Lean manufacturing:a perspective of lean suppliers

Yen Chun WuDepartment of Transportation, Warehousing, and Logistics, NationalKaohsiung 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 leanproduction and various aspects of the logistics system.This paper performs a comparison analysis tofind whether significant performance/practice differences exist between lean suppliers and non-leansuppliers. The research findings indicate that, even given the same organizational constraints andresources, lean suppliers gain significant competitive advantages over non-lean suppliers inproduction systems, distribution systems, information communications, containerization,transportation systems, customer-supplier relationships, and on-time staging/delivery performance.

IntroductionTop Japanese manufacturing firms have achieved excellent internationalcompetitiveness in a number of industries such as auto, electronics, andmachinery in the past two decades. Faced with intensive competition from theworld, increasing operation costs, and growing operational problems, manymanufacturing firms around the world, as a result, have made tremendousefforts to understand Japanese manufacturing practices. US writers such asHall (1983) and Schonberger (1982) argue that what the Japanese had actuallydone was to develop a new approach to manufacturing management. Leanmanufacturing, previously known as the Toyota Production System (TPS) orthe Just-in-Time (JIT) system (Toyota, 1988; Womack et al., 1990), has attractedmuch attention in the United States from both academia and industry.

Recent movements suggest that many automobile manufacturers areactively adopting the lean concept. Most auto manufacturers have now adoptedat 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 achallenging task because so many different aspects of plant operation areinvolved. The transfer of JIT, central to TPS, requires a substantial effort on thepart of foreign manufacturers.

Lean manufacturing, pioneered by Toyota, involves inventory and qualitycontrol, industrial relations, labor management, and supplier-manufacturerpractices that differ fundamentally from traditional American businesspractices. In spite of these differences between Japan and the United States,recent research (Cusumano and Takeishi, 1991; Liker, 1997; Womack and Jones,

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International Journal of Operations &Production Management

Vol. 23 No. 11, 2003pp. 1349-1376

q MCB UP Limited0144-3577

DOI 10.1108/01443570310501880

1996b) suggests that substantial transfer of the Japanese production systemcan occur and that this transfer has had a significant positive impact on theperformance of the selected US manufacturing plants. For instance, Nakamuraet al. (1998), using a sample of US and Japanese-owned manufacturing plants inthe United States in three different industries, shows that the implementation ofJIT has improved many of the performance measures for these USmanufacturing plants. A study by Zayko et al. (1997) indicates that leanmanufacturing can result in a 50 percent reduction of human effort,manufacturing space, tool investment, and product development time, and a200-500 percent improvement in quality. The results of a study of 200 USmanufacturers by Germain and Droge (1997) also demonstrate that improvedinventory, financial, and market performance correlates with increasedadoption of JIT purchasing methods. However, Toyota recently makes adramatic policy change for its lean support service. A decade after providingfree instruction in lean manufacturing to all American suppliers, Toyota iscurtailing the service. Parts suppliers need to pay the tuition if they want tolearn the vaunted TPS (Chappell, 2002).

Logistics or supply chain management refers to the art of managing the flowof materials and products from source to user (Copacino, 1997). According toLevy (1997), JIT delivery and low inventory are the heart of lean production.Lean logistics refers to the superior ability to design and administer systems tocontrol 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 unitof analysis than the supply chain or the individual firm. They reinforce theimportance of the value stream concept that extends both upstream from theproduct assembler into the “supply chain” and downstream into the“distribution chain”. However, large manufacturers have a better chance inachieving such “lean logistics” than their suppliers do, as it is more likely forlarge firms to have enough resources and bargaining powers. For suppliers,though it may not be possible for them to optimize their supply chainefficiency, it is still critical for suppliers to have a responsive logistics system inplace to meet the customer’s demand.

Lean suppliersHelper (1991) suggests that if US automakers wish to continue to compete inthe global industry, which is characterized by technology-, time-, andquality-based competition, they will need to establish long-term, mutual trustrelationships between the suppliers and customers. Research from Keller et al.(1991) reports that for manufacturers, supplier support was a critical factor forthe successful implementation of lean production. Helper’s (1991) surveyresults indicate that in order to enhance long-term competitiveness, it is

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important to encourage suppliers and customers to develop capabilities of JITproduction as well as JIT delivery. Customers can obtain improvements inquality and delivery by motivating suppliers to adopt JIT production and JITdelivery. Similarly, suppliers have to learn to respond to the increasinglydemanding needs of its customers in this competitive market, which is drivenby ever-increasing requirements for cost reduction, responsiveness to customerneeds, and JIT supply (Owen and Kruse, 1997).

As automakers have significantly reduced their number of suppliers (Helper,1991), it becomes imperative for automakers to choose suppliers who can meettheir product development, production, and logistics requirements due to highsupplier switching costs. According to Helper’s study, Japanese automakers(particularly Toyota) showed that a skilled and loyal supplier base could be akey source of competitive advantage.

As automobile manufacturers are striding toward the lean direction anddemand JIT logistics from suppliers, suppliers with lean systems in place aremore likely to be incorporated into the total system (Suzaki, 1987). As Heim andCompton (1992) put it, “A world-class manufacturer encourages and motivatesits suppliers to become coequals with the other elements of the manufacturingsystem.” An analysis conducted by Swenseth and Buffa (1990) shows that theimplementation of lean strategy results in an increase in the total logistics costof a manufacturer and his vendors. These cost increases are in the form ofincreased transportation, inventory carrying, and expected stockout costs.However, in the case of the US auto industry, it is not uncommon thatautomakers pay for the transportation. Therefore, if a supplier is armed withthe lean system, the supplier can keep its inventory to a minimal level andlower its expected stockout costs. Therefore, suppliers who adopt internal leanproduction practices should be more compatible with the buyer’s JIT logisticsrequirements.

A wealth of literature has been written regarding the positive strategicimpact of lean manufacturing on a company’s competitiveness in the past twodecades. Existing literature, however, focuses mainly on internal efficiencyperformance like cost reduction, quality, design, administrative efficiency, andproductivity. Relatively few empirical analyses are undertaken to understandwhether adoption of internal lean manufacturing techniques is also related toexternal logistics practices.

