Impact of JIT on inventory to sales ratios

Just‐In‐Time (JIT) production has received a great deal of attention, worldwide, since its introduction in Japan a few decades ago. It has been well documented that some of the main benefits of JIT implementation are reduction of inventories, lead‐time reduction, and cost savings. Most of the previous research on the impact of JIT on firm performance has either been anecdotal (one‐firm studies), or cross‐sectional (comparing JIT firms with non‐JIT firms at one point in time) in nature. This paper focuses on studying the impact of JIT on inventories to sales ratios prior‐ and post‐adoption based on actual performance of 74 firms as reported in COMPUSTAT data. Results show that the total inventory to sales ratio and raw material inventory to sales ratio decreased post‐implementation; however, there has not been any statistically significant change in work‐in‐process inventory to sales ratio and finished goods inventory to sales ratio post‐implementation.

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