International Journal of Operations & Production Management

Effect of the characteristics of the purchased products in JIT purchasing implementation

Javier González-Benito
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Javier González-Benito, (2002),"Effect of the characteristics of the purchased products in JIT purchasing
implementation", International Journal of Operations & Production Management, Vol. 22 Iss 8 pp. 868 - 886
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IJOPM
22,8
868
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International Journal of Operations &
Production Management,
Vol. 22 No. 8, 2002, pp. 868-886.
# MCB UP Limited, 0144-3577
DOI 10.1108/01443570210436181
The current issue and full text archive of this journal is available at
http://www.emeraldinsight.com/0144-3577.htm
Effect of the characteristics of
the purchased products in JIT
purchasing implementation
Javier GonzaÂlez-Benito
Departamento de AdministracioÂn y EconomõÂa de la Empresa, University
of Salamanca, Salamanca, Spain
Keywords Just-in-time, Purchasing, Motor industry, Parts, Manufacturing, Spain
Abstract JIT purchasing, like many other trends in supply management, is not applicable to
just any circumstances; rather, its implementation responds to particular factors. Focusing on the
characteristics of the purchased products, this paper contributes to identifying some of these
factors. Seven variables ± the volume, specificity, technological complexity, essentiality, fragility,
variability and economic value of procured products ± have been analysed and their effects on JIT
purchasing implementation have been tested over a sample of 152 Spanish auto component
manufacturers. In order to specify such effects, four dimensions of JIT purchasing have been
distinguished: operational, relational, involvement, and quality practices. Results show that
companies do not pursue the minimisation of inventory maintenance costs, but they seem to be
motivated by objectives such as quality, responsiveness, innovation or minimisation of circulating
capital. Thus, operational JIT purchasing practices are mainly applied to fragile and expensive
products, whereas the other complementary practices are applied to specific, technologically
complex and essential purchases.
1. Introduction
Since they became known world-wide in the 1970s and 1980s, just-in-time (JIT)
production systems have meant a target for many manufacturing companies,
mainly in the automotive industry. The principles and practices characterising
Japanese factories oriented the evolution of leading manufacturing firms
during the 1990s and, currently, many companies are still striving to become
JIT producers. Different authors have summarised the most notable elements of
JIT systems (e.g. Bartezzaghi and Turco, 1989; Chan et al., 1990; Gilbert, 1990;
Sakakibara et al., 1993; Schonberger, 1982; Voss and Robinson, 1987), and most
of them insist on the important role played by the suppliers, who must be able
to deliver frequent and small shipments just when required. To achieve this
from suppliers, a particular way of managing purchasing and supply activities,
called ``JIT purchasing'', has been developed in JIT environments.
JIT purchasing is not applicable to any supply chain; rather, its
implementation is determined by some particular circumstances. The purpose
of this paper is to contribute to identifying these circumstances, that is, to find
determinant factors of JIT purchasing. In particular, it tries to answer the
following questions: to which purchased products does JIT purchasing apply?
Which characteristics do these products have? The effect of different variables
This research has been partially funded by the Spanish Ministry of Science and Technology,
grant SEC 2001-1756.
 is analysed over a sample of 152 auto component manufacturers, most of them JIT purchasing
first-tier suppliers. implementation
The paper is divided into six sections. In the first two, a scheme of JIT
purchasing practices and a general model for the study of determinant factors
are respectively presented. The following section focuses on those factors
characterising the purchased products and includes seven research hypotheses.
Afterwards, the research methodology is described and, subsequently, the 869
main results are commented upon and discussed. The last section summarises
the main conclusions and proposes directions for future research.

2. JIT purchasing: main practices

JIT purchasing has been approached from different perspectives. Some authors
focus on JIT purchasing as a delivery control system and develop quantitative
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models to compare it with traditional procedures (Chyr et al., 1990; Fazel, 1997;
Fazel et al., 1998). Other authors take a broader perspective and focus on
identifying those practices characterising JIT purchasing, which ultimately
aim at transferring JIT production systems upwards into the supply chain (e.g.
Ansari and Modarress, 1988; De Toni and Nassimbeni, 2000; Fawcett and
Birou, 1993; Lee and Ansari, 1985; Schonberger and Gilbert, 1983; Waters-
Fuller, 1995). Thus, these practices affect not only logistics but also many other
aspects related to supply relationships, such as selection procedures, design
specifications, or length of contracts. Finally, some other authors think of JIT
purchasing as the consequence of some basic principles promoting co-operation
and benefit and risk sharing between purchasers and suppliers (Leavy, 1994;
O'Neal, 1987). Thus, JIT purchasing is understood to be a philosophy rather
than a simple set of practices. In a more general chain-based interpretation, this
philosophy has also been named ``lean supply'' (Lamming, 1993, 1996).
In this paper, JIT purchasing is thought of as the sum of two components,
operational and complementary, each of them characterised by a set of
practices. The operational component comprises those practices affecting the
flow of incoming materials and production planning. That is, it includes
practices related to logistics. The complementary component encompasses a
group of practices that facilitate the good working of operational practices.
Some complementary practices, here called relational practices, aim at
establishing co-operative and trusting relationships with a reduced supply
base. Some other practices, here called involvement practices, are intended to
empower suppliers and foster their participation in the relationship. A third
group of practices, here called quality practices, seeks to assure quality and
reliability from suppliers. All these groups of practices, which are summarised
in Table I, are very much interconnected in-between. In particular, the
successful implementation of operational practices seems to rely on the
implementation of complementary practices (GonzaÂlez-Benito et al., 2000). In
any case, this scheme, distinguishing four dimensions of JIT purchasing,
namely operational, relational, involvement, and quality practices, facilitates a
more detailed analysis of the phenomenon and the explanation of diverse
 IJOPM Complementary practices
22,8 Operational practices Relational practices Involvement practices Quality practices