Current comparison studies on productivity performance of suppliers whoprovide products for their lean customers, roughly fall into three categories.The first category is mainly based on sporadic case studies to illustrate theimplementing effort and resulting outcomes of that (those) particularsupplier(s). Secondly, regardless of the ownership issue (local vs foreign), allsuppliers are surveyed at random and lumped together. Then statisticalanalyses are performed on the survey data to show a picture about thesupplier’s overall productivity performance. The third category purposely

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selects suppliers for different ownership (e.g. US-owned suppliers vsJapanese-owned transplants or suppliers) or from different industries. Acomparative statistical analysis on performance is also conducted amongdifferent ownerships and industries. Many insightful comments and findingsare generalized from those studies. However, the above-mentionedcomparisons make many important, but questionable assumptions. That is,all suppliers/manufacturers investigated in those studies are assumed to havesimilar company constraints or resources. However, that is hardly the case inthe real world because each firm certainly enjoys different resources and facesdifferent constraint. Even given the same organizational constraints such ashuman resources, financial resources, facility equipment, industrial relations,and plant configuration, as well as cultural atmosphere, it is highly likely that afirm still responds significantly differently to different customers even thoughtheir customers are all in the same industry. Consequently, a supplier may takedifferent strategies to satisfy the requirements set by a particular customer(Wu, 2002). A comparative analysis of supply-chain performance by Liker andWu (2000) reveals that a buyer’s lean logistics practices and internal policiescan have a profound impact on its suppliers’ ability to optimize operations.

This exploratory study compares many different independent variables inmore of a descriptive mode. The literature on lean manufacturing methods ascompared to traditional US production methods suggests some possiblepropositions for directions of differences. Thus, the paper presents a series ofhigh-level research propositions that helped guide the design of the study.

The main thrust of this paper, taking the automotive parts supplier’sperspective, empirically examines connection between JIT and various aspectsof logistics system. The central research question in the paper is: “Dosignificant performance/practice differences exist between lean suppliers andnon-lean suppliers?”

Research propositionsLogistics represents a comprehensive process, which requires integration of awide range of activities. A modified definition of logistics by the Council ofLogistics Management (CLM, 1998) is provided below:

Logistics is that part of the supply chain process that plans, implements, and controls theefficient, effective forward and reverse flow and storage of goods, services, and relatedinformation between the point of origin and the point of consumption in order to meetcustomers’ requirements.

Specifically, JIT logistics is to shorten the lead time from customer order tomanufacture and delivery by getting the right parts to the right place at theright time. The ultimate goal is to provide best quality, lowest cost, on-timedelivery to the customer. A mere collection of JIT practices does not make asuccessful logistics system. To achieve the ultimate goal, many importantfactors must work together. Womack and Jones (1996b) provide an excellent

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summary of main actions taken to make the dramatic improvements to thevalue streams when Toyota transformed its US original and aftermarket partsdistribution 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 systemsJIT 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 oflean manufacturing. JIT achieves inventory turnovers of 20 in comparison withthree to five for the traditional production setting (Nakamura et al., 1998;Schonberger, 1986; Wurz, 1995). A survey by Germain and Droge (1997) showsthat JIT purchasers have less inbound inventory. To fully benefit from JIT, leansuppliers understand that they can meet customer demands for an everincreasing variety of products with frequent, quick changeovers incombination with other JIT techniques (Suzaki, 1987). In addition, highmachine mobility and multi-skilled workers can help lean suppliers adjustproduction 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 toquality problems on the shop floor so defects can be prevented. Zayko et al.(1997) report that lean production typically results in a 200-500 percentimprovement in quality. Levery (1998) states that preventive maintenance hasa significant impact on quality, quantity, and cost. Owing to the importance ofmachine reliability and availability, lean suppliers should faithfully follow theschedule of preventative maintenance. Hence,

P1. Significant differences in production performance exist between leansuppliers and non-lean suppliers.

Distribution systemsAccording to Shingo (1989), in addition to reduction in production cycle time,JIT is effective in reducing storage areas, which eliminates the need for outsidewarehousing. Even given a short order notice from customers, lean supplierswith a responsive production system should not have major difficulties inmeeting customer demands.

A basic JIT discipline is housekeeping. By practicing the principle oforderliness, a sense of standardized production and shipping operations will bedeveloped (Suzaki, 1987). In addition, lean production places an emphasis onproblem detection and problem-solving. Visual aids such as color-coding areoften used to prevent problems by immediately visually communicatinginformation to supervisors or others (Monden, 1993; Shingo, 1989; Womack andJones, 1996a).

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Lean production requires frequent, rapid flows of information and goodsalong the value chain (Levy, 1997). In addition to the famous kanban systemextensively used by Toyota, JIT manufacturers are also increasinglyexchanging computerized information with suppliers who can help themreduce the lead time from product design to market (Kasarda and Rondinelli,1998). Also, according to Kasarda and Rondinelli, it is important for leansuppliers to have telecommunications networks with their customers to getinformation on communication, order, production schedule, track andmanagement material flow, and inventory.

Under JIT, due to a large number of parts in small quantities coming into theassembly plant, efficient, effective containerization is important (Udoka, 1993).Use of containers of a standardized size can help reduce inventories andfacilitate the distribution process (Nicholas, 1998). According to Schniederjans(1993), use of bar-coding can result in reduction in wasteful activities ofinspection, classification, and storage of inventory and use of reusablecontainers can lead to improvement in materials handling methods(Schniederjans, 1993). In addition, Florida (1996) examines the relationshipbetween advanced production practices and innovative approaches toenvironmentally conscious manufacturing. He argues that firms that areinnovative in terms of their manufacturing process are likely to be more activein addressing environmental costs. Maxwell et al. (1993) also suggest arelationship between lean production and innovative environmentalmanufacturing practices. Suppliers with high delivery frequencies are likelyto use returnable containers for environmental and cost reasons. Hence,

P2. Significant differences in distribution performance exist between leanand non-lean suppliers.

