated with the exercise of buyer control. In [20],
authors define the JIT practices in two categories: (1) operational practices such as Kanban
with suppliers, frequent deliveries, standardized containers etc.; (2) complementary practices
such as single supplier, long-term contracts, quality certification, supplier development
programs etc. Based on the results achieved by testing the relevant hypotheses, it is found that
there is a highly dependency between the two practices for the success of logistic-related JIT
purchasing practices.
Ramasesh [9] mentioned about the importance of comparison of the initial investment
required for switching to JIT purchasing and its savings through its implementation process.
The author pointed out the difficulty of obtaining mathematical forms of JIT model and adds
that it is also hard to determine the cost parameters of such a JIT model. Based on a simple
assumption, a modified version of EOQ model for JIT purchasing is presented and an
illustrative numerical example is provided. The formula proposed does not handle much of
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the important potential benefits of the JIT but it simply proposes a technique to decide on the
contract quantity between the supplier and the buyer and the number of shipments during the
contract period. The study mainly focuses on the buyer’s side and tries to analyze the
justifiability of the initial investment required based on the benefits achieved over the
traditional EOQ model.
There exists less number of researches that model analytically the JIT environment but one of
them is the study of Aderohunmu et. al. [11], which investigates the policies and their
associated benefits both for the buyer and the supplier. In this research authors aimed to
optimize the total chain cost (vendor’s plus the buyer’s) taking into account the ordering, setup, transportation and inventory holding costs in a JIT purchasing environment. They first
analytically derive the buyer’s and vendor’s independent costs, that is, where the buyer and
vendor do not exchange cost information. In this case, the results showed that the buyer
transfers some of its holding costs to its vendor and which, in turn, increases the costs of the
buyer and benefits of both parties are reduced. Then, they analytically derive the costs of
buyer and vendor, where, in this case, parties coordinate in terms of cost information
exchange. Results indicate that both parties benefit from this policy in terms of costs. In
addition to this, they analytically showed that a single lot size model for both the vendor and
the buyer, that is, manufacturing lot size of vendor equal to the delivery lot size to the buyer
reduces the benefits achieved in terms of cost reduction. An illustrative example with the
sensitivity analyses of the model parameters are also provided at the end of the paper.
Another analytical study about the JIT purchasing is the work of Fazel et. al. [15]. In this
study authors analytically compare the costs under the JIT purchasing and EOQ with a
quantity discount. The quantity discount scheme employed is the all unit quantity discount
and the authors aimed at investigating the impact of parameters such as demand level, holding
cost, and ordering cost on the performances of both two models. Authors justified the
importance of such a work by noting that most of the companies in the world are
implementing the EOQ model or the JIT purchasing strategy. Also, the analysis in this paper
assumes the scenario that manufacturer has to pay a somewhat higher price to buy an item on
a JIT basis, compared to purchases made based on EOQ. This assumption makes the models
more realistic, since many suppliers in real business faced with high inventory levels under
JIT because they do not employ JIT philosophy in their manufacturing activities and incur
some proportion of this cost to its customer by increasing the cost of the item. According to
the results of the analyses, based on the proposed models, authors concluded that EOQ results
in better performance for items with higher levels of demand. On the other hand, JIT model
gain competitiveness as the holding cost, or ordering cost increase, or demand for the
inventory item decreases. A break-even point for the models also provided, where both
models result in same cost.
After two years from the work of Fazel et. al., Schniederjans and Cao [16] expanded their
models by including an additional term for the JIT model. Authors stressed that quantity
discount model gives EOQ system the advantage of price break that is not available to the JIT
system and therefore no equally obvious advantage was given to the JIT cost function.
Therefore, authors modified the cost function of JIT model of Fazel et. al. and include an
additional term. This additional term is the cost advantage of JIT from the facility size
reduction that occurs because of the inventory storage and production areas as a result of
adopting a JIT system. They justified the existence and the significance of this gain by
referencing too many sources and noted that the percentages of facility size reductions vary
from 25% to 80%. They had presented a very easy method of quantifying this gain and added
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this advantage to the JIT model. After this modification, they compared two models again and
found that JIT purchasing model is always superior to the EOQ model with a price discount.