Kanban with suppliers Frequent Supplier involvement Supplier selection

communications in design and based on quality and
development (more reliability
collaboration, more
870 autonomy)
Frequent delivery Single source (small Engineering visits Performance control
(small batch sizing) numbers of suppliers) (quality and
reliability)
Reduced inventory Long-term contracts Supplier development Quality certification
programmes (training
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courses)

Exact delivery time Lasting relationships

(or tight time
windows)

Standardised Relational
containers programmes
(initiatives to foster
cooperation)
Geographical Benefits sharing
concentration (through (risk sharing)
plants or warehouses)
Electronic data Mutual assistance
interchange (EDI)
Cost information
exchange
Table I.
Characteristic practices Cost-based price
of JIT purchasing calculation

aspects related to JIT purchasing implementation (see GonzaÂlez-Benito and

Spring, 2000). It highlights the fact that JIT purchasing is something more than
a shipment delivery system.
Complementary JIT purchasing practices are similar to the characteristics
attributed to partnership sourcing in the literature (Bhote, 1989; Ellram, 1990;
Saunders, 1997) and are usually implemented separately. Operational practices
are the only practices actually inherent in JIT environments. Thus, JIT
purchasing, as presented in this paper, is a particular case of partnership
sourcing, in which special attention is paid to certain operational practices.

3. Determinant factors of JIT purchasing

As an initial framework, a general model, based on the interaction model of the
IMP (International Marketing and Purchasing) group (HaÊkansson, 1982), was
 built in order to set the main guidelines for the study of the determinant factors JIT purchasing
of JIT purchasing implementation (Figure 1). Such a model distinguishes three implementation
types of factors or variables that should be taken into account: those related to
the exchanged product (product variables), to the purchaser and supplier
(organisational variables) and to the environment (environmental variables).
Organisational variables have been studied in GonzaÂlez-Benito and SuaÂrez-
GonzaÂlez (2001), and this paper focuses on studying product variables. From 871
the analysis of the literature and some case studies seven characteristics of
products have been selected: volume, specificity, technological complexity,
essentiality, fragility, variability, and economic value. Each of them is
commented upon in the following section, where seven research hypotheses are
proposed.
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4. Hypotheses
Volume
The volume of components is directly related to the space needed for storage
and the maintenance and transportation costs incurred in supply activities. In
fact, warehousing maintenance costs are frequently expressed as monetary
units per volume units. The implementation of JIT purchasing practices
involves inventory reductions and, hence, there are more economic incentives
to use such practices with those components whose volume means a problem of
space availability for the company.
This effect of volume on inventory and supply costs in JIT environments can
be illustrated more exhaustively with mathematical models. A basic model is
developed in the Appendix and it is proven that, as far as costs are concerned, a
company would find more advantages, if it implemented JIT purchasing
practices over voluminous components, especially when storage space is
limited. Although this model is set under very basic assumptions, further

Figure 1.
General model for the
study of JIT purchasing
implementation
 IJOPM developments might be carried out to make it closer to reality. Nonetheless, for
22,8 the purpose of this paper, this reasoning well illustrates the importance of
volume for supplying costs.
Thus, this leads us to pose the following hypothesis:
H1. The higher the percentage of voluminous components purchased by a
company, the higher the implementation of JIT purchasing practices.
872
Specificity
The degree of specificity of components is understood to be the degree of
customisation or adaptation to a concrete purchaser. A component will be said to
be specific, when it is designed and manufactured to satisfy the requirements of a
particular purchaser. This variable can hence be thought of as the inverse of
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standardisation. The specificity of products is directly related to the existence of

