Just-in-time inventory models relate to the system of inventory management aimed at offering the inventory readily available in order to meet the demand of potential customers. However, just-in-time models are aimed at reducing the excess of the extra products that pile up without bringing any earning. Therefore, just-in-time systems provide a benefit in terms of inventory maintenance and thus deserve additional research in terms of its implementation and possibly increases ineffectiveness for the business.
The article by Carnes, Jones, Biggart, and Barker “Just-in-time inventory systems innovation and the predictability of earnings” aimed to examine whether there is a difference in the predictability of the quarterly streams of earnings between the firms that did not adopt the just-in-time inventory and the firms that did (748).
Since the reduction of the inventory costs is greatly beneficial for increasing the effectiveness of the business by spreading awareness about the quality of products and eliminating waste, the study is, first of all, relevant for those wishing to improve the effectiveness of their business. The study expected that the adopters of the just-in-time inventory systems experience a much stable, smooth, and predictable stream of earnings.
The study design for the research called for the firms that offer financial statements widely available to the general public. The researchers were left with eighty-two firms after the changes and eliminations, which is relatively large sample size for this kind of research. The most important criterion for sample determination was that the firms announced their adoption of the just-in-time inventory systems (Carnes, Jones, Biggart, and Barker 743). The study considered three models that included Brown and Roseff’s model, Foster’s model, and the Griffin and Watts model. By means of performing the estimations of the firm-specific parameters for each expectation model, the researchers were able to come to a conclusion.
The findings of the study coincided with the predictions since firms that adopted the just-in-time inventory systems received an unexpected benefit in terms of earnings according to the one- and four-quarter predictions made by the researchers. The study is notable for it showing much bigger benefits of just-in-time inventory systems in comparison to the previously conducted research, which still supported the effectiveness of JIT, although on a much lower scale.
The future usage of the study can be implemented by accounting researchers and business managers who are predominantly responsible for increasing the effectiveness of the business at the same time by reducing the negative impact of unnecessary stock. Business managers may use the just-in-time inventory systems while conducting their earnings predictions that relate to the cost/benefit decision models (Carnes, Jones, Biggart, and Barker 748). The cost/benefit decision models are widely used in making decisions about the innovation adoptions, specifically the lean production methodologies, just-in-time inventory itself, as well as the Total Quality programs.
Researchers, on the other hand, may find the study valuable for outlining the possible innovations in the business operation that can impact the nature and the behavior of the earnings. Thus, the positive behavior of the company’s earnings might offer the business an opportunity to link the operational management to the research in the sphere of financial accounting. Therefore, the knowledge attained from the article can be used in a number of business spheres that entail inventory models and predictions of possible earnings.
Carnes, Thomas, Jefferson Jones, Timothy Biggart, and Katherine Barker. “Just-in-time inventory systems innovation and the predictability of earnings.” International Journal of Forecasting 19.4 (2003): 743-749. Print.