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Focus on management history

Just-in-time: the reincarnation of past theory and


practice

GoÈran Svensson
VaÈxjoÈ University School of Management and Economics, and
GoÈteborg University, School of Economics and Commercial Law, Sweden

Keywords reducing costs, increasing productivity,


Just-in-time, Organizational theory Introduction maintaining profitability, and so on. For
Abstract Many of today's widespread managerial example, car manufacturers have been
Many widespread managerial concepts have been introduced and treated as striving to reduce, and in some cases
concepts are expressed as new-to-the-world. However, this is mostly eliminate, inventories (e.g. sequence
abbreviations of two or three deliveries which almost lack inventory
due to ignorance or a lack of knowledge.
letters. In addition, they have
often been introduced and treated Despite the fact that the accumulated buffers between the supplier and the car
as new-to-the-world by both knowledge on the subject in literature is very manufacturer's assembly plant), reducing
scholars and practitioners. For often enormous, for some reasons it is often the number of subcontractors used (e.g. from
example, just-In-time (JIT) is a multiple sourcing to single sourcing per
either forgotten or hidden. Sometimes, these
managerial concept that has been
concepts have been heavily promoted by component or material), and the sharing or
heavily promoted in the world-wide
automotive industry. Its underlying business people, consultants, consultant diffusion, partly or totally, of manufacturing,
principles have been implemented agencies and so on. Unfortunately, the true assembling, research and development of
by most car manufacturers or car new materials and components (e.g.
origin of managerial concepts is seldom
assemblers for many decades. JIT,
revealed. outsourcing). These trends have to a certain
as a phenomenon, has been
named differently at different There have emerged various managerial extent contributed to an increasing
times during the last century. concepts at different times in the past and interdependence between firms in the
Therefore, the newness of JIT and marketing channels of the automotive
new ones are certain to emerge in the future.
its underlying principles is
Most of them are expressed as an industry. The trends have also implicated a
questioned in the article. The
article describes parts of the abbreviation of two or three letters, for movement of responsibility upstream, where
historic evolution of JIT during the example just-in-time (JIT). JIT signifies a the different functions performed on the car
twentieth century in literature. It
continuous search for waste reduction and to manufacturers' assembly line in the past
is concluded that JIT is just a
make only what is needed ``just in time'' have now been transmitted to sub-
reincarnation of past theory and
practice. (Toyoda, 1987). It is a concept that has been contractors. Rainnie (1991, p. 3) states: ``JIT is
frequently promoted and has attracted firms highly vulnerable to breakdown and relies to
and their executives in many different a large extent on pushing responsibility for
industries. Its underlying principles have quality control down the line to sub-
been widely implemented in the world-wide contractors''.
automotive industry. By many practitioners, Much of the material published about JIT
and some scholars, JIT has been regarded as focuses on the manufacturers' perspective
an innovative and new-to-the-world concept. (John and Heriot, 1993), as joint ventures
Like many other recent managerial concepts, between General Motors and Toyota
JIT is suffering from the absence of roots in (Newman and Rhee, 1990), Toyota (Monden,
literature. The objective of this article is 1983; Ohno, 1988), Ford (Deal, 1985) and others
therefore to describe the historical evolution (Ansari and Modarress, 1988) such as Buick,
of JIT in literature from the beginning of the Hewlett-Packard, Nissan and Kawasaki. A
twentieth century. The contents of the article number of reviews are published about JIT
are supported by references in literature (e.g. Sohal et al., 1988; Cheng, 1990; Goyal and
from the beginning of the twentieth century Deshmukh, 1992; Singh and Brar, 1992;
until today. Waters-Fuller, 1995), which describe and
Because of the keen competition in the picture the meanings, applications and
automotive industry, car manufacturers models of JIT. Comparisons are also made
have been searching for different means of between JIT and conventional concepts.
Management Decision Hence, publications about JIT may be
39/10 [2001] 866±879 classified in several areas (Goyal and
The current issue and full text archive of this journal is available at
# MCB University Press Deshmukh, 1992), namely publications that
[ISSN 0025-1747] http://www.emerald-library.com/ft
treat JIT as a philosophy (e.g. Sugimore et al.,
[ 866 ]
GoÈran Svensson 1977; Monden, 1981a, b; Schonberger, 1982; create situations where executives sub-
Just-in-time: the reincarnation Sohal et al., 1988), publications that treat the optimise their business efforts (Kailash and
of past theory and practice implementation of JIT within different areas Campbell, 1991).
Management Decision and activities (e.g. Lee and Ansari, 1985; In literature, there are many
39/10 [2001] 866±879
Ansari, 1986), publications that present interpretations of JIT, some of which are
mathematical models of JIT (e.g. Fellers, described later in this article. Initially, in
1984; De Treville, 1987; Gupta and Gupta, order to clarify its meaning to some extent,
1989) and other areas within JIT. These latter one might state that JIT embodies a
include set-up times (e.g. Lee and Seah, 1988), philosophy of excellence to establish demand-
quality aspects (e.g. Schonberger, 1982; pulled inventory practices that produce
Monden, 1983), manufacturing units (e.g. products to design specifications at a rapid,
Monden, 1983; Ohno, 1988) and buyer/seller smooth, delivery rate with no idle inventories,
synchronisation (e.g. Hall, 1983; Schonberger no unnecessary lead-times, and increased
and Gilbert, 1983; Manoochehri, 1984; Lee and employee involvement in the marketing
Ansari, 1985). There are also publications channel (Fogarty et al., 1989). Thus, JIT is a
that compare JIT with traditional systems commonly used concept, whose significance is
(e.g. Gelders and van Wassenhove, 1981; Rice normally referred to as the removal of waste
and Yoshikawa , 1982) and other JIT-systems and to make just what is needed, in order to
(e.g. Kim, 1985; Spearman et al., 1990). Thus, add value through the supply chain. This may
implementation of JIT is well documented in lead to reduced costs, to improved quality and
literature (Sohal et al., 1988). However, the to flexible companies, which in turn may
lack of a clear and concise definition of JIT create competitive advantages in the
implicates a limitation in the ability to marketplace (Waters-Fuller, 1995).
