RESEARCH AND REVIEWS Journal of Sport Management, 1995.9, 249-262 O 1995 Human Kinetics Publishers, Inc.

Case Study: Hillerich & Bradsby Company, Inc.

Implementation of Just in Time Manufacturing

Lori K. Miller, Lawrence Ur. Fielding, Mahesh Gupta, and Brenda G. Pitts

University of Louisvit le

In this case study of Hillerich & Bradsby Company, Inc. (H&B), the ways in which H&B implemented principle components of Just In Time (JIT) Manufacturing in the production of wooden baseball bats are identified. Various JIT components such as small batch production, a cellular layout, multifunctional workers, reduced set-up times, empowered employees, the kanban system, and supplier partnerships are discussed and applied to H&B productions. An analysis of selected financial ratios indicated that JIT successfully contributed to the maintenance of H&B's production efficiency and market leadership. While the first section of the paper briefly outlines the history of the H&B company, the second section addresses the JIT manufacturing process. Seven principle components associated with the JIT manufacturing process are addressed and applied to H&B's operations. In conclusion the limitations associated with H&B's implementation of the JIT manufacturing process are identified.

The Hillerich & Bradsby Company originated as the J. Fred Hillerich wood turning company in 1859. J. Fred Hillerich made a variety of wood products, including bowling balls, duck pins, newel posts, banisters, and beer facets. In 1880, Hillerich's only son, J. Andrew "Bud7' Hillerich, age fourteen, joined his father's company as an apprentice wood turner. Bud's interest in baseball led to the development of the "Louisville Slugger," a customized bat designed to meet the specific requirements of the user. Hillerich & Son baseball bats were sold locally and to touring professional baseball players during the early 1880s. The most famous of the early professionals was Pete "The Old Gladiator" Browning. Browning promoted Hillerich & Son bats during his professional years with the Louisville Eclipse team, a charter member of the American Association.

Lori K. Miller, Lawrence W. Fielding, and Brenda G. Pitts are with the Department of HPES, and Mahesh Gupta is with the College of Business and Public Administration, University of Louisville, Louisville, KY 40208.

250 Miller, FteIding. Gupta, and fftts

Hillerich & Son continued to manufacture baseball bats for local and professional players during the 1880s. In the late 1880s, Hillerich & Son decided to manufacture for the mass consumer market. The company secured its first distributor, the Simmon's Hardware Company in St. Louis in 1890. Frank Bradsby, a marketing specialist for Simmon's Hardware bought into Hillerich & Son in 1911. In 1916, the company changed its name to Hillerich & Bradsby (H&B).

By 1923, H&B had become the industry leader in the production of baseball bats (Annual Report, 1924). The company had a 76% share of the baseball bat market by the late 1920s and received an average profit margin of over 18% from baseball bat sales throughout the 1920s (Annual Report, 1929). Product quality and extensive promotion and advertising campaigns contributed to H&B's industry dominance. However, the company encountered difficult times during the postdepression era. For example, in 1937 H&B's share of the baseball bat market plummeted to 55% and the company received a 11 % profit margin from baseball bat sales. H&B's ability to secure government contracts allowed them to maintain stable operations during World War n. By 1949, H&B had increased its market share to 65%. However, this figure was still below the market share H&B secured in the 1920s. Profit margins associated with the sale of baseball bats averaged nearly 16% during the late 19409, also below 1920 figures.

H&B leaders believed the company's inability to manufacture enough baseball bats to meet demand prevented them from gaining back the market share they had secured in the 1920s (Annual Report, 1929). For example, H&B lost orders to McLaughlin-Milliard, Adorondack Bat Company, and Southwest Manu- facturing - Company due to its inability-to~manufac~the~supply~necessar~~to meet -demand (~inutes; 1949). The-organization-upgraded-its-Haynes-Manuit System, adopted in 1929ys a way to enhance volume produced while maintaining costs. The Haynes Manuit System was a wagelpiece system derived from Taylor- ism (Annual Report, 1929). The system determined wages by assigning a specific wage for each task completed. The upgraded Haynes Manuit system met the objectives of management as it allowed the company to increase production without a concomitant increase in costs (Annual Report, 1929).

