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Lean manufacturing: A perspective of lean suppliers

Article  in  International Journal of Operations & Production Management · November 2003

DOI: 10.1108/01443570310501880

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Lean
Lean manufacturing: manufacturing
a perspective of lean suppliers
Yen Chun Wu
Department of Transportation, Warehousing, and Logistics, National 1349
Kaohsiung First University of Science and Technology, Kaohsiung City,
Taiwan
Keywords Lean production, Just in time, Logistics management, Supplier relations,
Performance measurement (quality)
Abstract The main thrust of this paper empirically examines the connection between lean
production and various aspects of the logistics system. This paper performs a comparison analysis to
find whether significant performance/practice differences exist between lean suppliers and non-lean
suppliers. The research findings indicate that, even given the same organizational constraints and
resources, lean suppliers gain significant competitive advantages over non-lean suppliers in
production systems, distribution systems, information communications, containerization,
transportation systems, customer-supplier relationships, and on-time staging/delivery performance.

Introduction
Top Japanese manufacturing firms have achieved excellent international
competitiveness in a number of industries such as auto, electronics, and
machinery in the past two decades. Faced with intensive competition from the
world, increasing operation costs, and growing operational problems, many
manufacturing firms around the world, as a result, have made tremendous
efforts to understand Japanese manufacturing practices. US writers such as
Hall (1983) and Schonberger (1982) argue that what the Japanese had actually
done was to develop a new approach to manufacturing management. Lean
manufacturing, previously known as the Toyota Production System (TPS) or
the Just-in-Time (JIT) system (Toyota, 1988; Womack et al., 1990), has attracted
much attention in the United States from both academia and industry.
Recent movements suggest that many automobile manufacturers are
actively adopting the lean concept. Most auto manufacturers have now adopted
at least some aspects of this system. According to Maccoby’s (1997) study,
about one-fourth of US plants have tried to adopt the entire system. However,
transferring lean production to a foreign country is a long journey and a
challenging task because so many different aspects of plant operation are
involved. The transfer of JIT, central to TPS, requires a substantial effort on the
part of foreign manufacturers.
Lean manufacturing, pioneered by Toyota, involves inventory and quality
International Journal of Operations &
control, industrial relations, labor management, and supplier-manufacturer Production Management
Vol. 23 No. 11, 2003
practices that differ fundamentally from traditional American business pp. 1349-1376
practices. In spite of these differences between Japan and the United States, q MCB UP Limited
0144-3577
recent research (Cusumano and Takeishi, 1991; Liker, 1997; Womack and Jones, DOI 10.1108/01443570310501880
IJOPM 1996b) suggests that substantial transfer of the Japanese production system
23,11 can occur and that this transfer has had a significant positive impact on the
performance of the selected US manufacturing plants. For instance, Nakamura
et al. (1998), using a sample of US and Japanese-owned manufacturing plants in
the United States in three different industries, shows that the implementation of
JIT has improved many of the performance measures for these US
1350 manufacturing plants. A study by Zayko et al. (1997) indicates that lean
manufacturing can result in a 50 percent reduction of human effort,
manufacturing space, tool investment, and product development time, and a
200-500 percent improvement in quality. The results of a study of 200 US
manufacturers by Germain and Droge (1997) also demonstrate that improved
inventory, financial, and market performance correlates with increased
adoption of JIT purchasing methods. However, Toyota recently makes a
dramatic policy change for its lean support service. A decade after providing
free instruction in lean manufacturing to all American suppliers, Toyota is
curtailing the service. Parts suppliers need to pay the tuition if they want to
learn the vaunted TPS (Chappell, 2002).
Logistics or supply chain management refers to the art of managing the flow
of materials and products from source to user (Copacino, 1997). According to
Levy (1997), JIT delivery and low inventory are the heart of lean production.
Lean logistics refers to the superior ability to design and administer systems to
control movement and geographical positioning of raw materials,
work-in-process, and finished inventories at the lowest cost (Bowersox et al.,
2002). A more holistic view about lean logistics is proposed by Jones et al.
(1997). Jones et al. argue that the “value stream” is a new and more useful unit
of analysis than the supply chain or the individual firm. They reinforce the
importance of the value stream concept that extends both upstream from the
product assembler into the “supply chain” and downstream into the
“distribution chain”. However, large manufacturers have a better chance in
achieving such “lean logistics” than their suppliers do, as it is more likely for
large firms to have enough resources and bargaining powers. For suppliers,
though it may not be possible for them to optimize their supply chain
efficiency, it is still critical for suppliers to have a responsive logistics system in
place to meet the customer’s demand.

Lean suppliers
Helper (1991) suggests that if US automakers wish to continue to compete in
the global industry, which is characterized by technology-, time-, and
quality-based competition, they will need to establish long-term, mutual trust
relationships between the suppliers and customers. Research from Keller et al.
(1991) reports that for manufacturers, supplier support was a critical factor for
the successful implementation of lean production. Helper’s (1991) survey
results indicate that in order to enhance long-term competitiveness, it is
important to encourage suppliers and customers to develop capabilities of JIT Lean
production as well as JIT delivery. Customers can obtain improvements in manufacturing
quality and delivery by motivating suppliers to adopt JIT production and JIT
delivery. Similarly, suppliers have to learn to respond to the increasingly
demanding needs of its customers in this competitive market, which is driven
by ever-increasing requirements for cost reduction, responsiveness to customer
needs, and JIT supply (Owen and Kruse, 1997).
1351
As automakers have significantly reduced their number of suppliers (Helper,
1991), it becomes imperative for automakers to choose suppliers who can meet
their product development, production, and logistics requirements due to high
supplier switching costs. According to Helper’s study, Japanese automakers
(particularly Toyota) showed that a skilled and loyal supplier base could be a
key source of competitive advantage.
As automobile manufacturers are striding toward the lean direction and
demand JIT logistics from suppliers, suppliers with lean systems in place are
more likely to be incorporated into the total system (Suzaki, 1987). As Heim and
Compton (1992) put it, “A world-class manufacturer encourages and motivates
its suppliers to become coequals with the other elements of the manufacturing
system.” An analysis conducted by Swenseth and Buffa (1990) shows that the
implementation of lean strategy results in an increase in the total logistics cost
of a manufacturer and his vendors. These cost increases are in the form of
increased transportation, inventory carrying, and expected stockout costs.
However, in the case of the US auto industry, it is not uncommon that
automakers pay for the transportation. Therefore, if a supplier is armed with
the lean system, the supplier can keep its inventory to a minimal level and
lower its expected stockout costs. Therefore, suppliers who adopt internal lean
production practices should be more compatible with the buyer’s JIT logistics
requirements.
A wealth of literature has been written regarding the positive strategic
impact of lean manufacturing on a company’s competitiveness in the past two
decades. Existing literature, however, focuses mainly on internal efficiency
performance like cost reduction, quality, design, administrative efficiency, and
productivity. Relatively few empirical analyses are undertaken to understand
whether adoption of internal lean manufacturing techniques is also related to
external logistics practices.
Current comparison studies on productivity performance of suppliers who
provide products for their lean customers, roughly fall into three categories.
The first category is mainly based on sporadic case studies to illustrate the
implementing effort and resulting outcomes of that (those) particular
supplier(s). Secondly, regardless of the ownership issue (local vs foreign), all
suppliers are surveyed at random and lumped together. Then statistical
analyses are performed on the survey data to show a picture about the
supplier’s overall productivity performance. The third category purposely
IJOPM selects suppliers for different ownership (e.g. US-owned suppliers vs
23,11 Japanese-owned transplants or suppliers) or from different industries. A
comparative statistical analysis on performance is also conducted among
different ownerships and industries. Many insightful comments and findings
are generalized from those studies. However, the above-mentioned
comparisons make many important, but questionable assumptions. That is,
1352 all suppliers/manufacturers investigated in those studies are assumed to have
similar company constraints or resources. However, that is hardly the case in
the real world because each firm certainly enjoys different resources and faces
different constraint. Even given the same organizational constraints such as
human resources, financial resources, facility equipment, industrial relations,
and plant configuration, as well as cultural atmosphere, it is highly likely that a
firm still responds significantly differently to different customers even though
their customers are all in the same industry. Consequently, a supplier may take
different strategies to satisfy the requirements set by a particular customer
(Wu, 2002). A comparative analysis of supply-chain performance by Liker and
Wu (2000) reveals that a buyer’s lean logistics practices and internal policies
can have a profound impact on its suppliers’ ability to optimize operations.
This exploratory study compares many different independent variables in
more of a descriptive mode. The literature on lean manufacturing methods as
compared to traditional US production methods suggests some possible
propositions for directions of differences. Thus, the paper presents a series of
high-level research propositions that helped guide the design of the study.
The main thrust of this paper, taking the automotive parts supplier’s
perspective, empirically examines connection between JIT and various aspects
of logistics system. The central research question in the paper is: “Do
significant performance/practice differences exist between lean suppliers and
non-lean suppliers?”