develop mathematical models (Goyal and It should be noted that JIT is not an
Deshmukh, 1992; Sohal et al., 1988). At the academic concept or a concept created by
same time, there are few publications that consultants, but was a concept created at
focus on the interdependence between firms Toyota Motor Company (e.g. Toyoda, 1987;
in the marketing channels that JIT may Sohal et al., 1988; Singh and Brar, 1992; Ohno,
cause (De Treville, 1987). 1988) in order to manage its internal
Consequently, it may be stated once again activities and the relationships to sub-
that JIT deals with the minimising of waste contractors as efficiently as possible (Heiko,
and the manufacturing of only what is needed 1989). An interesting comparison might be
``just in time'' (Toyoda, 1987) in the marketing made to two other managerial concepts,
channel and in the processes of namely ``supply chain management'' and
manufacturers (Greene, 1987). It does not ``efficient consumer response''. The former
necessarily mean to speed-up the production was founded in the beginning of the 1980s by
rhythm, but that the production contains scholars (Oliver and Webber, 1982), the latter
fewer disruptions, fewer disturbances, being defined by a consultant agency (Kurt
improved quality, and so on (e.g. Porteus, Salmon Associates, 1993). This is a concept
1986; Hay, 1987; The Industrial Robot, 1984). widely promoted and used by them and
JIT is a matter of achieving an improved flow- others in the grocery and retail industry (e.g.
through in the processes of production (Hall, Coopers & Lybrand, 1996; GEA Conulenti
1983) or as Stalk (1988, p. 41) expresses it: Associati di Gestione Aziendale, 1994,).
Today, time is on the cutting edge. The ways The concept of ``just-in-time'' may also be
leading companies manage time ± in
interpreted as ``at the last minute'', which is
production, in new product development and
introduction, in sales and distribution ± well in accordance with the ideas of the
represent the most powerful new sources of originator Kiichiro Toyoda (Toyoda, 1987).
competitive advantage. Another similar concept is ``just-in-case'',
which should not be interpreted as JIT, but
However, there is a risk that the inventory as a precursor. It was the western world's
reduction increases the inventory volume traditional approach to manage the supply
upstream in the supply chain (Berry, 1982), chains or the marketing channels (e.g.
and therefore it is of vital importance to Nelleman and Smith, 1982; Rajan and de
watch the totality of JIT. The marketing Treville, 1987). Thus, JIT is basically a kind
channel should not only focus on isolated of stockless production technique or on-the-
parts (Manoochehri, 1984). There are a road inventory philosophy.
number of studies that have shown great
savings within different areas as a result of
JIT (e.g. Lotenschtein, 1986; Hay, 1988), but
few of these studies, if any, consider the
Other related managerial concepts
totality of the marketing channel. The In order to broaden the perspective and to
managerial habit of using blinkers may position the concept of JIT in a wider context,
[ 867 ]
GoÈran Svensson references to some other managerial integrate distribution channels did not work
Just-in-time: the reincarnation concepts that basically have the same well and stated:
of past theory and practice underlying ideas as JIT are made. These We needed a new perspective and, following
Management Decision concepts might also be seen as managerial from it, a new approach: supply-chain
39/10 [2001] 866±879 management (Oliver and Webber, p. 64).
and pragmatic imitators to the concept of JIT
and its underlying principles. Oliver and Webber (1982, p. 66) also argue
A further development of the JIT that SCM is different to traditional materials
philosophy is quick response (QR), which is a and production management in four respects,
concept that has its origin within the namely:
American textile industry. QR might also be . . . it views the supply chain as a single entity
seen as an imitator of JIT. QR is defined, for rather than relegating fragmented
example, by Stern et al. (1996, p. 176) as: responsibility . . . It calls for ± and in the end,
. . . the application of just-in-time concepts depends upon ± strategic making . . . provides
throughout the entire supply pipeline, from a different perspective on inventories . . .
the manufacturer to the final consumer, management requires a new approach to
provides the capability to reorder systems: Integration, all simply interface, is
merchandise as it is sold. The data-collection the key.
and recording capabilities of bar-code
technology and the ability to communicate Another more concise definition of SCM is
those data throughout the supply pipeline via formulated by Ellram and Cooper (1993, p. 1):
electronic data interchange are the tolls An integrating philosophy to manage the total
needed to build a Quick Response system. flow of a distribution channel from supplier
to ultimate customer.