Transportation systemsJIT delivery is the most obvious aspect of lean production affected bygeographic dispersion of the supply chain (Doz, 1987). JIT manufacturers viewsuppliers with close proximity as perfect candidates for JIT delivery. As automanufacturers 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 leansystems are the perfect candidates for making frequent JIT delivery. Accordingto Suzaki (1987), under JIT the role of transportation is to help productionactivities with the minimum amount of inventory, tying two plants with an“invisible conveyor system”. Materials transfer between firms should besynchronized with other production activities. As a result, when appropriate,multiplant transportation and mixed loadings are often recommended(Womack and Jones, 1996b). Hence,

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P3. Significant differences in transportation performance exist betweenlean and non-lean suppliers.

Customer-supplier relationshipsLambert et al. (1998) suggest that the structure of activities/processes withinand between companies is crucial for achieving superior competitiveness andprofitability. It is vital that lean suppliers receive, on-time, stable schedules sothat materials and parts can be secured and delivered (Keller et al., 1991). AsJIT manufacturers motivate their suppliers to adopt JIT production and JITdeliveries, they understand the importance of stable order demands forsuppliers who adopt the lean techniques (Harrison, 1997). Lean productionrequires close coordination with suppliers and customers to achieve the desiredlevels of quality and delivery (Levy, 1997). Instead of the previous adversarialstyle relationships, lean production places its purchasing emphasis oninvolving 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 tounderstand and incorporate the manufacturer’s requirements in theiroperations. Lean suppliers are more likely to gain more responsibility fordesign, subassembly, and JIT delivery in return for the promise of a long-termrelationship (Helper, 1991). We can expect a dependent, mutual trust, andlong-term relationship between the lean suppliers and customers. A surveystudy by Chen (1991) shows that, for over two-thirds of manufacturing firmssurveyed, the first step in the implementation included the certification ofsuppliers. Suppliers with lean systems are easier to get certified. Manycompanies accept goods uninspected as part of their JIT philosophy, especiallyfrom certified suppliers (Burman, 1995).

Though JIT systems work best with minimal formality regarding thespecific part numbers and quantity of product to be purchased (Lubben, 1988),customers can signal their intentions in several ways, including equityinvestment, vertical integration, legally enforceable contracts, and unwrittencontracts backed up by parties’ concern for their reputation for fair dealing(Helper, 1991). Owing to the serious impact of JIT delivery, we can expect thatcustomers have rigid requirements on quality, quantity, and delivery.

P4. Significant differences in customer-supplier relationship exist betweenlean and non-lean suppliers.

Research methodologyThis section describes the research setting, study population, survey design,data collection methods, and statistical analysis employed in the comparativestudy.

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Research settingThe automobile industry had served as the prime industry for the analysis.Automobile manufacture is chosen in the study because of its richness, itscomplexity of needs, as well as an unusual level of openness to scholarlyinquiry in this industry (Bensaou and Venkatraman, 1995; Dyer, 1996;Nishiguchi, 1994). Also, it is well recognized that the auto industry is moreadvanced in adopting JIT methods.

The sample of firms. The study population is defined as American first-tierautomotive suppliers manufacturing individual parts, assembledcomponents/subsystems for American automobile manufacturers andJapanese transplants located in the USA. Suppliers of raw materials andsemi-conductors, chemicals, indirect materials, tooling and dies, orconsulting/engineering service are excluded in the study.

This questionnaire is for plants whose primary business is auto partsmanufacturing – injection molding, machining, assembly, stamping, interiorand exterior components – and whose automotive customers include bothAmerican and Japanese companies. The sample for this study is mainly chosenfrom the 1996 ELM Guide to US Automotive Sourcing. In all cases we selectedcompanies at random with at least 100 million[1] annual sales, most of whichare located in the Mid-West region. The 100 million criterion was used to helplimit our samples to larger first-tier auto parts suppliers, who are directlyaffected by their automotive customer purchasing policies and practices.

The unit of analysis. The unit of analysis for the survey is the partsplant-customer dyad focused on their one largest-dollars volume product forthe dyad. That is, we are measuring relationships across plants. Because asupplier may operate several plants with very different internal and externallogistics, we treat the plant as the focus and treat multiple plants from the samecompany as separate cases. While the information is gathered at the supplierplant level, the measures used in the study focus on logistics practices betweenthe plant and the US and Japanese and plants to which it sells the largestdollars volume of product.

Survey approach. Based on a literature search, a preliminary surveyinstrument was designed to measure the variables of interest. In order toprovide insight beyond the questionnaire research, site visits were performedby the author. Though these interviews were performed on a convenientsample of suppliers (primarily located in Michigan and Ohio) who agreed tohost a short visit, many visited suppliers are published as the case studysubject for their excellent lean achievement (Liker, 1997; Liker et al., 1999).Preliminary questionnaires were sent to the plants at least one week prior toour visits with the request that they fill out the questionnaires in advance of ourvisits so the researchers could review and discuss the answers with therespondents. Following Campbell’s (1995) guidelines, the plant visits make itpossible to identify the most knowledgeable respondents and to develop items

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in simple, concrete terms anchored in the industrial context of designing,manufacturing, and assembling (i.e. in the language of the respondents). Thequestionnaire was pre-tested in ten sites and repeatedly modified in order toeliminate ambiguities and errors. Based on the plant visits, a structuredquestionnaire was developed to measure the variables of interest. We then wentback to the original ten sites with the final question wording and their datawere included in the study.

Because many companies supply their customers with several types ofproducts, and their relationships with their customers differ by product andcustomer, the respondents were first asked to identify their largest Americanand Japanese customers (referred to as “Customer A” and “Customer J”,respectively) in terms of annual sales. Then they were asked to answer thequestions based on a particular product, referred to as “Product A” in terms ofthe 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 onfirst-tier suppliers as their products are directly shipped to the automotivecustomer and are therefore more likely to be substantially impacted by the JITdelivery requirements set by the auto customers.