The system, however, was not welcomed by employees as it required them to either work faster or receive less pay. More specifically, workers viewed the upgraded system as an attempt by management to decrease working hours and related wages while forcing workers to operate in a stress-filled environment. Supported by the U.S. Steel Workers of America, H&B employees went on strike for six weeks in 1949 to protest management's adherence to the piecework system. However, regardless of the strike, H&B was still able to increase its production of baseball bats from two million in 1948 to three million in 1949. In addition, H&B's profit margin increased to 24% (Annual Report, 1949).

H&B continued to emphasize volume production during the 1950s and 1960s as the expanding baseball bat market demanded quantity production. Fur- ther, company leaders concluded that volume production was directly related to market share. The emphasis on volume production contributed to worker unrest and labor strife as H&B once again encountered labor strikes in 1951 and 1968.

During the 1970s, H&B faced new challenges that again jeopardized its attainment of market share. For example, foreign competitors were now compet- ing for market share. In addition, aluminum bats challenged wooden bats for

Just in Time Manufacturing 251

prominence in the market place. Rawlings, Worth, and Eastman, long-time manu- facturing competitors, grew stronger during the 1970s as they were the first to emphasize the aluminum bat market. Although H&B entered the aluminum bat market relatively early, aluminum sluggers were made by Alcola Aluminum and quality was poor. The company lost market share to competing companies as a result of its low quality aluminum bats.

During the early 1980s, John A. "Jack" Hillerich, H&B President, became increasingly concerned about both domestic and foreign competition. Hillerich decided that quality was the only assurance of continued market share. A 1984 business trip to Japan introduced Hillerich to the Deming philosophy. Hillerich absorbed Deming's quality-related postulates and introduced them to H&B before the end of 1984. Hillerich's quest for improved quality continued during the 1980s. In 1988, at Hillerich's insistence, H&B implemented JIT manufacturing. The two philosophies complement each other as both encourage organizations to continually improve productivity, efficiency, and product quality.

Prior management initiatives to improve productivity were not well received by H&B employees. However, Jack Hillerich was instrumental in cultivating an environment in which workers were receptive to both the Deming and JIT philosophies. Four factors contributed to Hillerich's successful implementation of both the Deming and JIT manufacturing philosophies. First, Hillerich employed the President of H&B's local union, Danny Anderson, to serve as the Deming Coordinator. Anderson's executive appointment was important because he was instrumental in cultivating worker acceptance for both the Deming and JIT philosophies. Second, Hillerich was, and still is, very familiar with the manufactur- ing process. Hillerich frequently walks through the factory and listens to what the workers have to say. It is not uncommon for line employees to call the H&B President, Hillerich, by his first name. Third, the implementation process involved the workers and was not viewed as a "top-down" implementation. Task teams, comprised of both management and labor, were formed to facilitate the SIT implementation process. In addition, management empowered the workers to perform preventive equipment maintenance and make decisions regarding facility layout and operational efficiency. Fourth, because of his relationship with the workers, Hillerich was able to convince them of benefits that they would derive as a result of the .TIT manufacturing process. For example, Hillerich sincerely believed that JIT would enhance worker marketability, reduce ergo- nomic problems, empower workers, and reduce worker alienation.

This paper is a case study of how one company, H&B, used the JIT manufacturing process to improve production and operational efficiency. The case study approach has been recognized as valuable qualitative research by a variety of disciplines (Dethloff & Pusateri, 1987; Memam, 1988). The data and information within this paper were compiled from extensive interviews, observations, and document analysis.

JlT Manufacturing

Consumer demand encouraged American businesses to supply in mass quantities following World War 11. Manufacturers, applying techniques developed earlier in the century, concentrated efforts on large batch, high volume production.

252 Miller, Fielding. Gupta, and Rtts

Product quality was viewed as a secondary concern. Several authors attribute this apparent indifference to quality as a cause for the declining status of American industry (Giunipero & O'Neal, 1988; Hayes & bem math^, 1980;-Katz, 1988; Main. 1984: Zipkin, 1991). . . .