Supply chain management (SCM) and supply
chains are two other concepts that have been ECR is another concept which is used in the
popularised in recent years. They are also world-wide grocery and retail industry. The
closely related concepts in relation to JIT. first existing definition of importance, in
Christopher (1992, p. 12) writes about the literature, was originally established by Kurt
concept of the supply chain: Salmon Associates (1993, p. 1):
The supply chain is the network of The ultimate goal of ECR is a responsive
organisations that are involved, through consumer-driven system in which
upstream and downstream linkages, in the distributors and suppliers work together as
different processes and activities that business allies to maximise consumer
produce value in the form of products and satisfaction and minimise cost. Accurate
services in the hands of the ultimate information and high-quality products flow
consumer. through a paperless system between
manufacturing line and checkout counter
Other authors use the word ``pipeline'' to with minimum degradation or interruption
describe supply chains. Coyle both within and between trading partners.
et al. (1996, p. 1) write: Since the beginning of the 1990s, there have
. . . there is a recognition that companies are
been many proposed definitions. One of these
usually part of a ``pipeline'' or supply chain
that brings a product to the ultimate user. In is from Coyle et al. (1996, p. 8), who define
its simplest context, the supply chain ECR thus:
involves a company's vendors and direct ECR is an attempt to increase the velocity of
customers. The supply chain perspective inventory in the package goods industry
ultimately recognizes that all three parties throughout the supply chain of wholesalers,
are, in a sense, partners in bringing a product distributors, and ultimately to consumers. To
to market. be successful, the ECR approach will have to
eliminate most of the forward buying
Many years ago, Banbury (1975) used the practices of large wholesalers and retailers,
concept of supply chain: which have led to large inventory
The distribution system is the final link in the accumulations in that industry.
chain of supply from generator to consumer,
but while it may be the last link it is by no At the time of its arrival and diffusion to
means the least important. An individual Europe, other definitions started to appear.
supply may be small and insignificant in cost For example, ECR Europe (1995), which is an
itself, but to the consumer it is all important European association, working in favour of
with some 13 million consumers in Britain the diffusion of ECR in the European retail
the total expenditure on the distribution industry and amongst their executives,
system is highly significant. defines the concept concisely as:
Working together to fulfil consumer wishes,
Oliver and Webber (1982) might be seen as
better, faster and at less cost.
the founders of the concept supply chain
management (SCM). In a study performed in These definitions contain a strong consumer
the US, Japan and Western Europe, they perspective and this is still the core idea of
concluded that traditional approaches to ECR.
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GoÈran Svensson As a result of the definitions presented, one the efficiency of the channel (Alderson, 1954).
Just-in-time: the reincarnation might conclude that JIT, in some parts, is a The point of departure may also be what
of past theory and practice
forerunner and related to other managerial creates independence for firms (Blau, 1964).
Management Decision concepts like QR, SCM and ECR. Although In a marketing channel, activities are
39/10 [2001] 866±879
there are differences, the underlying core specialised and there is a functional
ideas of the various concepts are very much distribution between firms (e.g. Bucklin,
the same, as for example, in terms of a 1966; Alderson, 1954). The dependence
holistic perspective, demand-driven systems, between firms may be explained by the fact of
market and consumer orientation, waste the division of labour (e.g. Stigler, 1951; Stern
reduction, and pull approach. and El-Ansary, 1992). Nowadays, firms in a
marketing channel strive to satisfy the
ultimate consumer or as Steudel and
Theoretical framework Desruelle (1992, p. 2) express it:
In essence, being world-class means being
JIT is strongly associated to marketing capable of bringing products to the
channel theory. A marketing channel and a marketplace that offer better value than the
supply chain have a vertical emphasis, so competition . . .
that horizontal matters are not usually
Generally, there is a mutual dependence
included. Therefore, the theoretical
between firms in a marketing channel (e.g.
perspective in this article of JIT in marketing
Alderson, 1957, 1965; McCammon and Little,
channels is supported by and limited to
1965; Stern, 1969). Existing interdependencies
channel theory (e.g. Weld, 1916; Bucklin,
create a necessity for co-operation between
1966). At the beginning of the twentieth
firms, in order to achieve individual and
century, scholars utilised economic
sometimes mutual goals.
foundations to analyse how a distribution
The supply chain which is a part of the
channel could be structured more efficiently
marketing channel should be regarded as a
for the eventual benefit of the ultimate
single entity (Alderson, 1965), a super-
consumer (Sheth et al., 1988). Different
organisation (Stern et al., 1996) or a social
principles may dominate activities
system (Balderston, 1964) consisting of a
performed in the marketing channel. For
number of interdependent firms that are
example, the principle of postponement (e.g.
involved in the task of the distribution of
Alderson, 1950), which might be described as
products to the ultimate consumer. However,
a pull approach, and the principle of
the problem is not to design a marketing
speculation (e.g. Bucklin, 1965), which might
channel or a supply chain theoretically, but
be seen as a push approach. However, the
to make it work practically (Stern et al., 1996,
holistic approach of the marketing channel
p. 281):
and supply chain is of major interest (e.g.