specific assets in the relationship, that is, to the acquisition or generation of assets
which lose part or all of their value, when used outside that particular relationship.
The equipment and personnel necessary to develop and manufacture specific
products are likely to be quite specialised, so that to a greater or lesser extent they
constitute physical and human specific assets. According to the postulates of
transactions cost economics (Williamson, 1975, 1985), the existence of specific
assets makes one party more vulnerable to the possibly opportunistic behaviour
of the other party, and, consequently, it makes governance structures next to
vertical integration more appropriate for the relationship in order to guarantee
supply. Thus, intermediate or hybrid governance structures (Williamson, 1991),
based on trust and co-operation, would be much more suitable when specificity of
products is high. Such a co-operative structure can be achieved through the
implementation of complementary JIT purchasing practices and, in particular,
through relational JIT purchasing practices.
On the other hand, since specific products require special design efforts, the
purchaser might take advantage of the knowledge and experience of its
suppliers to improve such a design. On the basis of a collaborative climate, the
purchaser would find certain advantages in involving its suppliers in product
design and development or in training them to reach the expected dexterity and
performance. Hence, it would be motivated to implement involvement JIT
purchasing practices.
According to these comments, a relationship seems to exist between the
specificity of components and the implementation of JIT purchasing practices,
which leads us to propose the following hypothesis:
H2. The higher the percentage of specific components purchased by a
company, the higher the implementation of JIT purchasing practices.

Technological complexity
The technological complexity of components is understood to be the degree of
technical knowledge and experience needed to design and manufacture such
components. On the one hand, manufacturers of complex components are likely to
 be more scarce than other kinds of producers, so small-numbers conditions JIT purchasing
(oligopolies or monopolies) are more frequent. Risk of opportunism is therefore implementation
high and intermediate structures based on co-operation become more suitable
(Williamson, 1975, 1991). On the other hand, the complexity of products and the
existence of specific assets seem to be correlated. Bensaou and Anderson (1997)
provide empirical evidence of the effect of technological complexity on the volume
of specific investments carried out in a relationship. These authors include 873
technological complexity in a broader construct that also includes the specificity
of products. This makes sense, since, although complexity and specificity are not
the same by definition, they frequently appear together. Companies tend to
differentiate their products by improving the most technologically complex
components, thereby requiring special designs and features in them. As a
consequence, complex components become specific components too, and the
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reasoning used to justify the previous hypothesis can also be applied to this case.
Thus, these arguments lead us to pose the following hypothesis:
H3. The higher the percentage of technologically complex components
purchased by a company, the higher the implementation of JIT
purchasing practices.

Essentiality
The essentiality of components is understood to be the need to stop part or all
of the manufacturing processes when such components are not available. For
example, a car maker would probably have to stop assembly lines, if it runs out
of chassis parts, but lines are rarely stopped when wing mirrors are concerned,
although, with some additional costs, mirrors might be installed in final
warehouses or shipping docks, as that they are not so essential as chassis parts.
At first glance, essentiality of purchases might prevent companies from
applying JIT delivery programmes, since it would be very risky to keep low
inventory of pieces that could stop processes. However, the broad definition of
JIT purchasing considered in this paper must be taken into account. The
purpose of complementary practices is to ensure quality and reliability from
suppliers, thereby ensuring a continuous flow of incoming materials to
production plants. Thus, it is argued that, rather than preventing a company
from applying JIT purchasing, essentiality motivates a comprehensive
implementation of the whole package of practices, especially complementary
practices. Operational practices would not involve so much risk for essential
components, if they were adequately accompanied by complementary
practices. Hence, the following hypothesis is proposed:
H4. The higher the percentage of essential components purchased by a
company, the higher the implementation of JIT purchasing practices.

Fragility
The degree of fragility of components affects warehousing costs. Special
containers and packaging for fragile products take up additional space and
 IJOPM require dedicated resources and treatment. Transportation and maintenance
22,8 costs therefore rise, so that cost reductions derived from JIT purchasing
implementation would be more notable for these components. As for volume,
the effect of fragility could easily be illustrated through mathematical models.
In this case, different maintenance and transportation costs should be
considered for fragile and non-fragile components and the reduction of
874 transportation costs achieved with JIT purchasing practices should be
understood as percentages.
Apart from cost-related benefits, a reduction of inventory for fragile
components reduces the risk of deterioration and, therefore, the risk of
introducing defective parts in the final product. This assertion is stated on the
basis that the probability of damage in inventory is higher for fragile
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components than for other components. From this point of view, the
implementation of JIT purchasing practices for this kind of product would also
contribute to improving quality. To sum up, additional benefits in terms of cost
and quality would be perceived when JIT purchasing is applied to fragile
products, and, in consequence, the following hypothesis is posed:
H5. The higher the percentage of fragile components purchased by a
company, the higher the implementation of JIT purchasing practices.