'~merican management embraced many programs while searching for a remedy to failing businesses. Examples include time sharing, flex-time, employee profit sharing, &d quality circles.%ach of these briefly became a "quick fix" component for American businesses. JIT reached America during the early 1980s. Both Kawasaki and General Electric introduced JIT in 1980 (Schroeder, 1993; Sepehri, 1986). The JIT system, striving for improved quality and waste reduction, combined elements of prior quick fix components into a meaningful strategy (Myers, 1987).'

As explained by Manoochehri (1988, p. 23), the "objective of JIT is to eliminate waste." Waste refers to all processes that do not add value to the product. Counting, moving, inspecting, waiting, reworking, and storing are processes that add nothing to product value. JIT targets these wasteful processes for elimination. McIlhattan (1987) estimated that over 90% of manufacturing processes associated with product manufacturing involve waste. JIT enables companies to reduce expenses associated with waste while simultaneously improving product quality, manufacturing productivity, and worker satisfaction.

Many American firms credit JIT for significant improvements in quality (Raia, 1986, 1991). Xerox, IBM, Hewlett-Packard, Harley Davidson, and Ford attribute improved product quality, low costs, and market share gains to Japan's JIT manufacturing system. Sepehri (1986) summarized the benefits associated with~JIT~as~follows: -

Eighty to ninety percent reduction in inventory investment, 80 to 90% reduction in manufacturing lead times, 75% reduction in work and setup, and 50% reduction in space requirements and material handling equipment. (P. 280)

Myers (1987) believed JIT "offers the last chance for many organizations to survive and compete in the world market . . . it is a timely opportunity to regain our competitive advantage" (p. 38).

JIT effectiveness is based on effectively implementing the following seven areas: (a) small batch production, (b) a cellular layout, (c) multifunctional workers, (d) reduced set-up times, (e) empowered employees, (f) the kanban system, and (g) JIT supplier partnerships. An understanding of these facets provides a better understanding of the JIT application.

Small Batch Production

The JIT system reduces the batch size or amount of inventory worked on at any one time. Before JIT implementation, H&B manufactured wood bats in large batches of 450 pieces. Individual employees completed a specified task on the entire 450 bats before moving the bats to the next station. The objective was to produce all the bats of a particular style at one time. The completed bats were then placed in storage. Upon completion, employees reset the manufacturing system for the next item and repeated the process.

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Small batch production eliminates much waste associated with large batch production. First, it significantly reduces lead time, or the total time required to manufacture one baseball bat. For example, before JIT manufacturing, it took H&B 15 days to manufacture one wooden baseball bat. JIT manufacturing enabled H&B to reduce lead time to two days. The decrease in lead time is attributed, in part, to the reduced batch size. H&B now manufactures baseball bats in batch sizes of 180 versus the prior batch size of 450 bats. Lead time reductions are important to company success because they significantly impact revenues and customer service. Prior to JIT, H&B repeatedly lost sales to competitors due to long lead times and the resultant inability to fill both midseason orders or reorders. Further, customer service suffered because H&B deliveries were frequently de- layed by as much as 14 weeks during the peak season.

H&B's distributors were frequently frustrated for two reasons when they were the recipient of a delayed order. One, the distributor frequently lost sales because their buyer simply purchased from other competing distributors. Two, distributors that received orders after peak season were often left with the risk and financial expenses associated with unsold inventory. JIT manufacturing en- abled H&B to better serve the buyer by successfully meeting advanced order delivery times and reacting to late season reorders.

Second, small lot production allows a company to adapt rapidly to changing market demands. Before JIT manufacturing, H&B manufactured large quantities of specific models according to estimated sales. When estimates were inaccurate or new models were demanded, H&B was unable to react quickly. Large batch work in process (WIP) inventories had to proceed throughout the entire production process before processing new orders. The large batch production often left H&B with mass quantities of obsolete products.