. . . the job of a channel manager is not done
Culliton et al., 1956; Brewer and Rosenzweig, when that optimal channel is designed; the
1961) in today's competitive marketplace in manager now has to make that channel work!
many industries. There is no guarantee that the optimally
Different circumstances in the designed channel will actually operate
environment may create dependences in a successfully.
marketing channel or a supply chain. In
The selection of a marketing channel and its
literature, various theoretically paired
logistic system becomes of vital importance
concepts are of interest, for example power/
for the presence or absence of dependence in
dependence (e.g. Cartwright, 1959; Emerson,
a marketing channel (Magee, 1960). To put
1962), risk/uncertainty (e.g. Knight, 1921;
the matter in a nutshell (Coleman and
Ganesan, 1994), and reliability/availability
Jennings, 1998, p. 63):
(e.g. Sandler, 1963; Frankel, 1988). There are
. . . management is only as strong as the
some other concepts too that could be of weakest link in its supply chain . . .
interest, for example, conflict (e.g. Lusch,
1978; Rosenberg and Stern, 1971), control (e.g.
Pfeffer and Salancik, 1978), and exchange (e.g.
The essence of JIT
Blau, 1964). However, the essence of this
article is on the dependence between firms in Based upon the theoretical framework
a marketing channel, that is, in a JIT context. described in the previous section, JIT applies
Traditionally, channel literature has to a certain extent to the principle of
concentrated on vertical dependencies postponement (e.g. Alderson, 1950; Bucklin,
between firms in the marketing channel. A 1965). For example, activities are postponed
marketing channel consists of a number of to latest possible point in time to reduce costs
actors or intermediaries that take part in the (e.g. Alderson, 1950). Alderson (1957, p. 424)
exchange process, since they may improve states:
[ 869 ]
GoÈran Svensson One general method which can be applied in too late. Monden (1981a, b) defines JIT as the
Just-in-time: the reincarnation promoting the efficiency of a marketing idea of producing the necessary units in the
of past theory and practice system is the postponement of differentiation necessary quantities at the necessary time.
Management Decision . . . the principle of postponement requires Rao and Scheraga (1988) comment that JIT is
39/10 [2001] 866±879 that changes in form and identity to the latest an approach to production management that
possible point in the marketing flow;
can yield enormous productivity increases,
postpone changes in inventory location to the
inventory reductions, and quality
latest possible point in time.
improvements. Schonberger (1982) states that
This principle is based on the fact that a firm JIT is manufacturing without inventories,
outsources activities to others in the and the elimination of waste. Shingo (1984)
marketing channel (Stigler, 1951), without looks at it slightly differently. JIT is a system
affecting the total outcome of the channel to eliminate everything that is not necessary,
negatively. These functional and JIT signifies that each process should be
interdependencies might be seen as the provided with the right components, the
foundations of the holistic approach (Culliton right quality and at the right time. Vollmann
et al., 1956; Brewer and Rosenzweig, 1961). et al. (1988) focus on JIT as a philosophy of
From time to time interdependencies are pursuing zero inventories, zero transactions,
emphasised in terms of JIT. Culliton et al. and zero disruptions. Finally, De Treville
(1956, pp. 64-5) use ``the total cost concept'' (1987) identifies four categories of JIT,
and Brewer and Rosenzweig (1961, p. 70) use namely:
the concept of ``rhochrematics'', which 1 JIT flow control only;
means: 2 flexible resource allocation;
. . . the science of product or materials flows. 3 disruption and learning; and
The term is connoted to mean scientific or 4 all JIT elements.
systematic approaches to the management of
materials flows (Brewer and Rosenzweig, In literature, the richness of different
1961, p. 70). definitions is overwhelming. Thus, published
definitions of JIT are often given different
A JIT system should be regarded as a holistic meanings. However, two main components of
vertical approach or system. the definitions seem to appear repeatedly,
namely, a continuous search for waste
reduction and to make only what is needed
Definitions just in time. This is well in accordance with
In order to catch a more profound and the concept's original definition (Toyoda,
comprehensive picture of JIT, some 1987).
definitions are presented. In literature, there
are many interpretations of JIT, and in order
to clarify its meaning different definitions of Objectives
JIT are reviewed. For example, Christopher In the same way that the meaning of JIT is
(1992) comments on JIT that it is both a unclear and ambiguous in literature, the
technique and a philosophy. He also writes: objectives of JIT are nevertheless very much
It is based upon the simple idea that wherever
dependent upon the author. For example,
possible no activity should take place in a
Aggarwal (1985) sees JIT's core objectives as
system until there is a demand for it. Thus no
products should be made, no components obtaining low-cost, high-quality, and on-time
ordered, until there is a downstream production. Hall (1983) writes that the
requirement (Christopher, 1992, p. 153). objectives of JIT are a stockless production
and an elimination of waste. Monden (1981a,
Hence, JIT applies to a so-called pull strategy. b) defines the goals as the reduction of costs
Another definition is collected from Ballou surrounding production processes, and the
(1992, p. 153), who defines JIT as: system also helps to increase the turnover
A philosophy of scheduling wherein the ration of capital. Rao and Scheraga (1988)
entire supply channel is synchronized to
comment that the purpose is to eliminate all
respond to the requirements of operations or
waste. Waste refers to any incurred cost,
customer.
such as inventory, set-up, scrap, and rework
He sees JIT as a synchronised consumer- that does not add to the value of the product.