Variability
The variability of components measures to what extent different versions of
the component must be alternated when assembled into final products. For
example, Grupo AntolõÂn, one of the largest Spanish auto components makers,
manufactures headliners in some of their plants, which are directly supplied to
final assemblers. Each car requires one different headliner which varies
according to the included accessories and the vehicle's structural features (three
or five doors, for example). The final characteristics of each headliner are
known only shortly before assembly. Thus, meeting this demand entails
keeping large inventories with all the possible headliners that might be
demanded or, alternatively, following JIT delivery programmes from
subassembly plants established close to the customers. These subassembly
plants combine the adequate components for the required headliner some
minutes before it is installed into the car. Components of headliners instead of
complete headliners are stored, thereby reducing the number of references to be
kept and, hence, inventory costs. Although such cost reductions accrue to the
supplier in this example, they will have repercussions for the purchaser in the
form of lower prices. Thus, inventory reductions seem to be specially notable
when JIT purchasing is applied to variable products and, to a greater or lesser
extent, it generates benefits for the purchaser. It is therefore proposed that:
H6. The higher the percentage of variable components purchased by a
company, the higher the implementation of JIT purchasing practices.
 Economic value JIT purchasing
Finally, the economic value of components might affect supply strategy, since implementation
the higher the incoming inventory levels, the higher the invested capital and, as
a consequence, the higher the financial and opportunity costs. Thus, reducing
stock levels of expensive components would yield significant saving for the
company. Furthermore, ABC classification systems, which are based on the
annual consumption value, are frequently used to rank purchases according to 875
their relative importance. Components classified as A reach the highest
consumption value and their supply receives special care. The most advanced
and sophisticated techniques are primarily introduced over these components
in an attempt to ensure and improve supply efficiency. In particular, ABC
classification systems are also used to guide JIT purchasing implementation
(Roy and Guin, 1999). If the consumption rates of two components are the same,
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their economic value or, in other words, price determines their importance and,
therefore, it might affect the implementation levels of JIT purchasing practices.
This reasoning leads us to pose the following hypothesis:
H7. The higher the percentage of expensive components purchased by a
company, the higher the implementation of JIT purchasing practices.

To sum up, seven characteristics of products ± volume, specificity,

technological complexity, essentiality, fragility, variability, and value ± have
been argued to have positive effects on JIT purchasing implementation. A
priori, operational practices seem especially suitable for voluminous, fragile,
variable and expensive products, whereas complementary practices seem to be
appropriate for specific, technologically complex and essential components.

5. Methodology
The sample consisted of Spanish auto components manufacturers, who are
being pushed by car assemblers to adopt JIT philosophies. A database with 397
firms with more than 50 employees was created from diverse sources[1]. An
extensive questionnaire was designed and, after being tested in ten companies,
it was posted to each manufacturer. It was personalised to purchasing and
logistics managers and accompanied by phone calls, so that a total of 152 (38
per cent) fully completed questionnaires were returned. To facilitate replies,
six-point scales were used, which were considered ordinal measures for some
statistical analyses.
The sample encompasses diverse manufacturers working within different
industrial sectors and developing multiple activities. The electronics, plastic
and steel industries are well represented and most of the companies carry out
some assembly processes. Spanish auto components suppliers tend to be
located around the five large manufacturers established in Spain (Ford, GM,
PSA, Renault, and VW), or concentrated in the three major industrial areas in
Spain: Madrid, Barcelona, and the Basque Country.
Most of the producers in the sample (116) have become internationalised
through the establishment of subsidiaries in other countries or through
 IJOPM integration into foreign groups. They have different sizes comprising between
22,8 50 and more than 1,000 employees, although more than one-third of them have
between 100 and 500 employees. A total of 53 manufacturers are not completely
dedicated to the automotive industry, but 33 of them devote 75 per cent or more
of their production to this industry. The sample encompasses suppliers
working in different tiers of the automotive network and other manufacturers
876 selling spares directly to distributors or final customers.
Table II shows how JIT purchasing measures were built. A list of JIT
purchasing practices was created and manufacturers were asked to mark the
percentage of purchased products to which each practice was being applied on
a six-point scale: 1 (0 per cent), 2 (1-25 per cent), 3 (25-50 per cent), 4 (50-75 per
cent), 5 (75-99 per cent) and 6 (100 per cent). The practices were divided into
four sets according to the scheme proposed in section 2 (operational, relational,
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involvement, and quality practices), and each set was reduced to a single
measure by extracting the most explicative factor through principal component
analysis. The four measures show satisfactory reliability (Cronbach's ) and
validity (factor loadings) (Flynn et al., 1990). Factor loadings were higher than
0.4 for practically all the items and higher than 0.6 for most of them. The
explained variance is also high and obviously higher for constructs based on a
large number of variables. These four measures were merged into one in a
second stage through a similar methodology, thus obtaining a global measure
of JIT purchasing implementation. This two-stage procedure guarantees that
all the dimensions of JIT purchasing are similarly represented in the measure
independently of the number of items used for each one.
As regards product characteristics, they were measured with single
questions. As for JIT purchasing practices, managers were asked to mark the
percentage of purchased products that meet each product characteristic (see
Table III) on a six-point scale: 1 (0 per cent), 2 (1-25 per cent), 3 (25-50 per cent), 4
(50-75 per cent), 5 (75-99 per cent) and 6 (100 per cent). Although most of the
measures are to some extent subjective, they reveal managers' perceptions,
which actually restrain and guide their decisions.
It must be pointed out that companies only were asked about direct
purchases, i.e. purchased products to be in some way incorporated into their
own finished products. Any other kind of purchased product was not
considered in the study.