Third, small lot production significantly reduces floor space. For example, reducing batch sizes from 450 to 180 pieces allowed H&B to decrease utilized floor space by more than 67%. Most of the savings came from reductions in the raw material stored and WIP inventorie~.~ H&B used the recouped space for employee education sites, additional research and development space, and promo- tional sales.

Fourth, small batch production enhances worker satisfaction. As explained by Danny Anderson, Deming Coordinator, large batch production overwhelmed workers. Performing one task on 450 billets made workers feel like they would never finish the prescribed task. In comparison, small lot production allowed the worker to complete orders on a daily basis and provided workers with a subsequent feeling of accomplishment.

Fifth, small lot production and reduced inventory levels freed up company assets. Manoochehri (1988) estimated that small companies tie up 35.1 % of company assets in inventory. Sepehri (1986) noted that holding costs, or the opportunity costs of the inventory, storage costs, and obsolescence costs, range from 15-30% per year. Reduced inventory allowed H&B to realize cost savings in two primary areas. One, small batch operations allowed H&B to purchase in smaller quantities without incurring loans and related expenses. For example, ordering inventory in smaller quantities reduces: (a) loan size, (b) related interest expenses, (c) expense associated with coordination and communication with banks, and (d) labor expense associated with the storing, moving, and counting of inventory. Two, H&B saved transportation expenses associated with raw

254 Miller, Fielding, Gupta, and Rtts

material deliveries. Prior to JIT, raw materials were delivered to H&B's Slugger Park manufacturing site by rail. Nonvalue expenses associated with large batch rail delivery included unloading, storing, pilferage, and hidden quality control problems. Small batch truck deliveries enabled H&B to mitigate the expenses common to large batch deliveries.

Cellular Layout

Traditional mass production factories grouped like equipment and machinery together (Chandler, 1977; Hounsel, 1984). In this functional layout, completed operations moved from one area of the plant (e.g., the wood turning area) to the subsequent operation area (e.g., the sanding area). EmpIoyees working in the functional layout area performed only one specialized task. Upon completing work on a large batch, the employee moved the batch to the next station where another employee performed the next step of the operation process. The unfinished goods often waited hours or days before an employee began work on the large batch. WIP continually created bottlenecks impacting the efficiency of the manu- facturing process. Distances further complicated the effectiveness of the func- tional layout. Employees often moved materials hundreds of yards before the WIP inventory reached the next work station. The functional layout system required frequent counting, moving, inspecting, and waiting-processes that added nothing of value to the final product. Added expenses include costs associ- ated with labor alienation, storage, and undetected quality problems.

The cellular layout modifies the traditional functional layout (Hyer & Wernmerlo~~l984LPorteIJ.99 1)Ae-celluldayoutestablishesasequentia1- --

operation~with_machines~groupebclosely~togeth~ene~t~ssociate&with-th~ cellular layout are numerous. For example, a cellular layout decreases the amount of inventory stacked or stored between process operations. The reduction in inventory results in a more efficient use of factory space and exposes inventory problems typically hidden at the bottom of stacked materials (Schroeder, 1993). Contrary to the functional layout, the cellular layout involves employees in more than one stage of the operation. Involving employees in a number of manufacturing capacities gives employees a greater sense of involvement and conceptual understanding of how their efforts contribute to the end product. Additional benefits associated with a cellular layout are addressed below.

Multifunctional Workers

The cellular layout is conducive to the multifunctional worker performing a variety of job operations. At H&B, each employee within a cellular unit can operate every piece of machinery within a particular cell. Indeed, one employee could operate the entire cell. Multifunctional workers are attractive to management because they provide a company with greater flexibility when dealing with employee absenteeism. Multifunctional work allows management to rotate em- ployees among various tasks based upon need. This benefits the employee because it provides them with greater marketability, reduces ergonomic problems, and reduces feelings, and related consequences, of worker alienation and boredom (Gordon, 1991; Hellriegel, Slocum, & Woodman, 1989).