driven system. Aggarwal (1985) regards JIT Schonberger (1982) states that the objectives
as an approach for providing smoother are to produce and deliver all kinds of goods
production flows and making continual only at the time needed. Shingo (1984) looks
improvements in processes and products. at its goals as achieving stockless
Hall (1983) writes that JIT is a philosophy manufacturing, that is, each process should
where all goods are to arrive exactly when be provided with the right components, the
they are needed, that is, neither too soon nor right quality and at the right time. Vollmann
[ 870 ]
GoÈran Svensson et al. (1988) state that it is about the reduction economy was ruined by the second world
Just-in-time: the reincarnation of the slack to zero in a firm's activities. war, which forced the Japanese economy to
of past theory and practice
Finally, De Treville (1987) argues that the aim maintain a strict control of the scarce
Management Decision of JIT is quite simply success. domestic resources of the country
39/10 [2001] 866±879
The objectives of JIT are hard to interpret (Bartholomew, 1984).
due to the lack of homogeneity in literature. Consequently, the means to achieve the
However, two objectives seem to be common objectives of JIT vary between authors, as do
denominators: a continuous search for waste their definitions and objectives. As the
reduction and to make only what is needed in illustrated examples in literature have
time. This is also well in accordance with the shown, published definitions, objectives and
concept original objectives (Toyoda, 1987). means of JIT are often given different
meanings and interpretations, but there is an
agreement concerning the benefits that may
Means be obtained through the implementation of
Firms may, according to the literature, take JIT such as: reduced inventory, lowered unit
many different actions to achieve the main costs, improved quality, more rapid reaction
objectives of JIT, which certainly vary to the to changes in design, and increased
same extent as the definitions and the productivity. I believe that the essence of JIT
objectives. For example, Aggarwal (1985) might be summarised as a holistic vertical
states that to achieve the objectives of JIT the pull approach.
system strives to eliminate stock or buffers
between the successive processes, and to
minimise any idle equipment, facilities, or JIT ± a historic review
workers. Hall (1983) writes more concisely This section of the article describes the
that it is a matter of reducing inventories. evolution of JIT during the twentieth century
Monden (1981a, b) argues that the JIT ideal is
by means of a sample of different sources in
achieved through the smoothing of
literature.
production, the design of processes, and the
The Japanese business philosophy of JIT is
standardisation of jobs. Rao and Scheraga
argued, by the author, to be built upon
(1988) state that it is to design product
existing thoughts in the western world. The
structures so that a small number of
difference is that Japanese firms have
materials and parts can be purchased,
implemented and introduced additional and
fabricated and assembled into components, to
improved solutions (Ramsay, 1990).
install pull signals on the shop floor, and
Therefore the underlying ideas, thoughts,
improved reporting of quality performance.
and principles of JIT are in themselves long-
Schonberger (1982) says that it is about total
standing. JIT also has a strong focus on the
quality management and continuous
final customer, that is, a so-called pull
improvements. Shingo (1984) argues for a
approach, which is a strategy that has been
shorter manufacturing run-through,
reduction of machine failures, diminished known for many decades. For example,
set-up times, flexible manufacturing, and so Copeland (1923, p. 288) writes:
One of the first steps to be taken by a
on. Vollmann et al. (1988) state that it is about
manufacturer, who is seeking to effect
changes in physical systems, the reduction of economies in selling his product, is to make
set-up times, and a drive towards lot sizes an elementary analysis of the habits of
that are constantly smaller, as well as the consumers in buying articles of the sort he is
reduction of inventory levels et cetera. producing.
Finally, De Treville (1987) argues that it is to
reduce buffer size, and to use disruption to Accordingly, customer orientation is nothing
cause learning in order to remove new. Shaw (1912, p. 736) comments:
Goods are being made to satisfy rather than to
organisational slacks.
sell . . . Today the more progressive
The potential in literature through the
businessman is searching out the
implementation of JIT is regarded as
unconscious needs of the consumer, and is
substantial (Kellock, 1985). There are producing the goods to gratify them.
however differences between, for example,
American and English companies in their Ford's inventory of finished and completed
implementation of JIT (Billesbach et al., cars was non-existent, because the demand of
1991). In developing countries, other their products was higher than their capacity
problems appear (Msimangira, 1993). It to produce (Arnold and Faurote, 1919). In the
should be remembered too, that inventory 1950s, the Japanese shipyards applied JIT in
reduction in Japan was not an objective in their steel deliveries from steel mills
itself, but rather a necessity since the (Schonberger, 1982). Consequently, the pull
[ 871 ]
GoÈran Svensson approach of JIT has been applied for almost a striking. Henry Ford was one of the foremost
Just-in-time: the reincarnation century. proponents of JIT systems . . .''.
of past theory and practice During the twentieth century there have
Management Decision Toyota's production system is usually
been other systems of vertical flows such as
39/10 [2001] 866±879 referred to as the origin of JIT. Wilson (1995,
group production. Gallagher and Knight
p. 75) also states that:
(1973, p. 7) refer to a Swedish manufacturer The key difference between the two systems
that in the 1940s used a group production follows from Ford's strictly and purposefully
system: limited product line. The environments that
The principles of group production are an the two faced were immeasurably different
adaptation of line production to machine- but their approaches are more alike than is
shops working on batch production . . . this generally recognized.
implies radical decentralisation into small
independent production units or groups, each Faurote (1928, p. 302) comments on Ford's
comprising the machines and everything refined manufacturing:
needed for the complete manufacture of a . . . stock will be forthcoming when needed,
special category of parts. that no surplus will be allowed to pile up at
any point along the process line, that both the
This was implemented again in the 1990s by department supply of raw materials and
Volvo, but did not work out well in a JIT finished parts shall be adequate at all times
context. The company did not achieve and in their right places.
sufficient profitability.