6. Results and discussion

In order to analyse collinearity between product variables, Table IV shows
Spearman correlation tests for each pair. In many cases correlation is
statistically significant (p < 0.01) and some pairs even share more than 40 per
cent of variance. Worth pointing out is the positive relationship between
specificity and technological complexity. As mentioned in section 3, these two
characteristics often appear together, since technologically complex products
tend to meet design specifications imposed by each individual purchaser. Also
worth highlighting is the correlation of economic value with each other
 Loadings JIT purchasing
implementation
Implementation of operational JIT purchasing practicesa
Usage of kanban systems 0.584
Weighted delivery frequencyb 0.828
Stocks of less than one day of production 0.685
Specification of the exact day and time for deliveries 0.688
Supplied in containers (not packaging) 0.655 877
Their manufacturers with plants or warehouses within 20km 0.569
Their manufacturers connected by EDI 0.601
Cronbach : 0.7834; % explained variance: 44.04
Implementation of relational JIT purchasing practicesa
Frequent meetings and communications with their manufacturers (at least
one a fortnight) 0.374
Bought from a single supplier 0.460
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Long-term contracts with their manufacturers (product life cycle) 0.609

Their manufacturers have been suppliers since the component was
created 0.489
Programmes devoted to improving the relationship 0.661
Sharing of marginal benefits 0.712
Support for their manufacturers in sorting out problems 0.712
Willingness to increase co-operation with their manufacturers 0.658
Access to the accounting books of their manufacturers 0.641
Price calculation based on actual costs 0.651
Cronbach : 0.8021; % explained variance: 36.79
Implementation of involvement JIT purchasing practicesa
Their manufacturers design and develop the components 0.781
Their manufacturers actively participate in the development of
our products 0.582
Visits of engineers to their manufacturers to find possible productivity
improvements 0.750
Offering of training and development courses 0.836
Cronbach : 0.7341; % explained variance: 55.20
Implementation of quality JIT purchasing practicesa
Suppliers chosen according to their quality and reliability as well as
the price 0.833
Control and penalisation of faults. Renewal of contracts depending on
that control 0.843
Manufacturers with at least one of the ISO-9000 quality certifications 0.747
Cronbach : 0.7341; % explained variance: 65.41
Global implementation of JIT purchasing practices
Implementation of operational lean purchasing practices 0.728
Implementation of relational lean purchasing practices 0.860
Implementation of quality lean purchasing practices 0.782
Implementation of involvement lean purchasing practices 0.646
Cronbach : 0.7484; % explained variance: 57.46
Notes: a Items measured as the percentage of supplies to which the practice is applied.
Six-point scales were used: 1 (none), 2 (few, 1-25 per cent), 3 (less than half, 25-50 per cent),
4 (more than half, 50-75 per cent), 5 (almost all, 75-100 per cent) and 6 (all, 100 per cent); Table II.
b
Constructed as 5*(A ± 1) + 3*(B ± 1) + C ± 1 from three questions: % of supplies Reliability and validity
delivered several times a day (A) with weight 5, % of supplies daily delivered (B) with of the JIT purchasing
weight 3 and % of supplies delivered two or three times a week (C) with weight 1 measures
 IJOPM Variable Measure
22,8
Purchased
products
Volume Percentage of components that would exceed space availability, if great
quantities were kept in inventory
Specificity Percentage of components that are especially designed for the purchaser
878 (that cannot be found in markets)
Technological Percentage of components that are technologically complex and require
complexity experienced, well-trained and competent manufacturers
Essentiality Percentage of components, without which some or all of the production
processes would have to be stopped
Fragility Percentage of delicate components that require special containers of
facilities for storage
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Variability Percentage of components that present different versions that have to be

alternated when assembled in the final product
Economic value Percentage of components whose high price would significantly raise
working capital when inventory grows
Table III. Notes: Six-point scale: 1 (None of the components), 2 (Few, 1-25 per cent), 3 (Less than half,
Measures for 25-50 per cent), 4 (More than half, 50-75 per cent), 5 (Almost all, 75-99 per cent) and 6 (All,
independent variables 100 per cent)

Technological Economic
Volume Specificity complexity Essentiality Fragility Variability value