Qualified suppliers were first screened and selected at random, based on oursample selection criteria. To enhance the response rate, in most cases, weobtained permission in advance from their corporate headquarters. Prior to themailing, phone calls were made to each plant to identify the appropriaterespondents at each plant. Each respondent was then contacted directly toexplain the purpose of the study and answer any concerns raised regarding thestudy, and to obtain their agreement to participate in the study. In addition, wecontrolled the number of plants we intended to contact within a manageablesize (25-30 plants) at any given time due to the large number of phone callsneeded to obtain complete data. As a result, the phone calls were made overtime and stopped when our research resources had been consumed and adesired number of responses had also been collected. In all, 156 plants werecontacted and eight plants were immediately dropped from the study due toplant shutdowns, serious labor issues, and insignificant automotive sales. Atotal of 11 plants refused to participate in the study for different reasons suchas company policy, management unavailability, and confidentiality.Confidentiality was the major reason given for the decision not to participatein this study. As a result, after these changes, the questionnaire was mailed to137 plants. A questionnaire was mailed to the suppliers, along with a coverletter and a memorandum from the researchers that explained the purpose ofthe study, stressed the need for participation, and assured confidentiality of allresponses.

The data required for this study were collected from people whose primaryresponsibility involves production scheduling, materials management, and/or

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outbound transportation. The respondents were encouraged to seek out help onquestions that could be better answered by other functions such as production,inventory, quality, and transportation. These respondents were selected on thegrounds that they would have the broadest knowledge about both productionand logistics. In order to enhance the quality of the study, aggressive follow-upphone calls, mailings, e-mails, and faxes were used to boost the response rateand to get answers to all questions left blank in the returned questionnaires. Toencourage their participation, these participants were promised a copy of asummary of the study.

The statistics presented in this report are based on responses received by 15October 1998. In all, 108 responses were received. From these cases, five caseswere dropped because they were not first-tier suppliers and therefore did notmeet the population criteria. Thus, the usable responses were reduced to 103cases, 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 Americanautomakers and Japanese transplants. Each plant surveyed generated twocases: one for its US customer, the other for its Japanese customer. Twelvecases were dropped for insignificant sales because data were entered into theanalysis pool only if the supplier’s Japanese or US customer represented at least10 percent of sales. This results in a total of 194 cases ð91 £ 2þ 12Þ: Sincenon-response bias is inherent in all survey research that does not have 100percent compliance, a test for non-response bias was performed (Walton, 1994).Two analyses were conducted to test for non-response bias. First, a test fornon-response bias was conducted based on the annual sales between therespondents and non-respondents (Evers et al., 1996). Secondly, late responsecan be used to test the non-response bias. No noticeable pattern among thevariables could be detected to indicate that a non-response bias existed.Accordingly, non-response bias is not considered as a problem (Armstrong andOverton, 1977; Lambert and Harrington, 1990).

Measurements. This lengthy 17-page questionnaire was categorized intoseven sections: business background, distribution system, trucking system,plant production system, customer characteristics, customer-supplierrelationships, and performance indicators.

Previous studies try to investigate logistics performance from only one orfew components of logistics practices. These studies do not provide strongquantitative 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 ofinput components in order to yield strong evidence.

The measures investigated in this study were developed largely based on anextensive literature review and personal plant visits. While some questions areborrowed from the existing studies, most were designed by the authors to meetour particular study objectives. For some measures such as loading methods

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and transport routes, pictorial examples are provided to assist respondents inanswering the questions. Individual measures will be described as they arepresented 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 notself-explanatory, the measure is discussed in the section where the results arereported.

Lean logistics focuses on the key concepts of value, value streams, flow, pull,and perfection (Jones et al., 1997). Since the degree of leanness is not directlyobservable, we create an index of individual measures of “leanness”. Based onthe literature review, the following core practices are used to evaluate thedegree to which lean manufacturing is implemented inside each plant. Eachitem 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 inmeasuring the “leanness” variable. First, Cronbach’s a is used in this study tomeasure the internal consistency and reliability. According to Nunnally (1978),a Cronbach’s a of 0.60 is considered to be acceptable for empirical studies. Weobtained an a value of 0.70 for the measure of “leanness”. Second, we comparethe scores of the subset of plants we had visited with our independentobservations for those plants. The results were similar.

Statistical analysisGenerally, large automobile parts plants have separate production lines for atleast final assembly to each major customer. Therefore, each plant wasassigned two overall leanness scores that were based on the sum of the itemsfor all five dimensions: one for its main product line for its largest Americancustomer; 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 leansupplier for its largest American customer, but as a non-lean supplier for itslargest Japanese customer, and vice versa. The overall leanness score is basedon the sum of the items from all five lean dimensions.

Analysis of covariance (ANCOVA) is used in the study to detect whethersignificant differences exist between the lean and non-lean plants in theirlogistics practices. All comparisons were investigated by controlling the effectsof other variables such as annual sales, product type (interior body, exteriorbody, mechanics, engine, or electronics), product complexity (measured by thenumber of different parts making up the final product), and customer identity

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(Japan/US customer). Conventional P values (0.10, 0.05, 0.01) are used in thestudy.

To make such a comparison, the 194 cases were equally divided into threeroughly 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 thelowest scoring group ðN ¼ 65Þ (referred to as non-lean suppliers) with thehighest scoring group ðN ¼ 65Þ (referred to as lean suppliers). We omitted themiddle group because we suspected that our measures were not sensitiveenough to classify suppliers who have mixed systems. However, readers areadvised to be cautious about the fact that the results of the comparison arelikely to be sensitive to the size and composition of the “middle group”.

Empirical resultsThe main focus of this section is to present the results associated with theabove-mentioned logistics practices.

Table I presents the mean differences in supplier’s production practicesbetween the lean and non-lean suppliers. As we can see, a clear patternemerges. Consistent with the expectations and previous research (Hall, 1983;Womack and Jones, 1996b; Womack et al., 1990), almost on every measure ofproduction, lean suppliers perform better than the non-lean suppliers. Suppliersusing lean techniques are able to maintain fewer shifts of inventory at thecustomer’s site than the non-lean suppliers.

