Financial benefits from JIT adoption: effects of customer concentration and cost structure

Article Abstract:

A study was conducted to ascertain if firms displaying improved inventory utilization after adoption of the just-in-time (JIT) concept increase their return on assets (ROA). This study also aimed to find out if firm-specific characteristics influence the ROA responses. Data were obtained from a sample of 46 firms that disclosed JIT adoption in their annual reports or 10-K filings for 1985-1989. Results showed that there was no significant ROA response to JIT implementation. Cross-sectionally, firms that adopted JIT and that had a diffuse customer base exhibited a superior ROA response as compared to JIT-adopting firms with a high level of customer concentration and to control firms. Superior ROA response for firms with lower inventory turns in the year JIT was adopted was also found. Firms with lower committed costs did not display a greater ROA response than firms with higher committed costs.

Performance, Customer relations, Just in time inventory systems, Just in time systems

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On the efficiency of cost-based decision rules for capacity planning

Article Abstract:

Simulation experiments were performed to describe the performance of four capacity-planning rules in assessing expected cost of understocking and overstocking capacity, namely product-based planning, resource-based planning, and pivotal resource-based planning, which covers two rules. The experiment focused on a firm that supplies several products or services by employing a fixed proportions or Leontief production technology. Findings revealed unexpectedly high performance levels as compared to a benchmark solution. For the product-based planning rule, performance decreases as products progressively share capacity resources. For resource-based rules, the opposite was found to be true. Finally, identification of mechanisms to organize installed capacity across resources seems to be advantageous.

Production management, Cost accounting, Industrial capacity

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Information acquisition and resource allocation decisions

Article Abstract:

The investment decisions of firms often seem to be suboptimal, and previous research has argued that the responses might be optimal if seen as being made within a framework of information asymmetry. A model of a two-person firm of an owner and a manager where the manager has the advantage of acquiring and knowing the benefits of information pertinent to making a decision between a risky and risk-free project was used to research information acquisition and resource allocation decisions. The model is similar to Demski and Sappington's (1987) model. Research results indicate that optimal responses to information asymmetry could be the root cause of decisions that seemingly disregard the value of information search and suboptimally use acquired information.

Decision-making, Decision making, Analysis, Management, Management research, Resource allocation

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