Research propositions
Logistics represents a comprehensive process, which requires integration of a
wide range of activities. A modified definition of logistics by the Council of
Logistics Management (CLM, 1998) is provided below:
Logistics is that part of the supply chain process that plans, implements, and controls the
efficient, effective forward and reverse flow and storage of goods, services, and related
information between the point of origin and the point of consumption in order to meet
customers’ requirements.
Specifically, JIT logistics is to shorten the lead time from customer order to
manufacture and delivery by getting the right parts to the right place at the
right time. The ultimate goal is to provide best quality, lowest cost, on-time
delivery to the customer. A mere collection of JIT practices does not make a
successful logistics system. To achieve the ultimate goal, many important
factors must work together. Womack and Jones (1996b) provide an excellent
summary of main actions taken to make the dramatic improvements to the Lean
value streams when Toyota transformed its US original and aftermarket parts manufacturing
distribution system. In addition to dealer involvement and network structure,
actions on the supplier side include production, distribution, transportation,
and customer relationships, each of which is discussed later.

Production systems 1353

JIT works on the principle of small-lot production and JIT delivery (Purchasing,
1992). Zipkin (1991) states that inventory reduction is a result of the adoption of
lean manufacturing. JIT achieves inventory turnovers of 20 in comparison with
three to five for the traditional production setting (Nakamura et al., 1998;
Schonberger, 1986; Wurz, 1995). A survey by Germain and Droge (1997) shows
that JIT purchasers have less inbound inventory. To fully benefit from JIT, lean
suppliers understand that they can meet customer demands for an ever
increasing variety of products with frequent, quick changeovers in
combination with other JIT techniques (Suzaki, 1987). In addition, high
machine mobility and multi-skilled workers can help lean suppliers adjust
production to changes in customer demand quickly (Hirano, 1989; Suzaki,
1987).
Lean production focuses on preventing defects, not merely finding them
(Shingo, 1989). As a result, lean suppliers are expected to be responsive to
quality problems on the shop floor so defects can be prevented. Zayko et al.
(1997) report that lean production typically results in a 200-500 percent
improvement in quality. Levery (1998) states that preventive maintenance has
a significant impact on quality, quantity, and cost. Owing to the importance of
machine reliability and availability, lean suppliers should faithfully follow the
schedule of preventative maintenance. Hence,
P1. Significant differences in production performance exist between lean
suppliers and non-lean suppliers.

Distribution systems
According to Shingo (1989), in addition to reduction in production cycle time,
JIT is effective in reducing storage areas, which eliminates the need for outside
warehousing. Even given a short order notice from customers, lean suppliers
with a responsive production system should not have major difficulties in
meeting customer demands.
A basic JIT discipline is housekeeping. By practicing the principle of
orderliness, a sense of standardized production and shipping operations will be
developed (Suzaki, 1987). In addition, lean production places an emphasis on
problem detection and problem-solving. Visual aids such as color-coding are
often used to prevent problems by immediately visually communicating
information to supervisors or others (Monden, 1993; Shingo, 1989; Womack and
Jones, 1996a).
IJOPM Lean production requires frequent, rapid flows of information and goods
23,11 along the value chain (Levy, 1997). In addition to the famous kanban system
extensively used by Toyota, JIT manufacturers are also increasingly
exchanging computerized information with suppliers who can help them
reduce the lead time from product design to market (Kasarda and Rondinelli,
1998). Also, according to Kasarda and Rondinelli, it is important for lean
1354 suppliers to have telecommunications networks with their customers to get
information on communication, order, production schedule, track and
management material flow, and inventory.
Under JIT, due to a large number of parts in small quantities coming into the
assembly plant, efficient, effective containerization is important (Udoka, 1993).
Use of containers of a standardized size can help reduce inventories and
facilitate the distribution process (Nicholas, 1998). According to Schniederjans
(1993), use of bar-coding can result in reduction in wasteful activities of
inspection, classification, and storage of inventory and use of reusable
containers can lead to improvement in materials handling methods
(Schniederjans, 1993). In addition, Florida (1996) examines the relationship
between advanced production practices and innovative approaches to
environmentally conscious manufacturing. He argues that firms that are
innovative in terms of their manufacturing process are likely to be more active
in addressing environmental costs. Maxwell et al. (1993) also suggest a
relationship between lean production and innovative environmental
manufacturing practices. Suppliers with high delivery frequencies are likely
to use returnable containers for environmental and cost reasons. Hence,
P2. Significant differences in distribution performance exist between lean
and non-lean suppliers.

