Finance and Accounting Term Paper

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business strategy commonly refereed to as Just-in-Time has become more and more dominant in many aspects of business. Corporations like Hewlett-Packard have begun to use the system to improve efficiency and customer service. Although the system has been criticized as a lofty idea or a theory rather than an attainable business practice, the company that have implemented the idea have profited form it. Moving ideas from boardrooms and ivory towers to the sales floors and manufacturing plants can be a tricky task. The growing popularity of Just-In-Time in theory and in practice demonstrates how these difficulties can be overcome when new business ideas are brought to bear upon business practice. There are several hindrances to the implementation of new ideas. The time and money it takes to develop a new idea is certainly one difficulty in implementing new ideas.

Another hindrance to implementing new ideas is the mentality of old-guard executives in new business. Lastly, some people are prejudiced about ideas that come from academia, especially when the tried and true methods seem to be working. This essay will explore these problems in a theoretical and practical format using the example of the success of the JIT method.

It is worthwhile to review JIT method before digging into the literature about new ideas. 1000ventures.com defines JIT as Just-in-time manufacturing means producing the necessary items in necessary quantities at the necessary time. It is a philosophy of continuous improvement in which non0value-adding activities (or wastes) are identified and removed. Putting this concept into practice means a reversal of the traditional thinking process. In conventional production processes, units are transported to the next production stage as soon as they are ready. In JIT, each stage is required to go back to the previous stage to pick up the exact number of units needed.

Some advantages of JIT include a shortened lead time, reduced time spent on non-process work, reduced inventory, better balance between different processes, and problem clarification. According to 1000ventures.com, Hewlett-Packard saw drastic improvements when they implemented JIT. The manufacturing time for the assembly of 31 circuit boards was reduced from 15 days to 11.3 hours. The money caught up in inventory fell from $670,000 to just $20,000.

The implementation of a business plan is not an easy task. In his article 'What's a business Plan?" Tim Barkow writes

In business, ideas are cheap. Everyone's got one. What counts is execution -- the path that realizes an idea's value. And that's where the business plan comes in. It is, at its core, the blueprint for building the business. It should be so detailed and precise that if you happened to die, your weird Aunt Mary could take over and still succeed.

Sometimes the hard work and cost of implementing new business plans can be a major stumbling stone in a paradigm shift. The idea "If it ain't broke, don't fix it," can be prohibitive in implementing new ideas. If a business is doing well, and projections for the future are good, then some executives may see that as proof that old ideas are fine, and money should not be spent to develop and implement new ideas. Developing and implementing a business plan takes time and resources that some executives are not willing use for that purpose. The success of JIT is a tribute to the flexibility and forward thinking of some executives, but the idea was a long time in implementation. According to Intranet management, a McGill business encyclopedia, the ideas of JIT have been around for a while.

Although many elements of JIT manufacturing were present in Ford's assembly line in the 1930's, JIT as a manufacturing process was not refined until the 1970's by Toyota Motors. Springing from Japan's post World War II goal of full employment through industrialization, Japanese manufacturers imported technology to avoid heavy R&D expenditures and focused on improving the production process...Total Quality Manufacturing experts, Deming and Juran, are responsible for pushing North American manufacturers to adopt JIT philosophies."

It is easy to see the appeal of JIT, and easy to see why executives would be quick to apply the idea. The idea is young in this country, but almost every company in the U.S. uses it. The appeal of some ideas is not so obvious, thus the reluctance on the part of some executives to use resources on idea development and implementation. Time and money are valuable to companies. Sometimes, the new idea is not an obvious good thing, and it is not obvious that the new idea is worth the time, money and effort it will take to implement.

This problem brings to mind a different, but related problem. It is, of course, sometimes the case, that executives can't see the benefits of new ideas because they are not obvious and the old way seems to be working well. This problem is underlayed by the problem some executives may have of simply not being able to let go of old, out-dated ideas.

The business online magazine Total Knowledge Management points out the old guard, in all disciplines, business included can have a difficult time changing.

Often there is this baggage that many senior executives carry with them from the past OD approaches. Often KM is approached as if it were just another piecemeal solution within the existing regime. It is difficult to understand the implications of a paradigm shift! Sometimes there is a reluctance to unlearn old ideas and re-learn such radically new ideas -- e.g. In the case of burnt out old senior executives. Inertia can be a powerful force in resisting change towards the new."

Resistance to change by executives to be seriously detrimental to the advancement of new ideas. Reluctance on the part of executives can stop good ideas dead in their tracks. Ideas like JIT catch on fast because their benefits are so obvious and the concepts are so simple. There is resistance to this change. In an interview with Economic Reform Today, Dr. Charles Oman, the Head of Research at the Development Center of the OEDC, where he currently works on Corporate Governance, talks about the JIT theory, and the resistance to it, despite the obvious benefits.

What is remarkable is that firms operating on this new model have achieved levels of capital and labor productivity significantly greater than the levels that even the most competitive businesses that operate according to the scientific management model can attain. This productivity differential in turn exerts tremendous pressure on all types of firms-from manufactures to modern service providers-to adopt the new business model. In certain industry, this model is referred to as the "just in time" system.

Dr. Oman said that despite the obvious benefits, some executives are still reluctant to adopt the idea.

Despite tremendous competitive pressure to adopt this new business approach, there remains much resistance to change. This resistance to making the transition from the "old" to the "new" business model goes far to explain both the growth and relatively high levels of unemployment in Europe and the significant growth in the number of working poor in the U.S. over the last couple of decades. While globalization today is often blamed for these problems, the real culprit is the difficulty many firms and people have in making the transition to the new business model. The difficulty is amplified by the considerable resistance one finds in many firms to making that transition.

Dr. Oman's comments bring to light other problems in implementing new business plans. Current trends in the local economy, the national economy, and, for larger companies, the world economy, can be a problem when implementing new business strategies. Sometimes labor unions can stand in the way, as well as certain labor markets that can make hierarchical models redundant and dysfunctional.

The connection between the economy and…[continue]

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