They analyze the numerical examples provided in the paper of Fazel et. al. with this new
setting. The break-even point of models shifted to a very large quantity even though just a 5%
gain from the facility space is assumed. Authors concluded that JIT purchasing always
superior to EOQ model at any level of annual demand and with almost ay cost structure. They
also noted that, as many other authors did, the theoretical nature of the economic costing
models do not consider many of the other advantages and disadvantages that a JIT system can
offer its users such as flexibility, quality and many others.
Also, there are two recently published survey papers in the literature. The former is the
Waters-Fuller’s paper [21] and the most recent one is the paper of Gunasekaran [2].
3. Research Proposals & Methodologies
Most of the disagreements among the researchers in the literature are caused from one issue.
One group of researchers proposes that JIT purchasing brings benefits to the buyer, and
additional costs to the supplier. They also told the reason as the transfer of buyer’s costs to its
suppliers. The other group, as oppose to this, proposes that JIT purchasing is beneficial for
both parties as long as they implement the prerequisites of JIT properly. They also add that
most of the failures of JIT purchasing caused because of the poor implementation of JIT
principles, especially by the supplier’s side. Since this is the source of debate, an important
research question arises. There are two benefits of finding an answer to this question. First,
the answer may unite the two opponents and second, according to the new insights gained
new sources that may cause the above problem can be investigated.
I have gained enough knowledge for two years about the JIT principles, concepts and
methodologies from my previous efforts including three project reports, related courses and
personal interest on JIT related issues, Kanban systems, JIT purchasing and so on. Therefore,
I have the ability to make some reasoning on the problem intuitively. Based on my previous
knowledge, there are two important aspects of JIT implementations. First one is called as the
JIT manufacturing activities and the second one is the JIT purchasing or JIT sourcing, where
the latter one is covered in this paper. In fact, it is impossible to isolate the two issues from
one another. There is a high dependency between the two which affects the performance of
the whole system and this is one of the reasons for why it is hard to examine the JIT
purchasing analytically. Also, note that, the other reason is the difficulty of quantifying most
of the costs and benefits of JIT. Since there is a high level of dependency between JIT
manufacturing and sourcing, implementation of one requires the implementation of the other,
at least to some extend. Hence, any firm that employs JIT purchasing should also switch its
manufacturing activities to JIT manufacturing. For example, a supplier which operates under
a JIT purchasing environment should utilize the setup time reduction concept. Otherwise,
manufacturing lot size of supplier exceeds its shipment quantity and this means excess
inventory and induce its inventory holding cost. From the buyer’s perspective, another
example would be the redesign of the manufacturing environment. That is, the buyer should
employ U-type assembly lines for example, which are more flexible than the traditional ones,
and have the opportunity to use cross-trained workers, which has impacts on utilization,
quality, and flexibility issues and so on. Hence, it seems intuitively correct that success of JIT
purchasing activity highly depends on the extend of the principles employed. Therefore,
according to my reasoning, both parties make profit from JIT purchasing, if they both
implement the JIT practices fully, especially in their manufacturing environments and this is
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what we can see in most of the success stories. However, there is one important question that
is not even considered by the researchers in the JIT purchasing area. From the researches on
JIT manufacturing, where the material flow is controlled by the Kanban system, it is known
for sure that JIT manufacturing is (because of Kanban system) optimal in low variability
environments. In other words, its performance is superior in repetitive manufacturing
environments. This aspect is not considered in JIT purchasing environment, especially for the
suppliers’ point of view. In most cases buyer have such a repetitive environment but suppliers
may not. Analysis in such cases should be carried out as well. Intuitively, if supplier has not
such a repetitive environment, which may occur especially in the highest levels of supply
chain (buyer’s supplier’s supplier), it is hard to implement JIT philosophy in the
manufacturing activities and this, I think, harm the supplier’s benefits.
