Impact of just‐in‐time inventory systems on OEM suppliers

Abstract

Purpose To analyze the impact of the adoption of just‐in‐time (JIT) production systems by different equipment manufacturers (OEMs) on the inventory profiles of their suppliers. Design/methodology/approach The research is designed to examine five financial measures of inventory management performance over the years 1994‐2004. Three specific industry sectors where OEMs have adopted and implemented JIT principles are studied. These sectors include the automotive, electronics, and aircraft industries. A one factor analysis of variance is employed to the five hypotheses and Tukey's post‐hoc test is used to interpret statistical pairwise differences between level means. Findings Overall, the research finds that OEM suppliers in the automotive, electronics, and aircraft sectors have shown mixed results in the impact JIT implementation has had on inventory performance measures. Research limitations/implications The research focuses on three industrial sectors over approximately a ten year time frame that may limit its generalizability. Practical implications The processes that influence the reduction in inventory levels may be in fact more complex and strategic in nature than an OEM adopting a JIT inventory policy. In general, strategic changes within the supplier organization would have to drive process improvements that lead to inventory reductions. Originality/value The paper provides focused research in an area that has received little attention in the current literature and is very topical to all academics and business professionals interested or involved in the area of JIT systems.