Just in Tfme Manufacturing 255

Reductions in Set-up Time

Companies, like H&B, that use the same machinery to produce a variety of product models face set-up time problems. Set-up time refers to the time required to adjust machines during a switch from the manufacturing of one product model to another. There is a great deal of waste, or down-time, associated with setting up the machinery necessary to manufacture a particular product model. American manufacturers have traditionally accepted set-up times as absolute and unchanging (Porter, 1991; Reid, 1990; Wilson, 1985). However, JIT manufacturing enables businesses to reduce set-up time. A variety of modifications can be made within a manufacturing system to reduce set-up time. Many of the modifications are minor and can be made for a marginal expense. For example, reductions in distance walked, immediate availability of necessary tools, and modest technolog- ical investments facilitate many long-term benefits (Reid, 1990).

Lengthy set-up times plagued H&B efficiency before JIT manufacturing. For example, H&B manufactures baseball bats on one of three types of lathes. One lathe is used for special, personal orders (e.g., professional baseball player bats). This hand-turned lathe is a replica of the lathe used by H&B in the late 1880s. The second lathe is an automatic lathe. This lathe requires a 4-4.5 hour set-up time. A third lathe is a tracer. This highly automated machine is H&BYs newest piece of equipment. The tracer lathe has a set-up time of a mere 90-120 seconds and does the complete turning job at one site.

Before JIT, H&B used the high technology tracer lathe to manufacture the five highest volume bats. The automatic lathe was to manufacture bats ordered in small volumes. Company leaders reasoned that the "best" machine should be used to manufacture those products in highest demand. However, both the tracer and the automatic lathe produce bats of equivalent quality. Using the automatic lathe for small volume orders required H&B to adjust machines fre- quently. Set-up times for the automatic lathe are excessive when compared to the tracer lathe. The JIT system focused H&BYs attention on the problem of waste due to lengthy set-up times. H&B now manufactures the highest volume bats on the automatic lathe since high volume products require few set-ups. The tracer lathe is used for the manufacture of small volume orders requiring frequent set-ups. The JIT system enabled H&B to produce more efficiently.

Set-up times were reduced in other ways. JIT also encourages businesses to ascertain carefully the markets demand for diversified products. For example, a reduction in the number of options (e.g., colors, sizes) provides for a more regular demand and a reduced need for set-up changes (Zipkin, 1991). As a result of JIT, H&B dropped several low volume models and established more uniform finishes for Louisville Slugger bats.

Empowered Employees

The JIT philosophy recognizes that the typical factory worker is very cognizant about product quality problems, layout deficiencies, and equipment maintenance needs. Consequently, the JIT manufacturing system requires management to empower employees to make decisions regarding quality, layout, and maintenance needs. Quality defects or mechanical problems that delay production efficiency, - - for example, are fmt realized by the employee. nab& employees to make on-sight decisions saves the company time and money.

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Workers' sentiments about management's perceived capitalistic pursuits often hinder the adoption of JIT by the work force (Giordano, 1992). Worker resistance, a traditional obstacle to operational change, was magnified within the H&B organization for two primary reasons. First, the average H&B worker is 52 years old and has been employed by the company for an average of 28 years. Even the newest employee has been with the company for 20 years (D. Anderson, personal communication, March 1993). Senior employees comfortable in current operational procedures were reluctant to change (D. Anderson, personal commu- nication, March 1993). Second, H&B workers became affiliate members of the United Steel Workers union in 1947.

Prior managerial changes were viewed by workers as bureaucratic measures that reduced worker freedoms, rights, and pay. As initially perceived by Karl Kaelin, an H&B rough and fine sander, "JIT stands for job in trouble" (Prihod, 1993). The three prior strikes in 1949, 1951, and 1968 exemplify the adversarial relationship that had existed between management and workers. Workers contin- ued to view management change initiatives, such as the adaptation of both the Deming and JIT philosophies, with hesitancy.