Transportation systems
JIT delivery is the most obvious aspect of lean production affected by
geographic dispersion of the supply chain (Doz, 1987). JIT manufacturers view
suppliers with close proximity as perfect candidates for JIT delivery. As auto
manufacturers often require their suppliers to make several deliveries a day,
with each delivery scheduled to arrive within a narrow window (Levy, 1997),
on-time delivery is very important (Sheridan, 1995). Suppliers with lean
systems are the perfect candidates for making frequent JIT delivery. According
to Suzaki (1987), under JIT the role of transportation is to help production
activities with the minimum amount of inventory, tying two plants with an
“invisible conveyor system”. Materials transfer between firms should be
synchronized with other production activities. As a result, when appropriate,
multiplant transportation and mixed loadings are often recommended
(Womack and Jones, 1996b). Hence,
 P3. Significant differences in transportation performance exist between Lean
lean and non-lean suppliers. manufacturing

Customer-supplier relationships
Lambert et al. (1998) suggest that the structure of activities/processes within
and between companies is crucial for achieving superior competitiveness and 1355
profitability. It is vital that lean suppliers receive, on-time, stable schedules so
that materials and parts can be secured and delivered (Keller et al., 1991). As
JIT manufacturers motivate their suppliers to adopt JIT production and JIT
deliveries, they understand the importance of stable order demands for
suppliers who adopt the lean techniques (Harrison, 1997). Lean production
requires close coordination with suppliers and customers to achieve the desired
levels of quality and delivery (Levy, 1997). Instead of the previous adversarial
style relationships, lean production places its purchasing emphasis on
involving a transformation to partnerships with suppliers (Jones et al., 1997).
Because lean suppliers are more likely to have the ability to guarantee delivery,
quality, and cost to the manufacturer and be more willing to work closely to
understand and incorporate the manufacturer’s requirements in their
operations. Lean suppliers are more likely to gain more responsibility for
design, subassembly, and JIT delivery in return for the promise of a long-term
relationship (Helper, 1991). We can expect a dependent, mutual trust, and
long-term relationship between the lean suppliers and customers. A survey
study by Chen (1991) shows that, for over two-thirds of manufacturing firms
surveyed, the first step in the implementation included the certification of
suppliers. Suppliers with lean systems are easier to get certified. Many
companies accept goods uninspected as part of their JIT philosophy, especially
from certified suppliers (Burman, 1995).
Though JIT systems work best with minimal formality regarding the
specific part numbers and quantity of product to be purchased (Lubben, 1988),
customers can signal their intentions in several ways, including equity
investment, vertical integration, legally enforceable contracts, and unwritten
contracts backed up by parties’ concern for their reputation for fair dealing
(Helper, 1991). Owing to the serious impact of JIT delivery, we can expect that
customers have rigid requirements on quality, quantity, and delivery.
P4. Significant differences in customer-supplier relationship exist between
lean and non-lean suppliers.

Research methodology
This section describes the research setting, study population, survey design,
data collection methods, and statistical analysis employed in the comparative
study.
IJOPM Research setting
23,11 The automobile industry had served as the prime industry for the analysis.
Automobile manufacture is chosen in the study because of its richness, its
complexity of needs, as well as an unusual level of openness to scholarly
inquiry in this industry (Bensaou and Venkatraman, 1995; Dyer, 1996;
Nishiguchi, 1994). Also, it is well recognized that the auto industry is more
1356 advanced in adopting JIT methods.
The sample of firms. The study population is defined as American first-tier
automotive suppliers manufacturing individual parts, assembled
components/subsystems for American automobile manufacturers and
Japanese transplants located in the USA. Suppliers of raw materials and
semi-conductors, chemicals, indirect materials, tooling and dies, or
consulting/engineering service are excluded in the study.
This questionnaire is for plants whose primary business is auto parts
manufacturing – injection molding, machining, assembly, stamping, interior
and exterior components – and whose automotive customers include both
American and Japanese companies. The sample for this study is mainly chosen
from the 1996 ELM Guide to US Automotive Sourcing. In all cases we selected
companies at random with at least 100 million[1] annual sales, most of which
are located in the Mid-West region. The 100 million criterion was used to help
limit our samples to larger first-tier auto parts suppliers, who are directly
affected by their automotive customer purchasing policies and practices.
The unit of analysis. The unit of analysis for the survey is the parts
plant-customer dyad focused on their one largest-dollars volume product for
the dyad. That is, we are measuring relationships across plants. Because a
supplier may operate several plants with very different internal and external
logistics, we treat the plant as the focus and treat multiple plants from the same
company as separate cases. While the information is gathered at the supplier
plant level, the measures used in the study focus on logistics practices between
the plant and the US and Japanese and plants to which it sells the largest
dollars volume of product.
Survey approach. Based on a literature search, a preliminary survey
instrument was designed to measure the variables of interest. In order to
provide insight beyond the questionnaire research, site visits were performed
by the author. Though these interviews were performed on a convenient
sample of suppliers (primarily located in Michigan and Ohio) who agreed to
host a short visit, many visited suppliers are published as the case study
subject for their excellent lean achievement (Liker, 1997; Liker et al., 1999).
Preliminary questionnaires were sent to the plants at least one week prior to
our visits with the request that they fill out the questionnaires in advance of our
visits so the researchers could review and discuss the answers with the
respondents. Following Campbell’s (1995) guidelines, the plant visits make it
possible to identify the most knowledgeable respondents and to develop items
in simple, concrete terms anchored in the industrial context of designing, Lean
manufacturing, and assembling (i.e. in the language of the respondents). The manufacturing
questionnaire was pre-tested in ten sites and repeatedly modified in order to
eliminate ambiguities and errors. Based on the plant visits, a structured
questionnaire was developed to measure the variables of interest. We then went
back to the original ten sites with the final question wording and their data
were included in the study.
1357
Because many companies supply their customers with several types of
products, and their relationships with their customers differ by product and
customer, the respondents were first asked to identify their largest American
and Japanese customers (referred to as “Customer A” and “Customer J”,
respectively) in terms of annual sales. Then they were asked to answer the
questions based on a particular product, referred to as “Product A” in terms of
the largest sales for Customer A, and “Product J” for Customer J, respectively,
and the specific plant to which they ship Product A (J) to Customer A (J),
referred to as Plant A (J). The data collection efforts were focused primarily on
first-tier suppliers as their products are directly shipped to the automotive
customer and are therefore more likely to be substantially impacted by the JIT
delivery requirements set by the auto customers.
Qualified suppliers were first screened and selected at random, based on our
sample selection criteria. To enhance the response rate, in most cases, we
obtained permission in advance from their corporate headquarters. Prior to the
mailing, phone calls were made to each plant to identify the appropriate
respondents at each plant. Each respondent was then contacted directly to
explain the purpose of the study and answer any concerns raised regarding the
study, and to obtain their agreement to participate in the study. In addition, we
controlled the number of plants we intended to contact within a manageable
size (25-30 plants) at any given time due to the large number of phone calls
needed to obtain complete data. As a result, the phone calls were made over
time and stopped when our research resources had been consumed and a
desired number of responses had also been collected. In all, 156 plants were
contacted and eight plants were immediately dropped from the study due to
plant shutdowns, serious labor issues, and insignificant automotive sales. A
total of 11 plants refused to participate in the study for different reasons such
as company policy, management unavailability, and confidentiality.
Confidentiality was the major reason given for the decision not to participate
in this study. As a result, after these changes, the questionnaire was mailed to
137 plants. A questionnaire was mailed to the suppliers, along with a cover
letter and a memorandum from the researchers that explained the purpose of
the study, stressed the need for participation, and assured confidentiality of all
responses.
The data required for this study were collected from people whose primary
responsibility involves production scheduling, materials management, and/or
IJOPM outbound transportation. The respondents were encouraged to seek out help on
23,11 questions that could be better answered by other functions such as production,
inventory, quality, and transportation. These respondents were selected on the
grounds that they would have the broadest knowledge about both production
and logistics. In order to enhance the quality of the study, aggressive follow-up
phone calls, mailings, e-mails, and faxes were used to boost the response rate
1358 and to get answers to all questions left blank in the returned questionnaires. To
encourage their participation, these participants were promised a copy of a
summary of the study.
The statistics presented in this report are based on responses received by 15
October 1998. In all, 108 responses were received. From these cases, five cases
were dropped because they were not first-tier suppliers and therefore did not
meet the population criteria. Thus, the usable responses were reduced to 103
cases, resulting in a 72.0 percent response rate[2]. Out of 103 usable responses,
91 (88.4 percent) plants supply products in large quantity to both American
automakers and Japanese transplants. Each plant surveyed generated two
cases: one for its US customer, the other for its Japanese customer. Twelve
cases were dropped for insignificant sales because data were entered into the
analysis pool only if the supplier’s Japanese or US customer represented at least
10 percent of sales. This results in a total of 194 cases ð91 £ 2 þ 12Þ: Since
non-response bias is inherent in all survey research that does not have 100
percent compliance, a test for non-response bias was performed (Walton, 1994).
Two analyses were conducted to test for non-response bias. First, a test for
non-response bias was conducted based on the annual sales between the
respondents and non-respondents (Evers et al., 1996). Secondly, late response
can be used to test the non-response bias. No noticeable pattern among the
variables could be detected to indicate that a non-response bias existed.
Accordingly, non-response bias is not considered as a problem (Armstrong and
Overton, 1977; Lambert and Harrington, 1990).
Measurements. This lengthy 17-page questionnaire was categorized into
seven sections: business background, distribution system, trucking system,
plant production system, customer characteristics, customer-supplier
relationships, and performance indicators.
Previous studies try to investigate logistics performance from only one or
few components of logistics practices. These studies do not provide strong
quantitative evidence because of the use of Likert scale “opinion-type”
questions and limited measures. In contrast, this study will use factual
(quantitative) questions as practical as possible and a comprehensive list of
input components in order to yield strong evidence.
The measures investigated in this study were developed largely based on an
extensive literature review and personal plant visits. While some questions are
borrowed from the existing studies, most were designed by the authors to meet
our particular study objectives. For some measures such as loading methods
and transport routes, pictorial examples are provided to assist respondents in Lean
answering the questions. Individual measures will be described as they are manufacturing
presented in the results section – in most cases they are self-explanatory, e.g.
percent of freight, shifts of inventory, years of contract. When a measure is not
self-explanatory, the measure is discussed in the section where the results are
reported.
Lean logistics focuses on the key concepts of value, value streams, flow, pull,
1359
and perfection (Jones et al., 1997). Since the degree of leanness is not directly
observable, we create an index of individual measures of “leanness”. Based on
the literature review, the following core practices are used to evaluate the
degree to which lean manufacturing is implemented inside each plant. Each
item is assigned an equal weight. The five variables are:
(1) pull system;
(2) level production;
(3) short lead time;
(4) continuous flow; and
(5) high inventory turnover.
Our analysis indicated that these practices were consistent and reliable in
measuring the “leanness” variable. First, Cronbach’s a is used in this study to
measure the internal consistency and reliability. According to Nunnally (1978),
a Cronbach’s a of 0.60 is considered to be acceptable for empirical studies. We
obtained an a value of 0.70 for the measure of “leanness”. Second, we compare
the scores of the subset of plants we had visited with our independent
observations for those plants. The results were similar.

