Journal Article Review: A Study on Just-in-Time Implementation in Portugal: Some Empirical Evidence

ISSUES

According to the study, most firms (87.5%) experience no seasonality, 74.6% of them don’t need extra work, and 85.7% have flexible workers, thus having some of the necessary conditions for Just-in-Time system. However, most firms (71.8%) still use a push method to control production. Researcher also found that quality is a major concern; in spite of the fact that less than half of the firms have a product and or process certification, quality is considered more important than price, and almost all the firms surveyed had some kind of mechanism to detect defectives. It is also found that, in most cases (around 85%) suppliers deliver in time and there are efforts to reduce setup times. Although used by less than one third of the firms, the Just-in-Time system is quite well known by 86.5% of them.

From the answers to question 26 of this study, the researcher concluded that when a firm says it is using a Just-in-Time system (31.5% of them answered “yes”), that does not necessarily mean that it has consistent practices. The questionnaires with an affirmative answer to that question were further analysed to see if the answers to the Just-in-Time implementation conditions were consistent. It is found that although the firms said that they have a Just-in-Time system to control their operations, they actually have a non-uniform production rate, are using the push-control system, have employees with low flexibility, do not have any quality control system, or have large production lots.

From the study, it presented statistical data regarding the number of workers, sales and inventory values, and the number of suppliers of the responding companies. The number of workers ranged from 17 to 3,686, with a mean of 190. Annual sales ranged from 8 000 euros to 312 500 million euros. In both work-in-process and final products inventory the mean was high for companies that were trying to implement the Just-in-Time system. The main raw material), there was a significant proportion (40%) that had 10 or fewer suppliers.

When the firms were asked about their knowledge about the Just-in-Time system and their answered were affirmative, they then were asked about their knowledge about its most important characteristic. It was found that 47 firms (about 42%) pointed out inventory reduction (in general, finished goods, and work-in-process) as the most important characteristic. It also found that for 15 firms (about 13%) good relationships with suppliers and/ or timely deliveries are important issues, while 19 firms (about 17%) mentioned high quality standards and zero defectives as a major concern.
Most researchers agreed that Just-in-Time system should be implemented in their firms as they bring lots of benefits. According to

A. Gunasekaran and J. Lyu, (1997), one secret to a successful Just-in-Time operation is in ensuring that everyone is involved. The implementation of Just-in-Time practices may bring to the surface such critical issues in employee relations as number of job classification, width of job description, and the employee training and development.
Charles Atkinson, (2005) on ‘McDonald’s a guide to the benefits of JIT’, said that the less obvious benefit is the higher quality customer service that arises from the JIT burger assembly. When McDonald’s waits for you to order the burger, they do a few things to improve customer service. First of all, when you place a special order, it doesn’t send McDonald’s into a panic that causes huge delays.

Now that McDonald’s is in the practice of waiting until you order a burger until they make it, they don’t freak out when they have to make a special order fresh just for you. This higher quality customer service is subject to McDonald’s ability to actually produce faster. Without this ability, McDonald’s ordering costs would be sky-high because the costs associated with ordering would be the loss of customers tired of ordering fast food that really isn’t fast.

According to Che Ruhana and T.Y. Keong in The Role Of Just-In-Time Implementation In Relation To Performance: An Exploratory Study, to survive in today’s dynamic and competitive markets, firms need to come up with strategies consistent with its environmental demands for efficiency, effectiveness and customer responsiveness. In view of the escalating threats from global players, especially those from China, Malaysian manufacturing firms are compelled to continuously review their strategies and devise plans to improve their operations if they were to survive and prosper. Currently, products from China have flooded the Malaysian market at very competitive prices and for the Malaysian manufacturers to counter the impending threats successfully; they need to be more efficient in their operations so that their manufacturing performance could be improved.
JIT approach to manufacturing must consist of the following building blocks: company-wide commitment, proper materials at the right time, supplier relationships, long term contract, quality and personnel (Ansari and Modarress, 1990). Top management support and commitment from all levels of staff are among the most important factors that ensure JIT success through adequate financial commitment and proper planning before implementation of a JIT manufacturing system (Shannon, 1993). JIT purchasing system must be in place to support the JIT manufacturing system. In this system, materials are purchased in small quantities from few reliable suppliers and delivered frequently just before they are needed for production. By reducing the number of suppliers and improving relationships with these valued partners, JIT firms will benefit from costs and time saving. By ordering small batches than are consumed almost as soon as they arrive, an organization can benefit from space saving which resulting from holding much less inventory as well drastic reduction in the costs associated with holding large amounts of inventory, which are in most cases higher that the freights costs and smaller discounts associated with the smaller lot size purchases. These cost savings can be then allocated to alternatives uses to improve the overall success of the organization (Ptak, 1997).

CONCLUSION

From the article, most of the surveyed firm either have only some of the conditions for a successful implementation of a Just-in-time system or there is a significant trend towards it (like no seasonality, flexible workers, quality concern, efforts to reduce setup times, etc).

Concerning the managers’ awareness about Just-in-time system, it is shows that most of the sample companies were concerned primarily with its operational elements such as reduction of inventories, quality improvement, and relationship with suppliers. This means that managers do not view the Just-in-time system as a global management philosophy nor do they recognize motivations for its implementation.

It is also provided empirical data which indicate the managers are aware of the any importance of quality, since almost all of the firms have an inspection system to detect defectives. However, not many of the managers are certified and quality circles practically do not exist. This is also happen due to most of the Portuguese firms do not have all the necessary conditions to successfully implement a Just-in-time system.

The following are basic perspectives about the Just-in-time system which found in the data. They are:
1. It is perceived as a tool to reduce inventories
2. To increase quality and to eliminate waste,
3. It highly depends on suppliers’ performance
4. It helps improve quality and thus reduce scrap and defectives
5. It is a tool for production planning and control

From the analysis of the aggregate data obtained from the 131 sets of responses, the most common difficulties for the implementation of the Just-in-time system in Portugal are:
1. most firms (more than 70%) still use a push method to control production
2. Some firms purchase raw materials in periods longer than 4 weeks (one possible explanation is that suppliers are not considered as partners and safety stock is kept to face poor supplier delivery performance
3. In both work-in-process and final products inventories the mean value is high for companies that were trying to implement Just-in-time system.

The limitation of this study are:
i. The main goal of the study was to find out whether Portuguese firms that have, apparently, operational condition to adopt a Just-in-time system, do use it, but no information is available to assess what is specific about Portuguese firms,
ii. What its impact is on the success of Just-in-time implementation
iii. To compare Portuguese practices with other countries.

Somehow, these limitations provide clues for the future research to find what is particular about Portugal and other recently developed countries, what can be learned from those settings, and to establish a link between this study and the studies presented about other countries.

References

Gunasekaran and J. Lyu, Production Planning and Control : Implementation of just-in-time in a small company: a case study (1997). Vol. 8, No. 4, pp. 406-412

Charles Atkinson, Inventory Management Review: McDonald’s, a guide to the benefits of JIT. (2005).

Che Ruhana and T.Y. Keong, The Role Of Just-In-Time Implementation In Relation To Performance: An Exploratory Study (2004):

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