It is, of course, hard to examine analytically the above questions but not impossible, at least
up to some extend. The most difficult part of such an analytical investigation will rise from
the quantifying the benefits achieved directly and indirectly. Direct benefits may also be
quantifiable when compared to indirect benefits, as well. I will try to explain what I want to
mean by direct and indirect benefits by an example. As an example for direct benefit of
improved quality, we can say that as the quality is improved, the cost of the product decreases
since no more defective items are processed, manufactured and wasted. As an indirect benefit
of quality, on the other hand, as the quality of purchased items improved, the variability of the
system is reduced and therefore utilization of the system is increased, customer satisfaction,
reliability of the firm are improved, need for service (cost) for the sold defective items is
reduced and so on. As it is obvious, for just quality issue, there are lots of promised benefits
and most of them, especially the indirect ones, are hard to quantify. However, the direct ones,
which include least dependency with the other system parameters, can be utilized for
analytical investigation. For example, again by referring the previous quality example, the
direct benefit of improved quality (reduced processing and manufacturing cost) can be
quantified and one way for achieving this would be the following:
Ρ: expected proportion of defectives in a batch of M units under non-JIT purchasing
environment.
p: expected proportion of defectives in a batch of N units under JIT purchasing environment.
S: total number of batches required annually under non-JIT purchasing environment.
s: total number of batches required annually under JIT purchasing environment.
C: cost of a finished product to the buyer ($/item)
c: cost of a purchased product to the buyer (raw material) ($/item)
D: cost of the finished product to the supplier ($/item)
IC: inspection cost of a batch of M units under a non-JIT environment (for buyer) ($/batch)
ic: inspection cost of an item under a JIT environment (for supplier) ($/item)
λ: proportion of the batches rejected under a non-JIT environment
Then the cost improvement of the buyer annually would be,
B= [IC * S ] + [(1- λ)*P*M*S*{(C+c)/2}] – [N*p*s*{(C+c)/2}]
(EQ-1)
and the cost difference for the supplier would be:
S= [λ*S*M*D] – [p*N*s*D] – [(ic)*s*N]
(EQ-2)
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In the first equation, the first term is the buyer’s total inspection cost in a non-JIT
environment, the second term is the cost incurred because of the loss from the processing and
manufacturing of defective items that couldn’t detected at the inspection step of incoming
materials under non-JIT environment. The last term of first equation represents the cost of
processing and manufacturing of defective items under JIT environment. Thus, the difference
is the cost improvement achieved by switching to a JIT environment due to the quality
improvement from the buyer’s perspective. Of course, this is a roughly derived equation and
(C+c)/2 stands for the average cost of defective items on the system. That is, it is assumed
that it is equally likely that the product can be detected to be defective at any point throughout
the manufacturing process and the value added to the product until the product is finished
increases linearly. The first term of the second equation is the total cost of products returned
as defective to the supplier under non-JIT environment. Second term is the cost of defectives
to the supplier under JIT environment and the third term is the total inspection cost incurred to
supplier since quality inspection is carried out by the supplier at all. Also note the following
relationships between the above parameters:
P*N < P*M
N<M
S<s
D<c<C
IC>ic
Since under JIT quality is assumed to be increased.
Since under JIT purchasing small batch deliveries is one of the targets.
Assuming the total demand is constant (Q=N*s=M*S) for both operating
conditions with small batch size JIT requires more deliveries.
or
IC<=ic
we can not exactly assume one of these relationship a
priori since IC depends on the sample size taken from the M units of batch, the
efficiency of techniques used for inspection by supplier and buyer and other
issues.
If we analyze the second equation (EQ-2), supplier’s cost difference, the equation is
simplified as the following:
S= [λ*S*M*D] – [p*N*s*D] – [(ic)*s*N]
 S= D * { [λ*S*M] – [p*N*s] } – [(ic)*s*N]
 S= D * { [λ*Q] – [p*Q] } – [(ic)*Q]
 S= D*Q* { λ – p – (ic)/D }
(EQ-3)
From the last equation (EQ-3), one may easily conclude that if { λ – p – (ic)/D }> 0, supplier
benefits from JIT purchasing, in terms of quality improvement practice of JIT, even the
inspection is moved to the supplier’s site.
If we analyze the first equation (EQ-1), buyer’s cost difference, the equation is simplified as
following:
B= [IC * S ] + [(1- λ)*P*M*S*{(C+c)/2}] – [N*p*s*{(C+c)/2}]
 B= [IC * S ] + [(1- λ)*P*Q*{(C+c)/2}] – [p*Q*{(C+c)/2}]
 B= [IC * S ] + [Q*{(C+c)/2}] * [(1- λ)*P – p]
 B= [Q*{(C+c)/2}] * [(1- λ)*P + IC/(M*{(C+c)/2})– p]
(EQ-4)
where IC/M is the average inspection cost per item and (C+c)/2 is the average lost per item
due to processing and manufacturing of defective items, and the bold written term in
Equation-4 is the proportion of those. The first term of EQ-4, [Q*{(C+c)/2}], is always
positive and if the remaining part is also positive, then buyer benefits from JIT purchasing.