Statistical analysis
Generally, large automobile parts plants have separate production lines for at
least final assembly to each major customer. Therefore, each plant was
assigned two overall leanness scores that were based on the sum of the items
for all five dimensions: one for its main product line for its largest American
customer; the other for its main product line for its largest Japanese customer.
That is, depending on its scores, the same plant may be classified as a lean
supplier for its largest American customer, but as a non-lean supplier for its
largest Japanese customer, and vice versa. The overall leanness score is based
on the sum of the items from all five lean dimensions.
Analysis of covariance (ANCOVA) is used in the study to detect whether
significant differences exist between the lean and non-lean plants in their
logistics practices. All comparisons were investigated by controlling the effects
of other variables such as annual sales, product type (interior body, exterior
body, mechanics, engine, or electronics), product complexity (measured by the
number of different parts making up the final product), and customer identity
IJOPM (Japan/US customer). Conventional P values (0.10, 0.05, 0.01) are used in the
23,11 study.
To make such a comparison, the 194 cases were equally divided into three
roughly equal-sized groups, based on their scores on the degree of “leanness”.
These ranged from the most lean to the least lean. The study compares the
lowest scoring group ðN ¼ 65Þ (referred to as non-lean suppliers) with the
1360 highest scoring group ðN ¼ 65Þ (referred to as lean suppliers). We omitted the
middle group because we suspected that our measures were not sensitive
enough to classify suppliers who have mixed systems. However, readers are
advised to be cautious about the fact that the results of the comparison are
likely to be sensitive to the size and composition of the “middle group”.

Empirical results
The main focus of this section is to present the results associated with the
above-mentioned logistics practices.
Table I presents the mean differences in supplier’s production practices
between the lean and non-lean suppliers. As we can see, a clear pattern
emerges. Consistent with the expectations and previous research (Hall, 1983;
Womack and Jones, 1996b; Womack et al., 1990), almost on every measure of
production, lean suppliers perform better than the non-lean suppliers. Suppliers
using lean techniques are able to maintain fewer shifts of inventory at the
customer’s site than the non-lean suppliers.
Table I also shows a shorter delivery lead time for lean suppliers, defined as
the time between the finished goods picked up from the dock and finished
goods directly delivered to the customer’s plant in terms of shifts. In
comparison with the non-lean suppliers, lean suppliers have a much higher
percentage of machines used to produce parts, which are movable without

Items Lean (N ¼ 65) Non-lean (N ¼ 65)

