"An Examination of the Relationships Between JIT and Financial Performance"

Rosemary Fullerton, Cheryl McWatters, and Chris Fawson

Journal of Operations Management

2003, 21, pp. 383-404

The authors of this article conducted a survey study of 253 US manufacturing firms. Using 3 profitability measures (Return On Sales; Return On Assets; and Cash Flow Margin), the researchers found:

1. There was a positive relationship between firm profitability and the degree to which JIT manufacturing practices (such as reduced set-up times, Total Productive Maintenance, multi-function employees, group technology, and uniform work loads) are implemented;
2. There were increasing marginal returns to long-term JIT investment, especially for kanban and JIT purchasing practices;
3. Inventory margin (low levels of inventory is a result of JIT implementation) had an inverse effect on profitability, with lower levels of inventory associated with higher profitability.

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