Volume 1.000
Specificity ±0.050 1.000
Technological
complexity 0.086 0.419** 1.000
Essentiality 0.007 0.274** 0.254** 1.000
Fragility 0.225** 0.225** 0.281** 0.162* 1.000
Variability 0.160* 0.154* 0.132 0.066 0.203* 1.000
Table IV. Economic
Correlations between value 0.349** 0.293** 0.483** 0.308** 0.404** 0.295** 1.000
product variables
(Spearman tests) Notes: * p = 0.05; ** p = 0.01

variable, especially volume, technological complexity, and fragility. It seems

reasonable that the characteristics described by most of the variables increase
purchasing prices, since they entail additional efforts on the part of the
supplier. The relationship between essentiality and economic value is, however,
more difficult to explain.
Given the existing collinearity between variables, multiple regression
analysis was not considered the most appropriate method, since some of the
variables might distort the effect of the others. Thus, individual analyses
primarily based on the statistical significance of correlation with JIT
purchasing measures were conducted (see Table V). These analyses can only
prove the existence of relationships between independent and dependent
 variables and, therefore, they can be useful to assess the predictive power of the JIT purchasing
independent variables, but they do not provide support for causality. implementation
Statistically, the importance of an independent variable might be due to its
relationship to other independent variables or to other relevant variables which
have not been included in the study rather than to a direct effect on the
dependent variable. Nonetheless, as we argue in section 4, there are theoretical
reasons for thinking that a direct causal effect exists. 879
As far as the global measure of JIT purchasing is concerned, all the variables
but volume and variability have a significantly positive effect (p  0.05). This
leads us to think that the implementation of JIT purchasing by Spanish auto
components manufacturers is not motivated by the desire to reduce inventory
costs, the main consequence of applying such practices to voluminous and
variable products, but it is actually spurred by the desire to assure quality and
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reliability from suppliers. Advanced supply practices seem to be mainly

applied to specific, complex and expensive products, which are essential for the
continuity of production processes. These product characteristics bring about
high dependence on suppliers and special efforts should be made to develop
and improve supply practices, thereby guaranteeing the continuous flow and
quality of key materials. According to this reasoning, the importance of
fragility must be due to the desire to minimise the risk of deterioration of fragile
components kept in inventory rather than to the intention of reducing
inventory costs.
With respect to the analysis of the different JIT purchasing dimensions, it
must be taken into account that such dimensions are highly correlated in-
between. Thus, special attention should be paid to the JIT purchasing measure,
which is the most correlated with each product variable. The effect on the other
JIT purchasing measures might simply be a consequence of the close
relationship between the four dimensions here distinguished. In this sense,
specificity and essentiality of components are specially relevant for the
implementation of relational practices. The specificity of products, quite related
to the existence of specific assets, motivates companies to establish co-
operative relationships with a reduced number of suppliers. As stated by

Global JIT Operational Relational Involvement Quality

purchasing practices practices practices practices

Volume 0.041 0.114 0.027 ±0.004 0.042

Specificity 0.399** 0.339** 0.467** 0.259** 0.144
Technological
complexity 0.351** 0.140 0.323** 0.377** 0.221**
Essentiality 0.254** 0.140 0.324** 0.130 0.200* Table V.
Fragility 0.261** 0.341** 0.215** 0.173* 0.032 Correlation between
Variability 0.061 0.113 0.044 0.054 ±0.054 product variables and
Economic value 0.224** 0.255** 0.162* 0.243** 0.004 JIT purchasing
measures (Spearman
Notes: * p < 0.05; ** p < 0.01 tests)
 IJOPM transaction costs economics, governance structures which are closer to vertical
22,8 integration become more cost-effective in-so-far as the volume of specific assets
increases. Furthermore, such structures establish a collaborative climate,
which contributes to the good working of operational practices and ensures the
supply of essential products.
Technological complexity reaches the maximum correlation with
880 involvement JIT purchasing practices. The design and development of complex
parts require well trained suppliers participating in the process. In this way, the
purchaser benefits from the knowledge, experience and specialisation of
suppliers, who are frequently the actual owners of the technology. Such
relationships should be organised under a partnership atmosphere that can be
achieved through relational practices. Companies try to be always surrounded
by a group of suppliers, who are partially or totally responsible for the design
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and performance of components.