In the beginning of the depression in the The Ford manufacturing system used at the
1920s a phenomenon called ``hand-to-mouth- beginning of the twentieth century is now
buying'' appeared (McGill, 1927), which called JIT (Johnson, 1992). Also, Weld (1916,
basically is similar to JIT, in the sense of p. 6) realised the importance of the different
inventory reduction and an improved rate of parts of a system:
At each step an increment of value is added
turnover in the inventory management. The
by those who handle or transform the
same concept was used in the mid-1970s
product.
(Baily and Farmer, 1977), and referred to
what the Japanese companies, at the time, Since the beginning of the twentieth century,
called JIT (Ansari and Modarress, 1988). disruptions in the supply chain have been an
Originally, the concept of JIT was founded in ever present phenomena (Faurote, 1928), as
1937 by Toyoda (1987, p. 58), whose basic well as waste reduction (Bornholt, 1913).
thought was: Thus, the importance of the supply chain is
Just make what is needed in time, but not long since recognised. Arnold and Faurote
make too much. (1919, p. 25) comment on the subject:
Handling of materials and work in progress of
In 1929, he had been visiting Ford's plant at
finishing is now the principal problem of
River Rouge (Womack et al., 1990), which motor-car cost-reduction, as the machine
might have inspired him. tools and the assembling processes and
Since the mid-1970s, when the first methods are now highly specialized . . ..
contributions were published about JIT
(Sugimore et al., 1977), many books and However, the success of JIT requires well-
articles have been written on the subject (e.g. functioning communication between firms
Monden, 1983; Schonberger, 1982). At the (Richeson et al., 1995). Helms (1990) argues
time, the concept of JIT was not used in the that communication is the key to the
western world, but it was called the ``Toyota successful implementation of JIT. Waller
manufacturing system'' (Sohal et al., 1988). In (1991) states that electronic data interchange
the western world even the name ``Kanban is information that is delivered in JIT! The
System'' was used, which was misleading, fundamentals of JIT are simple, but hard to
because Kanban is just a part of a JIT system. implement practically (Heiko, 1989).
The fundamental and underlying ideas of Schonberger (1982, p. 17) describes the
JIT have their origins at least at the complexity of JIT:
beginning of the twentieth century. Within Produce and deliver finished goods just in
time to be sold, sub-assemblies just in time to
agriculture and road construction, the
be assembled into finished goods, fabricated
principles of JIT have been implemented for
parts just in time to go into sub-assemblies,
generations (Arnold and Bernard, 1989). In and purchased materials just in time to be
literature, the impression is transmitted that transformed into fabricated parts.
JIT is a new and modern phenomenon, whose
true origin is seldom revealed, but, as stated The supply chain cannot work satisfactorily
above, that is not the case (e.g. Cheng, 1990; and optimally if all the various components
Hartley, 1981). Wilson (1995, p. 75) states: do not work together. On the one hand, JIT is
The parallels between the JIT approach and a matter of reducing inventories, sometimes
Ford's Model T production system are to achieve so-called zero inventory. On the
[ 872 ]
GoÈran Svensson other hand, it is not just a system to be in the US economy. McGill (1927, p. 344)
Just-in-time: the reincarnation installed, but a different lifestyle and comments on the topic with the following
of past theory and practice business culture that strives to achieve words:
Management Decision simplicity throughout the company and the It is considered the purchase of stocks of
39/10 [2001] 866±879 merchandise by the retailer or the purchase
rest of the supply chain (Hall, 1983).
The point of departure for the rest of this of raw and semi-finished materials by the
article is a brief historical review of three manufacturer in limited quantities encourage
more rapid turnover and reduce inventories.
widespread and well-known trends that have
been implemented in many industries, and The roots of one of the recent trends (i.e.
that have been intensified in the last decade. inventory reduction) within JIT had
These are inventory optimisation (i.e. definitely emerged. During the depression
inventory reduction), sub-contractor that followed in the US society, firms began
optimisation (i.e. from multiple to single to put emphasis on the inventory levels and
sourcing), and outsourcing optimisation (i.e. their supply chains, that is, as the name
buying instead of making). indicates, ``hand-to-mouth-buying''. Thus, the
One of three significant trends in the awareness of the importance of supply chains
context of JIT is that firms strive to minimise was discovered and commenced to influence
their inventories between actors and firms' business activities. Whitin (1957,
processes in the marketing channel or the p. 219) expresses himself rather harshly:
supply chain. In the seventeenth and Inventories are often referred to as the
eighteenth century, the well-being, strength ``graveyard'' of US business, as surplus stocks
and richness of factories and trading houses have been a principal cause of business
was judged in terms of their inventory sizes. failures. Inventories are also considered a
destabilising influence in business cycles . . .
The higher inventory levels the richer,
Businessmen have developed an almost
stronger, more influential and attractive
pathological fear of increasing inventories.
were the factories and trading houses.