Company executives overcame worker resistance regarding JIT implemen- tation, in part, by empowering the worker. For example, H&B employees were involved via task teams and provided input regarding the implementation of the .TIT process within the plant (e.g., facility layout, quality improvement, production efficiency). For example, it was the H&B sanders, not management, who sug- gested that timber for all bats be precut at 37 inches. Prior to JIT, all billets were cut one inch beyond bat length specifications. Employees were required to reset machinery for each order requiring a different bat length. The set-up times

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However, the benefits associated with reductions in set-up times outweigh the extra raw materials expense.

Both the JIT culture and the Deming philosophy empower H&B employees to stop production when a quality problem was recognized. As noted by Danny Anderson (H&B's Deming Coordinator and former Union president), before JIT and Deming, employees were reluctant to communicate production problems for two reasons. One, equipment problems required the worker to stop production and call maintenance. The maintenance workers frequently took 10-15 minutes before arriving at the malfunctioning piece of equipment. Production was further delayed until the maintenance employees were able to fix the machine. Factory employees being paid on a quota system lost pay when equipment had to be stopped in order to correct a deficiency. Consequently, many employees were unwilling to lose pay in order to fix quality defects. These product defects were typically passed on to the consumer.

Two, employees found that their supervisors were also indifferent to quality problems for similar reasons. Prior to JIT, supervisors were more concerned about achieving production quotas and meeting delivery schedules than with the quality of production. In fact, Anderson explained that a supervisor would often make an employee "look bad" when employees did take the time to communicate quality problems to a supervisor. H&B eliminated all quota systems with the adaptation of the Deming philosophy in 1984. As explained by Danny Anderson, workers now feel responsible to the H&B "team" and want to produce a quality

Just in Time Manufacturing 257

product that generates customer satisfaction. Bill Miles, Technical Golf Manufac- turer, echoed Anderson's sentiments. As stated by Miles, "We're all a team of people, we're not management and labor-we're a team of people with a common goal and that is to service our customer" (Prihod, 1993).

The Kanban System

The JIT system uses the Japanese kanban technique. The term kanban means "signal." Signal systems vary in sophistication. However, the typical signal system has two objectives. One objective includes the delivery of necessary product materials, parts, and components to a work station immediately before needed. The JIT delivery of product materials, parts, and components reduces WIP and related waste associated with space and damaged materials (Abernathy, Clark, & Kantrow, 1981). At H&B, a computer generated card "signals," or informs, employees as to what to produce, when to produce, and with what inventory to produce. Production is signalled, or initiated, when a member of a work team retrieves a kanban card from a subsequent work center. The kanban card tells workers the materials needed to manufacture that particular order. For example, a kanban card may inform the employee that one autographed Mickey Mantle, 35-inch bat, with a strictly natural finish needs to be manufactured on a MI10 model lathe. The kanban card also includes the purchaser (e.g., Upperdeck Authentics), the date the order was received (e.g., 11/08/92), and the purchase order and corresponding line number.

H&B uses the master production schedule to derive the kanban information. Kanban information is put into the computer on a daily basis by H&BYs Data Process Manager, Larry Grubbs. The manufacturing schedule is determined according to a two-tier plan. The two components include (a) running orders and (b) minimum inventory requirements and sales estimations. Running orders are those orders received at Slugger Park from various distributors (e.g., Krnart or specialty sporting goods stores). Running orders are received by electronic data interchange, fax, or mail. H&B, however, manufactures baseball bats on a yearly basis as it would be impossible for the company to manufacture all baseball bats during the peak ~eason .~ In addition, producing baseball bats on a yearly basis levels manufacturing and related expenses. During nonpeak times, manufacturing schedules are determined according to top management's minimum inventory requirements based on sales forecasts and past experiences. Running orders take precedence and kanban cards instruct workers to complete these orders prior to manufacturing minimum inventory requirements.

H&B uses materials requirement planning (MRP) as a tool within the JIT system. MRP is a planning tool that continually verifies that available inventory and capacity are sufficient to meet demand (Schroeder, 1993). The use of MRP ensures that materials and capacity are available to manufacture the orders before appearing on the kanban cards.

