The Limits of Japanese Production Theory

The concepts in “Japanese” production theory, also called zero inventory or just-in-time, have often improved productivity dramatically, sometimes by 100 percent or more. The theory's central principle is that inventory reflects underlying waste and that eliminating waste causes inventory to drop and productivity to rise. Costs are reduced, response time to customers is improved, and the ability to market in niches is enhanced. Ordinarily, as setup time or costs are reduced, inventory and production costs should decline. But in some circumstances, setup reduction can increase inventory and cost. An exploration of these contradictions may lead to a new and more powerful production theory that resolves these contradictions.