Table I also shows a shorter delivery lead time for lean suppliers, defined asthe time between the finished goods picked up from the dock and finishedgoods directly delivered to the customer’s plant in terms of shifts. Incomparison with the non-lean suppliers, lean suppliers have a much higherpercentage 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 5Delivery 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 3.0Quality responsiveness (min) 3.5 7.5 ***Frequency of preventive maintenancec 2.4 1.9 ***PM schedule followedd 3.1 2.6 *Percent of PM skipped 11.1 28.7 **Percent unscheduled downtime 5.8 8.0 ***

Notes: a Scale (1 = one process, 3 = many processes); b Scale (1 = monthly, 3 = daily, 5 =multiple times per shift); c Scale (1 = less frequent, 2 = almost the same, 3 = more often); d Scale (1= seldom, 4 = always); *p,0.1; **p , 0.05; ***p , 0.01

Table I.Differences in means onproduction systems(lean suppliers vsnon-lean suppliers)

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major expenses to enable equipment layout changes when switchingproduction to different models. In addition, lean suppliers’ workers operatemore processes than those for non-lean suppliers. In addition, when aproduction line in the plant is stopped due to quality problems orabnormalities, it takes lean suppliers 3.5mins to respond compared with7.5mins for non-lean suppliers.

Production systemsFinally, lean suppliers take preventive maintenance more seriously than thenon-lean suppliers. Their preventive schedule calls for more frequentmaintenance checking compared to the routine maintenance checklistrecommended by the original manufacturers, resulting in less percentage (5.8percent) of unscheduled downtime (8.0 percent for non-lean suppliers). Of 11items 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 systemsJIT systems focus on materials flow not on materials storage (Kamoun andYano, 1996). Central receiving facilities are often eliminated in favor of verylimited staging capabilities adjacent to the point of use.

Table II presents the results associated with the suppliers’ storage andshipping management practices. Surprisingly, about 10 percent of leansuppliers use their own outside warehouse or distribution center to storeadditional finished products while only 2 percent of non-lean supplier use thisstrategy. On an average, 90 percent of suppliers surveyed reported that theirshipping sites are always arranged properly and orderly. Lean suppliersappear to use visual aids ðP , 0:10Þ and color-coding more often than non-leansuppliers and arrange their shipping sites in a more orderly manner. The visualaids are used to clearly indicate who brings what to where and exactly when.However, the differences in color-coding and management of shipping sitesbetween 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 dataof the buyers in order to adequately plan for their own production. Keyingredients 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 **Use of color-codinga 71 65Orderly shipping sitea 91 88Use of visual aidsa 79 41 *

Notes: a 1 = yes, 0 = no; * p,0.1; ** p , 0.05; *** p , 0.01

Table II.Differences in means on

distribution systems(lean suppliers vs

non-lean suppliers)

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means of communication and information sharing (Henderson, 1990; Turner,1991). Das and Handfield’s (1997) study also shows similar conclusions. This isespecially important in developing customer-supplier-carrier partnerships dueto the intangibility of the services provided. Information and communicationssharing between the two partners can involve all the parties in the wholesupply chain in numerous ways (Greis and Kasarda, 1997). Many carriers havethe ability to offer computerized tracking and tracing of shipments (Masteret al., 1991). This information can be used to help manufacturers further narrowdelivery windows or make adjustments to the existing schedules, as moreinformation becomes available. A similar report by Sheth and Sharma (1997)also claims that linkages such as EDI will reduce costs for both the customersand suppliers and dramatically reduce cycle times.

Table III presents the results associated with information sharedelectronically between the suppliers and their customers. Consistent withexpectations, information communications/technology is used extensively inthe auto industry. As we can see, the degree of information sharing employedbetween the suppliers and customers is higher for lean suppliers than fornon-lean suppliers. Customers share more information electronically with theirlean suppliers than non-lean suppliers. There are significant differences ininformation sharing on shipment tracking, advanced shipment notice,shipment schedule, and production schedule. Table III suggests that thecustomers of lean plants put a greater emphasis on delivery performance. In all,71 percent of lean suppliers have access to shipment tracking compared to 54percent of non-lean suppliers. In addition, 100 percent of lean suppliers haveinformation on advanced shipment notices compared to 89 percent of non-leansuppliers. A total of 44 percent (90 percent) of lean suppliers have data on theproduction schedule (shipment schedule) while only 30 percent (84 percent) ofnon-lean suppliers have such information. This may be because there is lessinventory between the lean suppliers and their customers so this tracking takeson heightened importance.

Table IV presents the results associated with the use of containers.Bar-coded containers play an important role in efficient packaging. Manyresearchers (Grigg and Donohue, 1989; Udoka, 1993; Wurz, 1995) discuss the

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

Order processinga 81 86Shipment trackinga 71 54 **Advanced shipment noticea 100 89 ***Communicationa 86 84Shipment schedulea 90 84 *Production schedulea 44 30 *

Notes: a 1 = yes, 0 = no; * p,0.1; ** p , 0.05; *** p , 0.01

Table III.Differences in means onuse of informationcommunications (leansuppliers vs non-leansuppliers)

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benefits of containerization such as increased productivity, cost savings, andincreased product quality. Containers are particularly important to leanmanufacturers who wish to bring small quantities of material just where theyare needed and when they are needed. As we can see, 98 percent of leansuppliers use bar-coded containers compared to only 84 percent of non-leansuppliers. 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 usereturnable containers. In most cases, returnable containers are provided by theautomakers. Accordingly, we see that 76 percent of the lean suppliers use thecontainers whose size is designed by the customers compared with 57 percentfor non-lean suppliers. In lean manufacturing, customers decide on the size andshape of containers needed line-side for optimal parts presentation. Thoughlean suppliers reported a higher percentage (83 percent) of satisfaction with thesize of containers used for products delivered to the customer compared to 78percent for non-lean suppliers, the difference is not significant.

Transportation systemsSome writers such as Ferrin (1994) and Kenney and Florida (1993) believe thatsuppliers should be located near their customers. They believe that closersuppliers will have advantages over more distant suppliers. In addition tomaterial transportation problems, distant suppliers may be at a disadvantagein communication because of the less frequent visits by their personnel (SME,1988). However, authors such as Anderson and Quinn (1986) state that reformof transportation regulation made longer distances feasible in JIT systemsbecause the transportation costs can be better controlled than in the periodprior to deregulation. Artholomew (1984) agreed that US auto suppliers are notalways close to the assembly plants. He does not expect that adoption of JITwould cause suppliers to move their plants closer to their customers in theUnited States. Ayers (1989) believes that cost factors play a dominant role inJIT evaluations. Even though freight costs frequently increase with JITsystems due to the greater incidence of smaller shipments, it may be possible tooffset 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 67Returnable containers provided by customera 83 76Container size suggested by customera 76 57 **Appropriateness of container sizea 83 78

Notes: a 1 = yes, 0 = no; * p,0.1; ** p , 0.05; *** p , 0.01

Table IV.Differences in means on

containerization (leansuppliers vs non-lean

suppliers)

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As can be seen in Table V, American suppliers, either lean or non-leansuppliers, serve their customers with an average distance of greater than 400miles. The difference is not significant between the lean and non-lean suppliers.