As expected, fragility and economic value have the main effect on
operational JIT purchasing practices. The waiting-time for materials in
inventory is thus minimised and the risk of deterioration is lowered. Moreover,
financial and opportunity costs are also reduced, since the total value of
incoming inventories is lowered under JIT logistics arrangements. Although
volume and variability are not correlated with any of the JIT purchasing
measures, it can be observed that correlation reaches the highest value for
operational practices. In spite of the fact that they are not statistically
significant, these results tend to support the reasoning followed in the
proposition of hypotheses.
It is worth mentioning that quality JIT purchasing practices are scarcely
correlated with most of the variables. Only technological complexity and
essentiality are directly related to this dimension and, in both cases, correlation
is lower than for other groups of practices. This might occur because quality
practices are a constant or standard rather than an option in the automotive
industry, so they are applied to any kind of product without considering many
of its features. In fact, all the items used to measure the adoption of quality
practices reached high means with small variance, which proves the
generalised implementation of such practices.
To sum up, all the hypotheses except H1 and H6 are to a greater or lesser
extent supported by the data. Nonetheless, the predictive power of product
variables is expected to be low, since, as mentioned in section 3, many other
organisational and environmental variables are likely to explain JIT
purchasing implementation. Thus, the characteristics of purchased
components or materials should be considered part of a wide range of factors
taken into account to assess the convenience of new supply practices.
In order to provide additional evidence on the relationships between product
variables and JIT purchasing implementation, ANOVA tests were conducted to
compare means of implementation in the categories defined by the five
variables above confirmed as relevant (see Figure 2). As such variables have
been measured by six-point scales, each of them defines six groups of
 JIT purchasing
implementation

881
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Figure 2.
JIT purchasing
implementation for the
categories defined by
product variables
(ANOVA tests)
 IJOPM companies whose implementation levels can be compared. In all the cases the
22,8 differences between means are statistically significant (p < 0.10), and the
graphs show positive relationships between the variables and JIT purchasing
implementation. Only the graph for economic value has a strange form,
because the 21 companies purchasing between 75 per cent and 100 per cent of
expensive components, whose high price would significantly raise working
882 capital if inventory grew, reach low levels of JIT purchasing implementation.
As regards technological complexity, there is a clear difference between
companies purchasing less than 25 per cent of complex products and those
purchasing more than 25 per cent. Also notable is the difference between
companies that consider all their purchases as essential and the rest of the
companies, perhaps because JIT purchasing implementers tend to consider that
the lack of any component drastically distorts the usual working of the factory.
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In spite of these irregularities, the results, in general, support the hypotheses.

7. Conclusions
JIT purchasing practices are quite heterogeneous and affect multiple aspects of
supply relationships. Operational practices aim at improving logistics,
relational practices focus on promoting co-operation, involvement practices
foster supplier participation and quality practices pursue quality and reliability
assurance. The implementation of some or all of the practices is likely to be
influenced by the organisational characteristics of the purchaser and the
supplier, the industrial or geographical environment in which the relationship
takes place and the features of the products which are supplied.
This study has confirmed the relevance of product characteristics as
determinant factors in JIT purchasing implementation. The specificity and
technological complexity of products stand out as the most important
variables. They incline implementation efforts towards relational and
involvement practices in an attempt to establish adequate governance
structures to minimise the risk of accomplishing specific investments by any of
the parties. In other words, it is a primary objective to strengthen relationships
and promote collaboration with those suppliers of components, which mean
distinctive features of the final product and whose production requires specific
investments.
This idea of ensuring continuity in the relationship and promoting co-
operation is also positively affected by the essentiality of products. The lack of
certain materials and components can stop production processes and
purchasers try to guarantee the continuous availability of such products. The
establishment of co-operative relationships through relational practices
contributes to improving operational and logistical performance and, hence, it
is used to ensure the supply of essential products.
Variables such as volume and variability, which have direct repercussions
on inventory costs, do not affect implementation patterns. Thus, JIT
purchasing practices are not motivated by the desire to reduce inventory
maintenance costs, but rather by other objectives such as the increase of
 responsiveness or flexibility. Fragility, however, positively affects the JIT purchasing
implementation of operational practices. It leads us to think that companies try implementation
to minimise the risk of deterioration of fragile products in inventory rather than
reduce packaging and holding costs.
The data have also confirmed the importance of the economic value of
components for JIT purchasing implementation. Circulating capital and its
derived costs are therefore much more important than inventory maintenance 883
costs, although it might be simply due to the fact that the latter are difficult to
compute in some companies. Furthermore, products traditionally tend to be
ranked according to individual consumption rates and the implementation of
advanced practices such as JIT purchasing is planned according to this
ranking.
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Finally, it is worth mentioning that the distinction between four dimensions

or groups of practices constitutes an analytical framework that allows us to
specify the effect of external factors on JIT purchasing implementation.
Although many product characteristics can be considered as determinant
factors, they have different effects and incline implementation patterns towards
particular practices.
Managers should take into account that not all the purchases seem to be
equally suitable for JIT purchasing practices. At least, companies tend to apply
different groups of practices to different kinds of products. This means that
traditional stock classifications systems such as the ABC system, based only
on consumption values, might not be complete instruments to determine
priorities in JIT purchasing implementation. It might be useful to consider new
parameters, such as those studied in this paper.
It must be taken into account that this work presents some limitations that
should be overcome in future research. The use of objective data rather than
subjective measures built on perceptions would be desirable. Further research
should also widen the range of variables to be analysed and it should include
organisational variables as well. The analysis of other industries or
geographical locations would make comparisons possible and, hence, the
importance of environmental variables for JIT purchasing implementation
could be revealed.

