Operations Management: An Integrated Approach, 5th Edition

THE SUPPLY CHAIN LINK

The concept of JIT naturally extends itself to the entire supply chain. The philosophy of JIT teaches us that waste anywhere in the system hinders efficiency, doesn't provide value to the customer, and ultimately increases cost. Every organization is just one element of an entire supply chain system. As such, waste anywhere in the supply chain is ultimately passed down to other members of the chain and the final customer. Also recall that JIT views a company's suppliers as the external factory, focuses on building long-term relationships with suppliers, and promotes sharing data along the supply chain. In fact, a company's pull system cannot work properly unless its suppliers are also using it. Otherwise, the JIT system of the company would not be able to function properly, as there would be no guarantee of stable deliveries. Therefore, the principles of JIT need to be adopted by all members of a supply chain in order to have a full impact. This is often referred to as a lean supply chain.

Dell provides a good example of the impact JIT can have when it is implemented along the supply chain. The company has a build-to-order model that produces computers only when there is actual customer demand. Dell has implemented a JIT system throughout its supply chain and shares demand information with its suppliers. As a result, Dell is able to introduce new technologies in its computers much quicker than competitors because they are seamlessly available in the supply ...