Information and Incentive Effects of Inventory in JIT Production
Michael Alles, Amin Amershi, Srikant Datar, Ratna Sarkar
Management Science · 2000 · Volume 46 · Issue 12
DOI: 10.1287/mnsc.46.12.1528.12079
Abstract
This paper provides an economic rationale for modern manufacturing control practices such as the minimal inventories in Just in Time (JIT)systems, zero-defect policies, and continuous improvement. The popular and academic literature contains descriptive studies on the mechanics of these systems and their perceived benefits. We use a model of production to analyze both informational and incentive rationales for reduced inventories. A JIT-like environment of low inventory levels is optimal in our model because it helps workers to better observe and understand the production process and to think and act creatively to improve operational reliability and yields. Empirical evidence using data obtained from 116 plants worldwide supports our conclusions about the effect of reduced inventories on process reliability, product quality, and cost.
Keywords
just-in-time, inventory, information, incentives, quality, cost, control, performance
Enable JavaScript for citation tools and additional paper interactions.