It is generally agreed that the shipments required by the JIT companies aresmaller and more frequent than non-JIT systems. As a result, productionscheduling must alter traditional run sizes to support small, economic lot sizesthat can meet JIT distribution and inventory management objectives (Isaac,1992). In comparison with non-lean suppliers, lean suppliers are more likely tomake at least daily shipments (91 percent of shipments). Nevertheless, even fornon-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 fortheir shipments, our data show that, as general automakers in the USA areresponsible for transportation costs. This practice will help them consolidatetheir shipments, increase their bargain leverage with the trucking firms andtherefore reduce the overall transportation costs. However, US automakers likeFord realized that penalizing suppliers for failing to send full truck-loads ofparts undermined lean manufacturing principles, so it has begun to phase outthe penalty since 2001 (Shirouzu, 2001).

Table V shows some significant differences in trucking practices betweenthe lean and non-lean suppliers. For example, 48 percent of lean suppliers’trucking firms, versus 24 percent for non-lean suppliers, leave additionaltrucks/trailers at the suppliers so the suppliers can load freight in advance ofthe 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 451Percent of shipments delivered daily 91.0 71.5 *Percent use of additional truck/trailersa 48 24 *Percent side-loading trucks/trailers 14.0 6.3Loading time (mins) 41 83 ***Tightness of pickup time windows (mins) 46 74 *Percent on-time pickups required 99.0 97.9Percent on-time pickups achieved 91.0 83.2 *Percent on-time deliveries required by customer 100 94.5 **Percent transportation costs of total costs (N¼32) 1.47 (n ¼ 11) 1.78 (n ¼ 9)Percent of full truck-loads filled 57.4 63.8Percent emergency shipping compared with last

yearb 0.82 1.08 ***$ emergency shipping costs (per million sales) last

yearc $330 $596 *

Notes: a 1 = yes, 0 = no; b positive signs mean increase, negative signs mean decrease; c tocontrol the effects of the annual sales, emergency shipping costs are normalized by the annualsales; * p,0.1; ** p , 0.05; *** p , 0.01

Table V.Differences in means ontransportation systems(lean suppliers vsnon-lean suppliers)

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right to the truck rather than to inventory and can eliminate double handling sotruckers can then take the load immediately.

There is a striking difference in loading time. Note that non-lean suppliersspend twice as much time as lean suppliers do in loading a typical shipment. Apossible 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 dominantapproach in Japan, allows goods to be loaded from one or both sides of thetrailer instead of from the back.

Lean suppliers require a tighter on-time pickup time window (46mins) whilenon-lean suppliers give their trucking firms a 74min. pickup time window. Inresponse to stringent on-time delivery requirements (100 percent for leansuppliers, 95 percent for non-lean suppliers) set by their automobile customers,lean and non-lean suppliers alike demand excellent on-time pickups from theirtruckers accordingly. Although the truckers of lean suppliers perform muchbetter in on-time pickups (91 percent) than those of non-lean suppliers (83.2percent), they still do not live up to expectations set by both the suppliers andcustomers.

Overall, lean suppliers achieve higher scores on most aspects of logisticsperformance. Because of the increased frequency of shipments, their small size,and less likelihood that full vehicle loads are possible, vehicle utilization can bepoor in JIT systems. Perry (1988) refers to this as the substitution oftransportation assets for inventory assets. Contrary to the existing literature,lean suppliers, who make more frequent, small-batch deliveries, have relativelylow transportation costs compared to non-lean suppliers. However, this resultshould be taken with caution because only a small number of respondents werewilling 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 bothparties experienced about a 1 percent increase in emergency shipping last year,after controlling the effects of sales, lean suppliers spent less in emergencyshipping last year (per million sales dollar) than the non-lean suppliers. Thedifference is statistically significant at the 0.10 level. The result is interestingconsidering that with little inventory buffer on site, readers might expect thatlean suppliers will spend a significant amount of money in emergencyshipping. Our data demonstrate otherwise.

Several clever delivery methods for loading and transport routes have beendeveloped to allow for small quantity shipment of each product, while fillingtrucks. Tables VI and VII show how the suppliers apply the flow concept todelivery. Table VI shows the percentage of freight (in terms of sales dollars)transported by different loading methods. Though no significant differencesexist between the lean and non-lean suppliers, lean suppliers tend to take moreadvantage and are more capable of in-sequence mixed loading and mixed

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product loading than the non-lean suppliers. The results are consistent with theprevious research.

Traditional point-to-point delivery for lean manufacturing is fine if one plantprovides enough products for an assembly plant to fill the truck multiple timesper day. But if this is not the case, compound deliveries, also called “milk-runs”which involve stopping at several suppliers and/or assembly plants, arepreferred. Similar to the circuit delivery approach, the compound deliveryapproach is preferable when the shipments are from a great distance, it maynot be practical to make frequent milk-run routes and a consolidation centercan be used to take daily shipments of one product and break them up intosmaller, mixed product shipments.

As shown in Table VII, instead of using point-to-point deliveries, 61.5percent of lean suppliers prefer using circuit or compound delivery[4] while 47percent of non-lean suppliers use one of the approaches. The results supportSchineller’s study. According to Schineller (1998), multi-stop orderconsolidation is a cost-saving logistics strategy that involves building loads(routes) combining LTL-sized orders into multi-stop TL shipments to takeadvantage of cheaper per-mile TL rates.

Customer demandAs shown in Table VIII, only 31 percent of the lean suppliers’ customers allowthe truck drivers to unload freight before the scheduled delivery time if thedrivers arrive at the customer’s dock earlier than scheduled while 67 percent ofnon-lean suppliers’ customers permit early unloading. This implies thatcustomers for lean suppliers have tighter delivery time windows thancustomers for non-lean suppliers possibly because the lean suppliers arecapable of meeting them.