Inventory on the road (shifts) 2.0 2.8 ***

Inventory maintained at the customer’s site
(shifts) 3.5 5
Delivery lead time (shifts) 2.7 5.4 **
Machine mobility (percent) 40.6 23.5 ***
Labor flexibilitya 2.4 1.8 ***
Frequency of die changesb 3.3 3.0
Quality responsiveness (min) 3.5 7.5 ***
Frequency of preventive maintenancec 2.4 1.9 ***
PM schedule followedd 3.1 2.6 *
Table I. Percent of PM skipped 11.1 28.7 **
Differences in means on Percent unscheduled downtime 5.8 8.0 ***
production systems Notes: a Scale (1 = one process, 3 = many processes); b Scale (1 = monthly, 3 = daily, 5 =
(lean suppliers vs multiple times per shift); c Scale (1 = less frequent, 2 = almost the same, 3 = more often); d Scale (1
non-lean suppliers) = seldom, 4 = always); *p, 0.1; **p , 0.05; ***p , 0.01
major expenses to enable equipment layout changes when switching Lean
production to different models. In addition, lean suppliers’ workers operate manufacturing
more processes than those for non-lean suppliers. In addition, when a
production line in the plant is stopped due to quality problems or
abnormalities, it takes lean suppliers 3.5 mins to respond compared with
7.5 mins for non-lean suppliers.
1361
Production systems
Finally, lean suppliers take preventive maintenance more seriously than the
non-lean suppliers. Their preventive schedule calls for more frequent
maintenance checking compared to the routine maintenance checklist
recommended by the original manufacturers, resulting in less percentage (5.8
percent) of unscheduled downtime (8.0 percent for non-lean suppliers). Of 11
items listed in Table I, six items are statistically significant at the level of 0.01,
two items at the 0.05 level, and one item at the 0.10 level.

Distribution systems
JIT systems focus on materials flow not on materials storage (Kamoun and
Yano, 1996). Central receiving facilities are often eliminated in favor of very
limited staging capabilities adjacent to the point of use.
Table II presents the results associated with the suppliers’ storage and
shipping management practices. Surprisingly, about 10 percent of lean
suppliers use their own outside warehouse or distribution center to store
additional finished products while only 2 percent of non-lean supplier use this
strategy. On an average, 90 percent of suppliers surveyed reported that their
shipping sites are always arranged properly and orderly. Lean suppliers
appear to use visual aids ðP , 0:10Þ and color-coding more often than non-lean
suppliers and arrange their shipping sites in a more orderly manner. The visual
aids are used to clearly indicate who brings what to where and exactly when.
However, the differences in color-coding and management of shipping sites
between lean and non-lean suppliers are not significant.
Ansari (1986) states that to operate effectively in the JIT environment,
suppliers must also have access to the production and inventory planning data
of the buyers in order to adequately plan for their own production. Key
ingredients for any successful strategic partnership are open and effective

Items Lean (N ¼ 65) (%) Non-lean (N ¼ 65) (%)

Use of outside warehouse by the planta 10 2 ** Table II.

Use of color-codinga 71 65 Differences in means on
Orderly shipping sitea 91 88 distribution systems
Use of visual aidsa 79 41 * (lean suppliers vs
Notes: a 1 = yes, 0 = no; * p, 0.1; ** p , 0.05; *** p , 0.01 non-lean suppliers)
IJOPM means of communication and information sharing (Henderson, 1990; Turner,
23,11 1991). Das and Handfield’s (1997) study also shows similar conclusions. This is
especially important in developing customer-supplier-carrier partnerships due
to the intangibility of the services provided. Information and communications
sharing between the two partners can involve all the parties in the whole
supply chain in numerous ways (Greis and Kasarda, 1997). Many carriers have
1362 the ability to offer computerized tracking and tracing of shipments (Master
et al., 1991). This information can be used to help manufacturers further narrow
delivery windows or make adjustments to the existing schedules, as more
information becomes available. A similar report by Sheth and Sharma (1997)
also claims that linkages such as EDI will reduce costs for both the customers
and suppliers and dramatically reduce cycle times.
Table III presents the results associated with information shared
electronically between the suppliers and their customers. Consistent with
expectations, information communications/technology is used extensively in
the auto industry. As we can see, the degree of information sharing employed
between the suppliers and customers is higher for lean suppliers than for
non-lean suppliers. Customers share more information electronically with their
lean suppliers than non-lean suppliers. There are significant differences in
information sharing on shipment tracking, advanced shipment notice,
shipment schedule, and production schedule. Table III suggests that the
customers of lean plants put a greater emphasis on delivery performance. In all,
71 percent of lean suppliers have access to shipment tracking compared to 54
percent of non-lean suppliers. In addition, 100 percent of lean suppliers have
information on advanced shipment notices compared to 89 percent of non-lean
suppliers. A total of 44 percent (90 percent) of lean suppliers have data on the
production schedule (shipment schedule) while only 30 percent (84 percent) of
non-lean suppliers have such information. This may be because there is less
inventory between the lean suppliers and their customers so this tracking takes
on heightened importance.
Table IV presents the results associated with the use of containers.
Bar-coded containers play an important role in efficient packaging. Many
researchers (Grigg and Donohue, 1989; Udoka, 1993; Wurz, 1995) discuss the

Items Lean (N ¼ 65) (%) Non-lean (N ¼ 65) (%)

Order processinga 81 86
a
Table III. Shipment tracking 71 54 **
Differences in means on Advanced shipment noticea 100 89 ***
use of information Communicationa 86 84
communications (lean Shipment schedulea 90 84 *
a
suppliers vs non-lean Production schedule 44 30 *
suppliers) Notes: a 1 = yes, 0 = no; * p, 0.1; ** p , 0.05; *** p , 0.01
benefits of containerization such as increased productivity, cost savings, and Lean
increased product quality. Containers are particularly important to lean manufacturing
manufacturers who wish to bring small quantities of material just where they
are needed and when they are needed. As we can see, 98 percent of lean
suppliers use bar-coded containers compared to only 84 percent of non-lean
suppliers. The difference is statistically significant at the 0.01 level.
Table IV also shows that it is a common practice in the auto industry to use
1363
returnable containers. In most cases, returnable containers are provided by the
automakers. Accordingly, we see that 76 percent of the lean suppliers use the
containers whose size is designed by the customers compared with 57 percent
for non-lean suppliers. In lean manufacturing, customers decide on the size and
shape of containers needed line-side for optimal parts presentation. Though
lean suppliers reported a higher percentage (83 percent) of satisfaction with the
size of containers used for products delivered to the customer compared to 78
percent for non-lean suppliers, the difference is not significant.

Transportation systems
Some writers such as Ferrin (1994) and Kenney and Florida (1993) believe that
suppliers should be located near their customers. They believe that closer
suppliers will have advantages over more distant suppliers. In addition to
material transportation problems, distant suppliers may be at a disadvantage
in communication because of the less frequent visits by their personnel (SME,
1988). However, authors such as Anderson and Quinn (1986) state that reform
of transportation regulation made longer distances feasible in JIT systems
because the transportation costs can be better controlled than in the period
prior to deregulation. Artholomew (1984) agreed that US auto suppliers are not
always close to the assembly plants. He does not expect that adoption of JIT
would cause suppliers to move their plants closer to their customers in the
United States. Ayers (1989) believes that cost factors play a dominant role in
JIT evaluations. Even though freight costs frequently increase with JIT
systems due to the greater incidence of smaller shipments, it may be possible to
offset the costs through freight consolidation.

