JIT purchasing and production methods can be used in service industries as well. For example, inventories and supplies, and the associated labor costs to manage them, represent more than a third of the costs in most hospitals. By implementing a JIT purchasing and distribution system, Eisenhower Memorial Hospital in Palm Springs, California, reduced its inventories and supplies by 90% in 18 months. McDonald’s has adapted JIT production practices to making hamburgers.* Before, McDonald’s precooked a batch of hamburgers that were placed under heat lamps to stay warm until ordered. If the hamburgers didn’t sell within a specified period of time, they were discarded, resulting in high inventory holding costs and spoilage costs. Moreover, the quality of hamburgers deteriorated the longer they sat under the heat lamps. A customer placing a special order for a hamburger (such as a hamburger with no cheese) had to wait for it to be cooked. Now McDonald’s cooks hamburgers only when they are ordered. By increasing the quality of hamburgers and reducing the time needed for special orders, JIT has led to greater customer satisfaction. Responding to the needs of younger customers at the time, McDonald’s introduced customizable burgers in 2013 with its “Create Your Taste” line that let customers customize their burgers by choosing the meat, cheese, toppings, and sauce. However, the line produced challenges for the company in the form of longer preparation times and higher prices. McDonald’s downgraded the program to the semicustomizable “Signature Crafted Recipe” line in 2016 and ultimately eliminated offering customizable burgers altogether in 2019.*
We next turn our attention to planning and control of production systems.