Note
1. The sources used were: Repertorio de Fabricantes EspanÄoles de Equipos y Componentes de
AutomocioÂn 97, published by the Spanish Institute of Foreign Trade (Instituto EspanÄol de
Comercio Exterior (ICEX)); a list of companies associated with ODETTE (http://
www.odette.es); Dun & Bradstreet 1998 database of the 50,000 largest Spanish
companies; and a list of suppliers given by some assemblers.

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Appendix. Effect of volume on inventory costs

Let us suppose a company in which:
. Shipment size for purchases is computed through the economic order quantity (EOQ)
model (see Urgeletti (1983), for a review of the main variations of this model).
. Two components, [1] and [2], with volumes of V1 and V2 cubic metres respectively
(V1 < V2) and the same density, are purchased in similar annual quantities (Q).
. Consumption is constant and equally distributed in time.
. The annual maintenance cost for each cubic metre of materials in inventory is P1
monetary units and the transportation of each cubic metre from the supplier's plant to
the reception docks involves a cost of P2 monetary units.
According to the basic EOQ model, total inventory cost is equal to the sum of ordering and
holding costs, that is, the costs of getting purchases into the plant and the costs of maintaining
them till required in the production line. In the case above, outlined holding costs for a shipment
size, q, are:
‰1Š
CH …q† ˆ …q=2† V1  P1 for component [1]
 IJOPM and
22,8 ‰2Š
CH …q† ˆ …q=2† V2  P1 for component [2]
‰1Š ‰2Š ‰1Š ‰2Š
It is immediately deduced that CH …q† < CH …q† and …CH †…q†=q† < …CH …q†=q†, thus
holding costs are higher for the most voluminous components and differences grow, if shipment
size is increased.
In order to simplify even further the analysis of Hahn et al. (1983), let us suppose that ordering
886 costs equal the sum of administrative costs (CA per shipment), transportation costs (P2 per m3)
and inspection costs (CI per m3). Thus, holding costs in non-JIT environments are given by:
‰1Š     
CO …q† ˆ CA Q=q ‡ P2 V1 Q ‡ CI V1 Q for component [1]

and
‰2Š     
CO …q† ˆ CA Q=q ‡ P2 V2 Q ‡ CI V2 Q for component [2]
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JIT purchasing practices have mitigating effects on the three components of ordering costs
(Hahn et al., 1983). Administrative costs can be reduced through single sourcing EDI or long-
term contracts; transportation costs can be reduced through geographical concentration or single
sourcing (simplified routes, higher utilisation) and inspection costs can be eliminated, since
quality is previously assured through certification, adequate supplier selection and development
and evaluation procedures. Let us suppose that, in JIT environments, administrative and
transportation costs are reduced by
CA and
P2 respectively. Ordering costs are then given by:
‰1Š   
CO;JIT …q† ˆ …CA
CA † Q=q ‡ …P2
P2 † V1 Q for component [1]

and
‰2Š   
CO;JIT …q† ˆ …CA
CA † Q=q ‡ …P2
P2 † V2 Q for component [2]

‰1Š ‰1Š ‰1Š

Total inventory costs can therefore be written as CT …q† ˆ CH …q† ‡ CO …q† in non-JIT
‰1Š ‰1Š ‰1Š
environments and CT;JIT …q† ˆ CH ;JIT …q† ‡ CO;JIT …q† in JIT environments for component [1] and
similarly for component [2]. The economic order sizes for component [1] in non-JIT and JIT
‰1Š ‰1Š
environments, which are obtained from solving the equations CT …q†=q ˆ 0 and CT;JIT
‰1Š    ‰1Š  
…q†=q ˆ 0 respectively, are qnon JIT ˆ …2 CA Q=…V1 P1 ††1=2 and qJIT ˆ …2 …CA
CA †
 1=2 ‰2Š    1=2 ‰2Š 
Q=…V1 P1 †† : In the same way, qnon JIT ˆ …2 CA Q=…V2 P1 †† and qJIT ˆ …2 …CA


CA †Q=…V2 P1 ††1=2 .
Thus, the reduction of costs achieved with JIT purchasing for component [1] is:
‰1Š ‰1Š ‰1Š ‰1Š      
CT …qnon-JIT † CT ;JIT …qJIT † ˆ
CA Q …V1 P1 =…2 CA Q†† ‡
P2 V1
  
Q ‡ CI V1 Q ˆ R‰1Š

and for component [2] is:

‰2Š ‰2Š ‰2Š ‰2Š       
CT …qnon-JIT † CT ;JIT …qJIT † ˆ
CA Q …V2 P1 =…2 CA Q†† ‡
P2 V2 Q
 
‡ CI V2 Q ˆ R‰2Š

Since R[2] > R[1], it is proved that inventory cost reductions under JIT purchasing are more
notable for voluminous components.
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