Pappilon (1937, p. 20) stated: Nowadays, firms that keep high levels of
The stock or riches of kingdom doth not only inventories are regarded as less prosperous
consist of our money, but also in our and more vulnerable. However, inventory
commodities and ships for trade and may restrict capital flexibility, which in turn
magazines furnished with all necessary may limit the firm's liberty to use its
material.
resources in the most suitable way. There are
Not until the beginning of the twentieth companies that have involved the
century did executives become aware of the importance of lean supply chains in their
inventories and the supply chain as business mission. For example, MetsaÈ Serla
influential factors for the availability of cash Tissue is a manufacturer and market leader
and the flexibility of a company (McGill, in the Scandinavian consumer goods market,
1927). Arnold and Faurote (1919, p. 33) studied that produces toilet paper and kitchen rolls.
the supply chain at Ford and concluded: The company has the following phrase in
The Ford shops are minutely systemised, and their business mission:
all accounts are carefully and accurately kept; Strive to achieve a smooth flow of goods and
no purchase order is issued without what information in the whole supply chain.
amounts to a complete inventory of the
component under replenishment . . . This is due to the fact that the information
technology has made it possible to implement
Many recent authors (e.g. Hall, 1983) state it practically (Silver et al., 1998). Some
that JIT is a philosophy where all goods are reasons that might explain the past behavior
to arrive exactly when they are needed, that are that product life cycles were longer
is, neither early nor late. The importance of (Kotler, 1997), innovations were diffused
inventory size has been acknowledged for a slowly on narrow and limited markets
long time. For example, Bornholt (1913, (Rogers, 1962, 1982), competition was less
p. 1672) states: keen (Porter, 1985), and the complexity of
The first machine sets the pace and the technology, production, and product was less
operators of the other machines must keep developed.
their machines moving at a similar rate so Rainnie (1991) argues that JIT is highly
that the stock will not run short or
vulnerable to breakdown and relies to a large
accumulate.
extent on pushing responsibility for quality
In the 1920s, traditional supply chains were control upstream to sub-contractors. The
discovered as causing problems for interdependence between firms in a
prosperous companies. At the time, many marketing channel has been of interest since
supply chains contained great amounts of at least the beginning of the twentieth
buffers that caused the emergence of a century. For example, Faurote (1928, p. 303)
phenomenon called ``hand-to-mouth-buying'' writes:
[ 873 ]
GoÈran Svensson Like other shops, the Ford Motor Company popularity in the last decades. Though, as
Just-in-time: the reincarnation has its problems of material supply, Coleman and Jennings (1998, p. 63) state:
of past theory and practice shortages, transportation of raw and finished Inventory reduction increases reliance on all
Management Decision parts . . . members of the supply chain, particularly the
39/10 [2001] 866±879 distribution and the transportation functions.
He also states (Faurote, 1928, pp. 303-4):
Summed up briefly, Ford Management would One of the trends dealing with inventory
seem to consist of having a clear ideal of the reduction within a JIT context might be
product to be manufactured, knowing
argued as well-known and implemented in
beforehand exactly what materials will be
needed in its structure, where these are to be
the past. Therefore, it is argued that this part
found, how they are to be transported from of JIT is definitely not new-to-the-world.
the source to the plant, when and how they Another of the three significant trends in
can be stored, how they are to be fabricated, the context of JIT is that firms in many
what machines and tools will be needed, how industries (e.g. the automotive industry)
many workmen will be required, and of what strive to move from multiple sourcing
mental calibre. towards dual or single sourcing per
The automotive industry has been strongly component or group of components. This is
influenced by the underlying principles of done due to the keen competitive
JIT. Ford (1923) pointed out fundamental environment in the marketplace (Ramsay
conditions required for the well-functioning and Wilson, 1990). In other circumstances
of the marketing channel or the supply chain. where companies have only one available
Comparing Hall's (1983) definition with Ford, source, so-called sole sourcing becomes
many decades earlier, interesting parallels necessary, due to geographic location,
are revealed. Henry Ford was a man that had exclusive rights, customer preferences, lack
early thoughts related to JIT (Ford, 1923, of alternatives or monopoly (e.g.
p. 143): Bartholomew, 1984; Hall, 1983; Trevelen,
We have found in buying materials that it is 1987). A reduced supplier base fits well in
not worth while to buy for other than terms of a JIT system. However, at the
immediate need. We buy only enough to fit beginning of the twentieth century, the
into the plan of production, taking into
necessity for fewer sub-contracting
consideration the state of transportation at
intermediaries was alerted. Weld (1916, p. 14)
the time. If transportation were perfect and
an even flow of materials could be assured, it writes:
would not be necessary to carry any stock . . . the popular opinion is that subdivision of
whatsoever. The carloads of raw materials the marketing process into a number of
would arrive on schedule and in the planned successive steps has been carried too far ± in
order and amounts and go from the railway other words, that there are too many
cars into production. That would save a great middlemen between producer and consumer.
deal of money, for it would give a very rapid
At the time, Shaw (1912, p. 730) concluded
turnover and thus decrease the amount of
from some of his empirical observations that:
money tied up in materials.
The tendency to decrease the number of
Thus, Ford pointed out some fundamental middlemen is one of the most characteristic
conditions required for the well-functioning features of modern distribution. It promises
of the supply chain. His thoughts of almost a to show much greater development in the
century ago are nowadays called JIT! future if present economic conditions
Silver and Peterson (1985, p. 2) comment on substantially continue.
the importance of the supply chain and its Reduced sub-contractor sourcing implies
economic consequences for the firm: that fewer suppliers are in charge of the
According to Statistics Canada the total responsibility to perform a set of functions
inventories owned by Canadian
that were previously performed by others. It
manufacturers are in the neighbourhood of
$30 billion. Furthermore, on average, 34 might be seen as a kind of vertical
percent of the current assets and 90 percent of integration. Weld (1916, p. 20) states:
the working capital of a typical company in When one dealer undertakes to combine and
the USA are invested in inventories. In to perform functions formerly performed by
addition, considerable labor costs (clerical two or more successive middlemen, we have
and managerial) are incurred in the control of what might be called integration. . .
inventories.