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

Point-to-point delivery 38.5 53 *Circuit delivery (milk-runs) 44.7 36.8Compound delivery 16.8 10.2

Notes: * p , 0.1; ** p , 0.05; *** p , 0.01

Table VII.Differences in means ontransport routes (leansuppliers vs non-leansuppliers)

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

Single-product loads 27 31Mixed-product loads 56 59In-sequence mixed loads 17 10

Table VI.Differences in means onloading methods (leansuppliers vs non-leansuppliers)

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Suppliers may receive several modification notices from the customerregarding the required delivery quantities for a specific order before theactual quantities are delivered to the customer. This research is interested inhow accurate the required quantities are at different stages as a percent of thescheduled delivery quantities. Table VIII shows that lean suppliers enjoy morestable order demand from their customers compared to non-lean suppliers. TheTPS views stability of customer schedules as a prerequisite for JITmanufacturing (Toyota, 1995) because big fluctuations in the dailyproduction volume force the plant to change its quantitative work forceevery day, thus making standardization very difficult, leading to qualityproblems and waste of work force especially at a plant where daily worktransfer is unfeasible. In addition, stable daily production schedules have apositive impact on maintaining stable shipping schedules for their customers.

Customer-supplier relationshipAccording to Gupta (1990) and Newman (1988), JIT requires a specialrelationship between the supplier and the purchasing department of a JITfacility. The relationship between the supplier and purchaser must be one of acooperative partnership where both parties work together to build a prosperousfuture. According to Schniederjans (1993), some of the characteristic features oftheir relationship include: long-term contracts; improved accuracy of orderfilling; improved quality; ordering flexibility; small lots ordered frequently; andcontinuous improvement in the partnership. According to Treleven (1987),when suppliers are treated as long-term business partners, close relationshipsand increased two-way communication allow the parties to mutually solvequality problems.

Respondents were asked about the length of business relationship withoutinterruption with their customer and the degree to which the relationship withtheir customers is based on mutual trust. As can be seen in Table IX, incomparison with non-lean suppliers, lean suppliers maintain a closerrelationship with their customers. Table IX shows that a long-term, mutualtrust, 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 thescheduled delivery time by customers 31 67 ***

Percent deviation from schedule (1 weekbefore needed) 16.2 23

Percent deviation from schedule (2-3 daysbefore needed) 4.4 8.5 ***

Percent deviation from schedule (1 day beforeneeded) 2.0 3.6 **

Notes: * p , 0.1; ** p , 0.05; *** p , 0.01

Table VIII.Differences in means oncustomer demand (leansuppliers vs non-lean

suppliers)

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their customers than for non-lean suppliers. Lean suppliers have had a businessrelationship with their customers for almost 5 years longer than non-leansuppliers. They are more apt to “trust” their customers. Compared to 68 percentof non-lean suppliers, 81 percent of lean suppliers have participated in sometype of supplier quality certification program required by their customers. It isinteresting to note that some practices associated with lean manufacturing arecommon to lean and non-lean suppliers – namely accepting supplier-certifiedparts and sole sourcing (defined as the percentage of all domestically producedproducts for the customer manufactured by the supplier). The present ratingsystem commonly used in the auto industry is that suppliers are rated on a100-point scheme, with points given for quality, delivery, technological level,cost-reduction effort, and cooperativeness toward the buyer’s requests. Ourdata provide evidence that delivery performance plays a critical role in thesupplier selection decision[5].

Table X shows the results on provisions included in the suppliers’ contractswith their customers. Compared to non-lean suppliers, the contracts betweenthe lean suppliers and their customers appear relatively flexible in terms ofvolume commitment, investment commitment, and unit price. This flexibilityprovides both sides with room for future adjustments, if necessary.

On the other hand, lean suppliers’ customers seem to put an emphasis onobligations that the suppliers need to perform such as delivery performanceand quality while 100 percent of the contracts between the non-lean suppliersand their customers include a provision on the price. As can be expected, onlyabout 5 percent of the contracts have a provision stipulating that the supplier islimited in or prohibited from doing business with other companies. Suchpractice is not uncommon in the Japanese auto industry.

Items Lean (N ¼ 65) Non-lean (N ¼ 65)

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

certification programb 81 68 **Percent of products accepted as good without

inspection 95.2 90.4Percent of sole source 92.0 88.0Percent emphasis on delivery performance by

customerc 44 40

Notes: a Scale (1 = none, 5 = complete); b 1 = yes, 0 = no; c 100 percent means that the customerselects the supplier as its supplier solely because of its excellent delivery performance notbecause of its quality, price, design/manufacturing capabilities, etc. 0 percent means that nomatter how poor the supplier’s delivery performance, it has no influence on the customer’sdecision in supplier selection; * p,0.1; ** p , 0.05; *** p , 0.01

Table IX.Differences in means oncustomer-supplierrelationships (leansuppliers vs non-leansuppliers)

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Logistics performanceTable XI presents the results associated with internal logistics performance. Incomparison with the non-lean suppliers, lean suppliers have a higherpercentage of on-time staging and fewer late deliveries. A significant differencein quality exists between the lean and non-lean suppliers. As expected, leansuppliers report much fewer defects than non-lean suppliers.

ConclusionOwing to the recent terrorist attacks, some scholars have begun to criticize theJIT delivery system. There will be a reexamination of shipping patterns andexisting relationships. Many industry practitioners agree that “Just In Time”will bend, but will not break. Relationships between service providers andservice users will be stronger. The security of assets and protection of propertywill lead the criteria for selection.