Items Lean (N ¼ 65) (%) Non-lean (N ¼ 65) (%)

Use of bar-coded containersa 98 84 ***

Use of returnable containersa 73 67 Table IV.
Returnable containers provided by customera 83 76 Differences in means on
Container size suggested by customera 76 57 ** containerization (lean
Appropriateness of container sizea 83 78 suppliers vs non-lean
Notes: a 1 = yes, 0 = no; * p, 0.1; ** p , 0.05; *** p , 0.01 suppliers)
IJOPM As can be seen in Table V, American suppliers, either lean or non-lean
23,11 suppliers, serve their customers with an average distance of greater than 400
miles. The difference is not significant between the lean and non-lean suppliers.
It is generally agreed that the shipments required by the JIT companies are
smaller and more frequent than non-JIT systems. As a result, production
1364 scheduling must alter traditional run sizes to support small, economic lot sizes
that can meet JIT distribution and inventory management objectives (Isaac,
1992). In comparison with non-lean suppliers, lean suppliers are more likely to
make at least daily shipments (91 percent of shipments). Nevertheless, even for
non-lean suppliers, 71 percent of shipments are delivered on a daily basis.
While it is a common practice that auto suppliers in Japan are responsible for
their shipments, our data show that, as general automakers in the USA are
responsible for transportation costs. This practice will help them consolidate
their shipments, increase their bargain leverage with the trucking firms and
therefore reduce the overall transportation costs. However, US automakers like
Ford realized that penalizing suppliers for failing to send full truck-loads of
parts undermined lean manufacturing principles, so it has begun to phase out
the penalty since 2001 (Shirouzu, 2001).
Table V shows some significant differences in trucking practices between
the lean and non-lean suppliers. For example, 48 percent of lean suppliers’
trucking firms, versus 24 percent for non-lean suppliers, leave additional
trucks/trailers at the suppliers so the suppliers can load freight in advance of
the truck driver arriving at their dock. This allows lean manufacturers to build

Items Lean (N ¼ 65) Non-lean (N ¼ 65)

Shipping distance (miles) 408 451

Percent of shipments delivered daily 91.0 71.5 *
Percent use of additional truck/trailersa 48 24 *
Percent side-loading trucks/trailers 14.0 6.3
Loading time (mins) 41 83 ***
Tightness of pickup time windows (mins) 46 74 *
Percent on-time pickups required 99.0 97.9
Percent on-time pickups achieved 91.0 83.2 *
Percent on-time deliveries required by customer 100 94.5 **
Percent transportation costs of total costs (N¼ 32) 1.47 (n ¼ 11) 1.78 (n ¼ 9)
Percent of full truck-loads filled 57.4 63.8
Percent emergency shipping compared with last
yearb 0.82 1.08 ***
Table V. $ emergency shipping costs (per million sales) last
Differences in means on yearc $330 $596 *
transportation systems Notes: a 1 = yes, 0 = no; b positive signs mean increase, negative signs mean decrease; c to
(lean suppliers vs control the effects of the annual sales, emergency shipping costs are normalized by the annual
non-lean suppliers) sales; * p,0.1; ** p , 0.05; *** p , 0.01
right to the truck rather than to inventory and can eliminate double handling so Lean
truckers can then take the load immediately. manufacturing
There is a striking difference in loading time. Note that non-lean suppliers
spend twice as much time as lean suppliers do in loading a typical shipment. A
possible explanation for this significant difference is that more lean suppliers
(14.0 percent) use trucks/trailers equipped with a side-loading feature[3]
compared to 6.3 percent for non-lean suppliers. Side loading, the dominant
1365
approach in Japan, allows goods to be loaded from one or both sides of the
trailer instead of from the back.
Lean suppliers require a tighter on-time pickup time window (46 mins) while
non-lean suppliers give their trucking firms a 74 min. pickup time window. In
response to stringent on-time delivery requirements (100 percent for lean
suppliers, 95 percent for non-lean suppliers) set by their automobile customers,
lean and non-lean suppliers alike demand excellent on-time pickups from their
truckers accordingly. Although the truckers of lean suppliers perform much
better in on-time pickups (91 percent) than those of non-lean suppliers (83.2
percent), they still do not live up to expectations set by both the suppliers and
customers.
Overall, lean suppliers achieve higher scores on most aspects of logistics
performance. Because of the increased frequency of shipments, their small size,
and less likelihood that full vehicle loads are possible, vehicle utilization can be
poor in JIT systems. Perry (1988) refers to this as the substitution of
transportation assets for inventory assets. Contrary to the existing literature,
lean suppliers, who make more frequent, small-batch deliveries, have relatively
low transportation costs compared to non-lean suppliers. However, this result
should be taken with caution because only a small number of respondents were
willing or able to provide such information and the difference is not significant.
Surprisingly, truck utilization is not significantly different for lean suppliers
(57.4 percent) compared to the non-lean suppliers (63.8 percent). Though both
parties experienced about a 1 percent increase in emergency shipping last year,
after controlling the effects of sales, lean suppliers spent less in emergency
shipping last year (per million sales dollar) than the non-lean suppliers. The
difference is statistically significant at the 0.10 level. The result is interesting
considering that with little inventory buffer on site, readers might expect that
lean suppliers will spend a significant amount of money in emergency
shipping. Our data demonstrate otherwise.
Several clever delivery methods for loading and transport routes have been
developed to allow for small quantity shipment of each product, while filling
trucks. Tables VI and VII show how the suppliers apply the flow concept to
delivery. Table VI shows the percentage of freight (in terms of sales dollars)
transported by different loading methods. Though no significant differences
exist between the lean and non-lean suppliers, lean suppliers tend to take more
advantage and are more capable of in-sequence mixed loading and mixed
IJOPM product loading than the non-lean suppliers. The results are consistent with the
23,11 previous research.
Traditional point-to-point delivery for lean manufacturing is fine if one plant
provides enough products for an assembly plant to fill the truck multiple times
per day. But if this is not the case, compound deliveries, also called “milk-runs”
which involve stopping at several suppliers and/or assembly plants, are
1366 preferred. Similar to the circuit delivery approach, the compound delivery
approach is preferable when the shipments are from a great distance, it may
not be practical to make frequent milk-run routes and a consolidation center
can be used to take daily shipments of one product and break them up into
smaller, mixed product shipments.
As shown in Table VII, instead of using point-to-point deliveries, 61.5
percent of lean suppliers prefer using circuit or compound delivery[4] while 47
percent of non-lean suppliers use one of the approaches. The results support
Schineller’s study. According to Schineller (1998), multi-stop order
consolidation is a cost-saving logistics strategy that involves building loads
(routes) combining LTL-sized orders into multi-stop TL shipments to take
advantage of cheaper per-mile TL rates.