The diminishment of the sub-contractor base
Nowadays, it is common and recognised is encouraged by those benefits that may be
knowledge that the existence of high achieved, but at the same time implicates
inventory levels may create critical costs (Porter, 1980). The risk that a company
situations for a firm. Therefore, the may be exposed to when using single
reduction of inventories has gained sourcing is often argued as less
[ 874 ]
GoÈran Svensson recommendable. Arnold and Faurote (1919, (e.g. Shaw, 1912; Weld, 1916). Weld (1916, p. 20)
Just-in-time: the reincarnation p. 33) come to the conclusion that: states:
of past theory and practice It is the policy to deal with several suppliers But the tendency in many trades has been for
Management Decision of the same component, to ensure supply by dealers to restrict their operations by
39/10 [2001] 866±879 drawing from several sources (which specialising on a narrower and narrower set
certainty of supply could not be had from any of functions, thus bringing about a greater
single producer) and also to make possible subdivision of processes and larger number of
avail of competitive advantages not to be had successive middlemen.
if the total orders were placed with a single
producer only. He also writes (Weld, 1916, p. 21):
. . . it is at least true that there is ample
A phenomenon implemented in the economic justification for a subdivision of the
automotive industry is the creation of sub- marketing process among specialised classes
contractor parks nearby the assembly plant of dealers; that in some cases lower costs and
greater efficiency may be gained by further
of a car manufacturer. In these parks the sub-
specialization . . .
contractors perform assembling activities
that were previously done within the Shaw (1912, p. 732) comments on outsourcing
manufacturer's assembly plant. This is a of the distribution to third party logisticians:
trend that has reinforced the outsourcing of The transportation companies and the
activities to sub-contractors in the express companies are in a true sense
automotive industry. At the beginning of the middlemen in distribution, tho they perform
twentieth century, Ford strove to incorporate but one of the functions formerly shared by
successive middlemen who took over
and own as many functions as possible
functions by area.
within the company, in order to satisfy the
need of different components and materials. Already at the beginning of the twentieth
Drucker (1990, p. 100) writes: century, marketing channels were dedicated
In the early 1920s, when the Model T was in to their core competence and core activities.
its full glory, Henry Ford decided to control Ford's factories bought ready-made from
the entire process of making and moving all others, rather than manufacturing parts
the supplies and parts needed by his new themselves. Arnold and Faurote (1919, p. 33)
plant, the gigantic River Rouge. He built his
writes:
own steel mill and glass plant. He founded The Highland Park shops are very far from
plantations in Brazil to grow rubber for tires. manufacturing the entire Ford car. A long list
He bought the railroad that brought the of components, both rough and finished, are
supplies to River Rouge and carried away purchased from outside suppliers . . .
finished cars. He even toyed with the idea of
building his own service centres nationwide Accordingly, outsourcing has been with us
and staffing them with mechanics trained in for a long time.
Ford owned schools, but Ford conceived all
this as a financial edifice held together by
ownership. Instead of building a system, he
built a conglomerate, an unwieldy monster
Conclusions
that was expensive, unmanageable and The main message in this article is that JIT is
horrendously unprofitable. In contrast, the not new-to-the-world, but a suitable and
new manufacturing system is not controlled attractive etiquette or name that has gained
at all. Most of its parts are independent
world-wide acceptance in the last decades.
suppliers at one end, customers at the other.
However, its underlying thoughts and
Thus, this form of complete control and principles are long since documented in
ownership of the different processes involved literature. For example, optimisation of
in the car manufacturing, from raw inventory management, supplier sourcing,
materials to finished car, did not produce any and outsourcing have been well known for
real benefits for the company. The necessity many years. Ford was a man of visions.
for outsourcing was empirically confirmed According to Faurote (1928, p. 305) he said:
and for a car manufacturer was a necessity to We know very little about the smallest thing,
survive and to stay in business. However, the the atom, and practically nothing about the
largest thing, the universe . . . There is plenty
well-functioning of distribution is of
of room for thinkers.
substantial importance for the
competitiveness of a firm (Davis, 1994), In some aspects he was a man of modern
because it only lead to reduced costs, thoughts. At the time, he knew the
improved quality and increased flexibility importance of the holistic approach. The
(Waters-Fuller, 1995). principal question of whether JIT had any
The underlying ideas and early origin novelty value at the time it was introduced,
during the twentieth century behind namely that it was new-to-the-world, has
outsourcing might be traced in the literature. been answered. However, the author of this
[ 875 ]
GoÈran Svensson article argues that JIT only has cosmetic and practices in JIT companies in the US and
Just-in-time: the reincarnation novelty value. Therefore, it is highly the UK'', International Journal of Purchasing
of past theory and practice and Materials Management, Vol. 27 No. 4,
overestimated. The theoretical evidence that
Management Decision is brought forward in the paper supports the pp. 24-8.
39/10 [2001] 866±879 Blau, P.M. (1964), Exchange and Power in Social
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Bornholt, O.C. (1913), ``Continuous
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and practice!
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