A second objective of the kanban system includes informing workers as to when a particular work area is behind schedule, ahead of schedule, or idle. Company "signals" range from computerized, visual, and auditory scoreboards to simple, visual, spatial signals. H&B uses a container signal system. Workers know that when a container is empty, no production is to take place. The worker has two options. The worker can either move to another work station that needs

258 Mil ier. Fielding, Gupta, and Pitts

assistance or perform preventive equipment maintenance. The efficient utilization of workers eliminates waste associated with idle employees.

JrT Supplier Partnerships

The JIT strategy encourages businesses to use only suppliers that have adopted the JIT approach to manufacturing (Giunipero & O'Neal, 1988). The supplier is an important part of improving product quality. As noted by Crosby, "half or more of a company's internal quality problems are caused by defective purchased materials" (Smock, 1982). Receiving orders in smaller quantities highlights quality problems previously hidden at the bottom of large batch orders.

JIT literature suggests that, ideally, each business should deal with only one supplier. This contradicts traditional American businesses philosophy that argues that many suppliers are necessary to ensure available stock and bargaining leverage regarding price. Small businesses typically have limited influence over a supplier, often making total JIT operations impossible (Sepehri, 1986). The JIT philosophy also argues that the supplier should be viewed as an "extension of the factory" in which the two parties cooperate and strive toward common goals (Sepehri, 1986, p. 277). The supplier benefits from the resultant stable and steady demand. JIT also reduces suppliers' administrative costs (e.g., sorting orders, communication, coordination, size of the sales force) associated with multiple buyers. The manufacturer benefits from JIT deliveries and quality materi- als that better meet engineering specifications.

H&B does the majority of its business with JIT suppliers. As noted by illerich, '-'H&B simply cannot afford to work with suppliers who have not

-adopted theJIT techniqueLVerticalintegration allowed H&B to-solidify-relation-- ships with the supplier of timber as the company began establishing supplier subsidiaries (i.e., timber yards) in the 1950s.

Limitations Associated With HW's Implementation of JIT

First, H&B has not performed an ongoing evaluation of JIT benefits. As explained by Sepehri (1986), "defect rates, WIP, machine condition, worker proficiency, and output" are true indicators of JIT's success. However, financial data provided by H&B allowed us to better quantify, or measure, JIT success.

Inventory turnover ratios are a common tool in ascertaining JIT effective- ness (Hannan, 1987; Reid, 1990; Sepehri, 1986). Inventory turnover ratios indicate how quickly a company is able to move inventory (i.e., raw materials, WIP, and finished goods) through the production process. A great deal of waste and expense are associated with low inventory ratios. For example, low inventory turnover ratios indicate that a great deal of inventory is costing a company money associated with the necessary storage, moving, and counting of inventory. Further, accumu- lated inventory incurs risks associated with pilferage, obsolescence, damage, and deterioration. High inventory ratios allow companies to generate a steady cash flow while reducing associated risks.

H&BYs inventory turnover ratios reflect benefits resulting, in part, from the JIT manufacturing process. In 1985 the company had an inventory turnover

Just in Time Manufacturing 259

ratio of 2.70 (Figure 1). More specifically, H&B's inventory remained in either the raw materials, WIP, or finished goods stage for approximately 135 days. However, in 1989, one year after JIT implementation, the company's inventory turnover ratio reached 15.4. After .TIT implementation, H&B 's inventory remained in the factory for approximately 25 days. The higher ratio indicates improved manufacturing efficiency. The inventory turnover ratios declined in 1990 and 1991 to 10.34 and 6, respectively. However, both ratios remained higher than before the .TIT implementation. The inventory ratio decline resulted from an approximate $500,000 increase in inventory. Hillerich, H&B President, explained that H&B ordered excessive inventory so that bats could be made-to-stock, which ensured customers on-time deliveries. With the bat orders manufactured, the company was able to concentrate labor and nonlabor resources in golf production.