Customer demand
As shown in Table VIII, only 31 percent of the lean suppliers’ customers allow
the truck drivers to unload freight before the scheduled delivery time if the
drivers arrive at the customer’s dock earlier than scheduled while 67 percent of
non-lean suppliers’ customers permit early unloading. This implies that
customers for lean suppliers have tighter delivery time windows than
customers for non-lean suppliers possibly because the lean suppliers are
capable of meeting them.

Table VI. Items Lean (N ¼ 65) (%) Non-lean (N ¼ 65) (%)

Differences in means on
loading methods (lean Single-product loads 27 31
suppliers vs non-lean Mixed-product loads 56 59
suppliers) In-sequence mixed loads 17 10

Items Lean (N ¼ 65) (%) Non-lean (N ¼ 65) (%)

Table VII.
Differences in means on Point-to-point delivery 38.5 53 *
transport routes (lean Circuit delivery (milk-runs) 44.7 36.8
suppliers vs non-lean Compound delivery 16.8 10.2
suppliers) Notes: * p , 0.1; ** p , 0.05; *** p , 0.01
Suppliers may receive several modification notices from the customer Lean
regarding the required delivery quantities for a specific order before the manufacturing
actual quantities are delivered to the customer. This research is interested in
how accurate the required quantities are at different stages as a percent of the
scheduled delivery quantities. Table VIII shows that lean suppliers enjoy more
stable order demand from their customers compared to non-lean suppliers. The
TPS views stability of customer schedules as a prerequisite for JIT 1367
manufacturing (Toyota, 1995) because big fluctuations in the daily
production volume force the plant to change its quantitative work force
every day, thus making standardization very difficult, leading to quality
problems and waste of work force especially at a plant where daily work
transfer is unfeasible. In addition, stable daily production schedules have a
positive impact on maintaining stable shipping schedules for their customers.

Customer-supplier relationship
According to Gupta (1990) and Newman (1988), JIT requires a special
relationship between the supplier and the purchasing department of a JIT
facility. The relationship between the supplier and purchaser must be one of a
cooperative partnership where both parties work together to build a prosperous
future. According to Schniederjans (1993), some of the characteristic features of
their relationship include: long-term contracts; improved accuracy of order
filling; improved quality; ordering flexibility; small lots ordered frequently; and
continuous improvement in the partnership. According to Treleven (1987),
when suppliers are treated as long-term business partners, close relationships
and increased two-way communication allow the parties to mutually solve
quality problems.
Respondents were asked about the length of business relationship without
interruption with their customer and the degree to which the relationship with
their customers is based on mutual trust. As can be seen in Table IX, in
comparison with non-lean suppliers, lean suppliers maintain a closer
relationship with their customers. Table IX shows that a long-term, mutual
trust, interdependent relationship is more likely between lean suppliers and

Items Lean (N ¼ 65) (%) Non-Lean (N ¼ 65) (%)

Shipments allowed to be unloaded before the

scheduled delivery time by customers 31 67 ***
Percent deviation from schedule (1 week
before needed) 16.2 23
Percent deviation from schedule (2-3 days Table VIII.
before needed) 4.4 8.5 *** Differences in means on
Percent deviation from schedule (1 day before customer demand (lean
needed) 2.0 3.6 ** suppliers vs non-lean
Notes: * p , 0.1; ** p , 0.05; *** p , 0.01 suppliers)
IJOPM
Items Lean (N ¼ 65) Non-lean (N ¼ 65)
23,11
Business relationship (years) 14.2 9.6 **
Length of contract (years) 4.2 3.7 **
Relationship based on mutual trusta 3.48 3.13 *
Percent participation in supplier quality
1368 certification programb 81 68 **
Percent of products accepted as good without
inspection 95.2 90.4
Percent of sole source 92.0 88.0
Percent emphasis on delivery performance by
Table IX. customerc 44 40
Differences in means on Notes: a Scale (1 = none, 5 = complete); b 1 = yes, 0 = no; c 100 percent means that the customer
customer-supplier selects the supplier as its supplier solely because of its excellent delivery performance not
relationships (lean because of its quality, price, design/manufacturing capabilities, etc. 0 percent means that no
suppliers vs non-lean matter how poor the supplier’s delivery performance, it has no influence on the customer’s
suppliers) decision in supplier selection; * p, 0.1; ** p , 0.05; *** p , 0.01

their customers than for non-lean suppliers. Lean suppliers have had a business
relationship with their customers for almost 5 years longer than non-lean
suppliers. They are more apt to “trust” their customers. Compared to 68 percent
of non-lean suppliers, 81 percent of lean suppliers have participated in some
type of supplier quality certification program required by their customers. It is
interesting to note that some practices associated with lean manufacturing are
common to lean and non-lean suppliers – namely accepting supplier-certified
parts and sole sourcing (defined as the percentage of all domestically produced
products for the customer manufactured by the supplier). The present rating
system commonly used in the auto industry is that suppliers are rated on a
100-point scheme, with points given for quality, delivery, technological level,
cost-reduction effort, and cooperativeness toward the buyer’s requests. Our
data provide evidence that delivery performance plays a critical role in the
supplier selection decision[5].
Table X shows the results on provisions included in the suppliers’ contracts
with their customers. Compared to non-lean suppliers, the contracts between
the lean suppliers and their customers appear relatively flexible in terms of
volume commitment, investment commitment, and unit price. This flexibility
provides both sides with room for future adjustments, if necessary.
On the other hand, lean suppliers’ customers seem to put an emphasis on
obligations that the suppliers need to perform such as delivery performance
and quality while 100 percent of the contracts between the non-lean suppliers
and their customers include a provision on the price. As can be expected, only
about 5 percent of the contracts have a provision stipulating that the supplier is
limited in or prohibited from doing business with other companies. Such
practice is not uncommon in the Japanese auto industry.
 Lean
Items Lean (N ¼ 65) (percent) Non-lean (N ¼ 65) (percent)
manufacturing
Volume commitmenta 51 67
Investment commitmenta 68 77
Business commitmenta 6 4
Unit pricea 87 100 *
Detailed technical specificationa 84 89 1369
On-time delivery requirementsa 83 53 ***
Delivery frequency requirementsa 83 65 *** Table X.
Penalties due to late deliveriesa 71 55 *** Differences in means on
Penalties due to poor qualitya 71 53 *** contract provisions
Penalties due to short quantitya 71 56 *** (lean suppliers vs
Notes: a 0 = no, 1 = yes; * p, 0.1; ** p , 0.05; *** p , 0.01 non-lean suppliers)

Logistics performance
Table XI presents the results associated with internal logistics performance. In
comparison with the non-lean suppliers, lean suppliers have a higher
percentage of on-time staging and fewer late deliveries. A significant difference
in quality exists between the lean and non-lean suppliers. As expected, lean
suppliers report much fewer defects than non-lean suppliers.