In response to global challenges, companies are trying to put into place leanproduction system such as the Daimler-Chrysler Operation System, FordProduction System, and Delphi Production System (Liker, 1997). As they havebeen transforming all of their manufacturing to their own versions of TPS(Liker, 1997), they will be motivated to switch to lean suppliers (MacDuffie andHelper, 1997). To be competitive in the changing global market, a supplierneeds to respond rapidly. One way to do this, while meeting demands for high

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

Volume commitmenta 51 67Investment commitmenta 68 77Business commitmenta 6 4Unit pricea 87 100 *Detailed technical specificationa 84 89On-time delivery requirementsa 83 53 ***Delivery frequency requirementsa 83 65 ***Penalties due to late deliveriesa 71 55 ***Penalties due to poor qualitya 71 53 ***Penalties due to short quantitya 71 56 ***

Notes: a 0 = no, 1 = yes; * p,0.1; ** p , 0.05; *** p , 0.01

Table X.Differences in means on

contract provisions(lean suppliers vs

non-lean suppliers)

Items Lean (N ¼ 65) Non-lean (N ¼ 65)

Percent on-time staging 96.6 93.4 **Percent late deliveries 1.35 2.15 *PPM defective products shipped to customer 278 958 *PPM products require rework or scraping 18,729 66,351 ***

Notes: * p , 0.1; ** p , 0.05; *** p , 0.01

Table XI.Differences in means on

logistics performance(lean suppliers vs

non-lean suppliers)

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quality and cost reductions, is becoming a lean supplier and having an efficientlogistics system (Kasarda and Rondinelli, 1998; MacDuffie and Helper, 1997).

Much of the past work has focused on the production performance inside theplant or on logistics systems. The purpose of the study is to investigate ifsignificant differences exist in logistics practices and capabilities between thelean and non-lean suppliers.

Past research (Bagchi et al., 1987) suggests that though JIT inventorysystems can reduce inventory-carrying costs, higher transportation costs aregenerally incurred. However, our results indicate that lean suppliers are notonly able to reduce their inventory level significantly, but they also spend muchless in emergency shipping and no more on routine shipping. Our results are inline with Droge and Germain’s (1998) study. The results of our study alsodemonstrate an inverse relationship between the degree of leanness and theamount of inventory kept on hand. Manufacturers who invest significantresources toward implementing JIT in their factories will in general benefit bycarrying smaller amounts of inbound, WIP, and finished goods inventory. Theinverse relationship exists regardless of the firm’s operating context (absolutesize). By using several JIT techniques, lean suppliers achieve higherperformance in on-time staging. Therefore, lean suppliers appear better andare able to reduce the expedited outbound shipments.

The findings of Kenney and Florida (1993) suggest that to be effective, theJIT system must have close geographic proximity to producers. However, ourstudy suggests that lean suppliers with an average distance of over 400 milescan still achieve competitive logistics advantages. The assumption that theautomaker takes control of transportation under an inbound JIT system wasverified in the study. This is in contrast with the approach commonly used inJapan where transportation service is often provided by supplier-owned trucksto provide a high level of service. Our finding is consistent with Harper andGoodner’s (1990) report which states that for a manufacturer to be able toimplement an inbound JIT system, it is usually necessary to have control overthe inbound transportation. To achieve excellent performance in loading, leansuppliers appear more willing to explore all possibilities such as the use ofside-loading trucks/trailers and use of additional trucks/trailers left at the dock.

The use of standardized containers to transport components simplifiesmaterial flows whereas the replenishment of materials based on pull strategiesusing kanban cards leads to simplification of ordering procedures (Lu, 1986).Though lean suppliers achieve more satisfactory containerization, still, 17percent 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 datainterchange (EDI). Our study provides evidence that EDI plays an importantrole in supply chain management. Supply chain management emphasizesvendor responsiveness, flexibility, and dependability as a means to improve

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customer service and logistics productivity. Timely and accurate informationexchange between the supply chain partners is essential for responsiveness,flexibility, and dependability (Crum et al., 1996). Our results indicate that forlean suppliers, the need to track the status and location of shipment isincreasing as more companies implement JIT or other inventory-reductionprograms. Overall, our results show that lean suppliers use more EDI thannon-lean suppliers.

Our results show that motor trucking still dominated inbound/outboundtransportation in the JIT systems and American suppliers made some progressin loading methods and routes though no significant differences exist betweenthe lean and non-lean suppliers. For lean suppliers, shipment sizes tended to besmaller and shipment frequencies greater and their ability to effectivelymonitor and respond to the transportation process becomes extremelyimportant. As expected, our results show that full outbound vehicle loadswould sometimes be difficult to attain, and partially filled trucks would befrequent, resulting in poorer vehicle utilization.

The study also provides evidence that lean suppliers are able to reducelogistics costs over time as compared to non-supplier firms. Much of theexisting literature on purchasing, materials, production, and inventorymanagement pays attention to the benefits to the supplier firm in terms ofreductions in manufacturing costs. Our results suggest that the benefits oflong-term relationships go beyond just manufacturing efficiencies. Theempirical findings in our study support this approach.

According to Gentry’s (1996) report, a negative relationship was foundbetween the inclusion of cancellation or penalty clauses in carrier contracts andthe use of a single carrier within the buyer-supplier partnership. This suggeststhat when a single carrier is utilized for transportation versus multiple carriers,these clauses are not likely to exist in contracts. However, as for automotivesuppliers, our data show that penalty clauses on delivery requirements arelikely to be included in the contracts between the lean suppliers and theircustomers. Such practice reinforces the importance of commitment to worktogether to solve quality and delivery problems. This finding supports thestudy by Brand and Grabner (1985). Their report indicates that on-timedelivery and pickup performance was the most important means of evaluationfor inbound and outbound freight movement.

To sum up, by comparing many different independent variables betweensuppliers with and without the use of internal lean manufacturing techniques,even given the same organizational constraints and resources, our studyprovides empirical evidence that use of internal lean manufacturing techniquesnot only has a significant impact on plant performance, but also facilitate manyexternal logistics practices.

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Notes

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 towardglobalization in the auto industry requires suppliers to be financially and manageriallystrong. As a result, any companies with less than $100 million in sales will not remain atier-one supplier.

2. The response rate was far above the norm (20-25 percent) for business surveys due to theaggressive 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 andunloading from either side. About 85 percent of deliveries are unloaded from the side – farfaster than unloading from the rear (Bradley, 1992).

4. A similar system had been developed by Xerox in 1980s to improve the efficiency ofdeliveries 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 aJIT production line (Lubben, 1988).

5. Winners of the Toyota Quality Alliance Award need to pass a rigorous rating process thatexamines product quality, delivery, warranty, purchasing, marketing, programmanagement, and technical development (Toyota, 1998).

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