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Moreover, from the literature, we know that quality improvement always benefits the buyer
and this means that this term is always positive. Therefore, even if the EQ-3 results in
negative value, buyer may compensate the loss of its supplier by sharing some of its gain with
its supplier to encourage the JIT purchasing activity.
As best as my knowledge allows me, there is no such research that considers such a quality
related analysis. The above analyses are not difficult to carry out and such direct benefits
should be analyzed. In fact, indirect benefits may require more complex derivations and
should be considered as second-generation analyses. Hence, derivations like the one presented
above should be the target of theoretical studies of the future.
In the literature, as I mentioned in the previous section, empirical studies based on hypothesis
testing are very popular. Although the results of such studies are not strong as the results of
theoretical studies, they fill the gap of insufficient theoretical base of the concept, and
moreover, include very valuable information about the parameters of the system. In other
words, the ranges of improvements for the parameters such as percentage of quality
improvement achieved, percentage decrease in the material handling operations etc. by
switching to a JIT environment can be estimated from such studies exist in the literature.
These may help the analyses and their sensitivity of theoretical researches. Therefore, as
another research area, I propose the estimation of the ranges of such parameters by the
empirical methods and studies, which may provide valuable insights.
In the literature, simulation based studies are not encountered during the literature review
process. Among the relevant papers reviewed, there is no reason stated for this situation.
According to me, there are two reasons for this case. The first reason is because of the
characteristics of the problem, that is, it is difficult to construct a simulation model for
Kanban managed JIT environment. In most of the recent papers about Kanban systems,
simulation is employed and problem specific subroutines are constructed in order to handle
the system characteristics, which is a costly issue. The second reason is caused because of the
lack of estimates of parameter ranges which are required to construct experimental designs. In
the previous paragraph, I mentioned about the importance of estimating the parameters’
ranges. This may open the gates of simulation based studies, which is especially important to
examine the performance of JIT purchasing system in nonstationary environments.
Theoretical studies in nonstationary stochastic environments for JIT purchasing are almost
impossible to carry out and simulation is widely used to examine the performances in such
environments (from the knowledge gained on Flexible Kanban Systems).
4. Conclusion
In this paper JIT purchasing is studied from both the buyer’s and supplier’s perspectives.
Relevant literature is first reviewed and research questions are proposed. Intuitive reasoning is
carried out and methodologies are proposed. JIT purchasing became a popular concept for the
industry and the academicians in the last decades. Most of the large firms apply JIT
purchasing for most of their outsourced products, subassemblies and raw materials. There is a
large literature about the subject but, unfortunately, there is an absence of theoretical work.
Hence, there is a debate between two groups both in researchers and practitioners about the
benefits and costs of the philosophy. Therefore more quantitative results are a need for this
area.
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JIT purchasing may not be beneficial for all firms, especially the ones that are subject to high
levels of variability. However, there is no clear cut for which firms should implement JIT
purchasing and which should not. There are many descriptive studies that provide clues to the
managers for implementing or not implementing the strategy, but not enough quantitative
analyses. According to my intuition, JIT purchasing is beneficial for most of the firms that
implement all the prerequisites of JIT philosophy fully.
References
[1]
Dong, Y., Carter, C. R., Dresner, M. E., “JIT purchasing and performance: an
exploratory analysis of buyer and supplier perspectives”, Journal of Operations Management,
Vol. 19, 2001, pp. 471-483.
[2]
Gunasekaran, A., “Just-in-time purchasing: An investigation for research and
applications”, International Journal of Production Economics, Vol. 59, 1999, pp. 77-84.
[3]
Ansari, A., Modarress, B., “JIT purchasing as a quality and productivity centre”,
International Journal of Production Research, Vol. 26, No. 1, 1988, pp. 19-26.
[4]
Inman, R. A., Mehra, S., “Financial justification of JIT implementation”, International
Journal of Operations & Production Management, Vol. 13, No. 4, 1993, pp. 32-39.
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