Conclusion
Owing to the recent terrorist attacks, some scholars have begun to criticize the
JIT delivery system. There will be a reexamination of shipping patterns and
existing relationships. Many industry practitioners agree that “Just In Time”
will bend, but will not break. Relationships between service providers and
service users will be stronger. The security of assets and protection of property
will lead the criteria for selection.
In response to global challenges, companies are trying to put into place lean
production system such as the Daimler-Chrysler Operation System, Ford
Production System, and Delphi Production System (Liker, 1997). As they have
been transforming all of their manufacturing to their own versions of TPS
(Liker, 1997), they will be motivated to switch to lean suppliers (MacDuffie and
Helper, 1997). To be competitive in the changing global market, a supplier
needs to respond rapidly. One way to do this, while meeting demands for high

Items Lean (N ¼ 65) Non-lean (N ¼ 65)

Percent on-time staging 96.6 93.4 ** Table XI.

Percent late deliveries 1.35 2.15 * Differences in means on
PPM defective products shipped to customer 278 958 * logistics performance
PPM products require rework or scraping 18,729 66,351 *** (lean suppliers vs
Notes: * p , 0.1; ** p , 0.05; *** p , 0.01 non-lean suppliers)
IJOPM quality and cost reductions, is becoming a lean supplier and having an efficient
23,11 logistics system (Kasarda and Rondinelli, 1998; MacDuffie and Helper, 1997).
Much of the past work has focused on the production performance inside the
plant or on logistics systems. The purpose of the study is to investigate if
significant differences exist in logistics practices and capabilities between the
lean and non-lean suppliers.
1370 Past research (Bagchi et al., 1987) suggests that though JIT inventory
systems can reduce inventory-carrying costs, higher transportation costs are
generally incurred. However, our results indicate that lean suppliers are not
only able to reduce their inventory level significantly, but they also spend much
less in emergency shipping and no more on routine shipping. Our results are in
line with Droge and Germain’s (1998) study. The results of our study also
demonstrate an inverse relationship between the degree of leanness and the
amount of inventory kept on hand. Manufacturers who invest significant
resources toward implementing JIT in their factories will in general benefit by
carrying smaller amounts of inbound, WIP, and finished goods inventory. The
inverse relationship exists regardless of the firm’s operating context (absolute
size). By using several JIT techniques, lean suppliers achieve higher
performance in on-time staging. Therefore, lean suppliers appear better and
are able to reduce the expedited outbound shipments.
The findings of Kenney and Florida (1993) suggest that to be effective, the
JIT system must have close geographic proximity to producers. However, our
study suggests that lean suppliers with an average distance of over 400 miles
can still achieve competitive logistics advantages. The assumption that the
automaker takes control of transportation under an inbound JIT system was
verified in the study. This is in contrast with the approach commonly used in
Japan where transportation service is often provided by supplier-owned trucks
to provide a high level of service. Our finding is consistent with Harper and
Goodner’s (1990) report which states that for a manufacturer to be able to
implement an inbound JIT system, it is usually necessary to have control over
the inbound transportation. To achieve excellent performance in loading, lean
suppliers appear more willing to explore all possibilities such as the use of
side-loading trucks/trailers and use of additional trucks/trailers left at the dock.
The use of standardized containers to transport components simplifies
material flows whereas the replenishment of materials based on pull strategies
using kanban cards leads to simplification of ordering procedures (Lu, 1986).
Though lean suppliers achieve more satisfactory containerization, still, 17
percent of lean suppliers were not satisfied with the design of the container.
In order to reduce their costs and provide better service to the shippers,
suppliers are relying extensively on information sharing such as electronic data
interchange (EDI). Our study provides evidence that EDI plays an important
role in supply chain management. Supply chain management emphasizes
vendor responsiveness, flexibility, and dependability as a means to improve
customer service and logistics productivity. Timely and accurate information Lean
exchange between the supply chain partners is essential for responsiveness, manufacturing
flexibility, and dependability (Crum et al., 1996). Our results indicate that for
lean suppliers, the need to track the status and location of shipment is
increasing as more companies implement JIT or other inventory-reduction
programs. Overall, our results show that lean suppliers use more EDI than 1371
non-lean suppliers.
Our results show that motor trucking still dominated inbound/outbound
transportation in the JIT systems and American suppliers made some progress
in loading methods and routes though no significant differences exist between
the lean and non-lean suppliers. For lean suppliers, shipment sizes tended to be
smaller and shipment frequencies greater and their ability to effectively
monitor and respond to the transportation process becomes extremely
important. As expected, our results show that full outbound vehicle loads
would sometimes be difficult to attain, and partially filled trucks would be
frequent, resulting in poorer vehicle utilization.
The study also provides evidence that lean suppliers are able to reduce
logistics costs over time as compared to non-supplier firms. Much of the
existing literature on purchasing, materials, production, and inventory
management pays attention to the benefits to the supplier firm in terms of
reductions in manufacturing costs. Our results suggest that the benefits of
long-term relationships go beyond just manufacturing efficiencies. The
empirical findings in our study support this approach.
According to Gentry’s (1996) report, a negative relationship was found
between the inclusion of cancellation or penalty clauses in carrier contracts and
the use of a single carrier within the buyer-supplier partnership. This suggests
that when a single carrier is utilized for transportation versus multiple carriers,
these clauses are not likely to exist in contracts. However, as for automotive
suppliers, our data show that penalty clauses on delivery requirements are
likely to be included in the contracts between the lean suppliers and their
customers. Such practice reinforces the importance of commitment to work
together to solve quality and delivery problems. This finding supports the
study by Brand and Grabner (1985). Their report indicates that on-time
delivery and pickup performance was the most important means of evaluation
for inbound and outbound freight movement.
To sum up, by comparing many different independent variables between
suppliers with and without the use of internal lean manufacturing techniques,
even given the same organizational constraints and resources, our study
provides empirical evidence that use of internal lean manufacturing techniques
not only has a significant impact on plant performance, but also facilitate many
external logistics practices.
IJOPM Notes
23,11 1. The 100 million annual sales criterion used in this study can be justified by the ELM Guide.
The 1996 ELM Guide to US Automotive Sourcing indicates that the trend toward
globalization in the auto industry requires suppliers to be financially and managerially
strong. As a result, any companies with less than $100 million in sales will not remain a
tier-one supplier.
1372 2. The response rate was far above the norm (20-25 percent) for business surveys due to the
aggressive follow-up and getting permission in advance from corporate headquarters.
Response rate = [valid responses received] / [number of first-tier suppliers in our data] ¼ 103 /
[156 2 8 2 5] ¼ 72.0 percent.
3. The docks at the Toyota plant are side-load pits that allow trailer-level loading and
unloading from either side. About 85 percent of deliveries are unloaded from the side – far
faster than unloading from the rear (Bradley, 1992).
4. A similar system had been developed by Xerox in 1980s to improve the efficiency of
deliveries for suppliers located in the immediate vicinity of the customer. The “Bus Route”
system was installed by Xerox Corporation in Webster, New York, to manage delivery for a
JIT production line (Lubben, 1988).
5. Winners of the Toyota Quality Alliance Award need to pass a rigorous rating process that
examines product quality, delivery, warranty, purchasing, marketing, program
management, and technical development (Toyota, 1998).

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