Additional ratios illustrate JIT's impact on asset utilization. The fixed asset turnover ratio (a.k.a., return on fixed assets) indicates how effectively fixed assets (e.g., plant, equipment) are used in generating sales. Similar to the inventory turnover ratio, a high fixed asset turnover indicates that a company is using fixed assets in an efficient and effective manner. H&B's fixed asset turnover ratios improved after implementing JIT (Figure 2). For example, in 1984 every dollar of fixed assets contributed 76 cents to H&B's sales income. In comparison, in 1989 every dollar of fixed assets contributed $1.44 to company sales. In 1991, H&B reported a return on fixed assets of 1.63.

The total asset turnover ratio (a.k.a., return on total assets) indicates how effectively a company is using its total assets to generate sales. Similar to the prior turnover ratios, a high ratio indicates better asset utilization. In 1984, every dollar of H&B's total assets contributed 37 cents to company sales (Figure 3). In 1989, every dollar of assets contributed 50 cents to H&B sales. In 1991, total assets generated 53 cents per dollar of sales.

Second, H&B uses very little statistical process control to monitor quality. As noted by Anderson, Deming Coordinator, this is one of the company's weakest areas. However, H&B does monitor quality in other ways. One, H&B has excellent research and development laboratories in Texas, Indiana, and Kentucky. These

Return on Inventory 16 1 I

1984 1985 1986 1987 1988 1989 1990 1991

Figure 1 - Inventory turnover ratio.

Miller, FLelding, Gupta, and Pitts

Return on FA 7

1984 1985 1986 1987 1988 1989 1990 1991

Figure 2 - Return on fixed assets.

Total Assets

Figure 3 - Return on total assets.

laboratories are used to assess the quality of various material components prior to product development. H&B also uses the laboratories to assess the durability of completed products. Two, the company monitors product quality through worker involvement. Employees are encouraged to stop production at any time to correct quality deficiencies. Three, product quality is monitored through customer feedback. H&B is very involved with the end users of their products and puts great credence on comments regarding product quality.

Conclusion

H&B's application of the JET system has undoubtedly enhanced productivity and efficiency while cultivating an environment of empowerment and cooperation. A large part of the company's successful implementation of JIT is attributed to

Just in Time Manufacturing 261

management's approach to the implementation process. There is not a prescribed method of implementing .TIT that provides identical benefits for all companies because circumstantial differences exist among all firms (e.g., product diversity, cyclical/seasonal businesses, available capacity). However, top management com- mitment and involvement in operational procedural changes and subsequent worker receptiveness are integral success determinants for all organizations striv- ing to implement JIT operations (Myers, 1987; Quinn & Harrington, 1987; Schroeder, 1993). H&B's dedicated support for JIT facilitated JIT's implementa- tion and resultant success. For example, the company provided extensive training for all Louisville employees working at the corporate headquarters and the Louis- ville Slugger factory. Employees attended orientation sessions designed to educate employees about the JIT philosophy while reducing worker fears associated with a new operational process. H&B's successful implementation and resultant operation of JIT was largely a result of top management's commitment to JIT and worker involvement. As stated by Hubert Roberts, H&B's V.P. General Manager of Timber (Prihod, 1993),

My advice to people who are investigating implementation of JIT is that if you want to be here five years from today you better not wait any longer because I don't believe you can be competitive without JIT.

References

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'JIT can be embraced by both manufacturing and service industries. 'H&B, because it is acyclical business, was only able to realize significant reductions

in its raw materials and WIP inventories. H&B still retains finished goods inventories until ready for shipment during the peak months of February, March, and April. In comparison, a non-cyclical business would not have the expenses associated with the finished goods inventory accumulation.

3H&B receives most orders between November and December with shipment ex- pected in January and February.

Acknowledgments The authors would like to thank the following individuals for sharing with us their

valuable time and i;lsights: John A. Hillerich, 111, H&B President; Billy B. Williams, V.P. Advertising, Public Relations, Licensing; George Manning, V.P. Technical Services & Plant Facilities; Marty Archer, V.P. Manager Athletic Goods Division; Danny Anderson, Deming Coordinator; Larry Grubbs, D.P. Manager; Jay Strange, Sales Manager, Domestic Sales; Dave Marcum, Production Manager; and Dave Ottman, New Product Development Manager.