(FORTUNE Magazine) – AMERICAN managers in the U.S. who latched on to Japanese-style just-in-time production methods as a panacea for their manufacturing woes are finding that making the cure work is tougher than they expected. The regimen calls for a lot more than merely reducing the number of suppliers, renegotiating contracts with them, and tinkering with the layout of the plant. People have to change their attitudes as well, not only workers, but, more important, managers. The men and women in charge have to abandon the security blanket that inventory often represented for them and learn to trust their suppliers as they never have before. In dealing with suppliers, the old adversarial ways die hard. As perfected by Japanese companies like Toyota, just-in-time is an exacting discipline. The basic idea: parts and raw materials should arrive at the factory just as they are needed in the manufacturing process. This lets the manufacturer eliminate inventories and the costs of carrying them. Or at least that is what manufacturers dream will happen. Too often the dream turns out to be a nightmare for suppliers. They must ensure not only that materials get there at the right moment, but also, in some cases, that different parts, sizes, and colors arrive in precisely the right sequence for the assembly line. Even more taxing, suppliers have to deliver materials of uniformly high quality; with just-in-time, there is no backup inventory to reach into if a newly arrived part is defective. No one has good statistics on how many U.S. companies are using just-in- time, but a new book, World Class Manufacturing, by Richard J. Schonberger, a leading authority on just-in-time in the U.S., lists nearly 100 companies that have tried the method. The range of companies is wide, extending from Campbell Soup to Omark Industries, an Oregon maker of chains for power saws, to Motorola and Intel, two big semiconductor manufacturers. Production executives crisscross the country visiting companies skilled in the discipline. Hewlett-Packard, a leading just-in-time disciple, has had to cut back on visitors so employees can get their work done. Astute observers have found that the most common, and harmful, mistake U.S. companies have made has been in their attitude going into just-in-time. ''The big problem,'' says Edward J. Hay of Rath & Strong, a Lexington, Massachusetts, management consulting firm, ''is that companies treat just-in- time as a way of getting the suppliers to hold the inventories.'' Manufacturers who take this tack typically leave it up to their suppliers to figure out how to produce and deliver materials just in time, usually under threat of losing the business if they don't comply. ''Many of the old-style purchasing agents are still in very influential positions,'' says Ken Stork, corporate director of purchasing for Motorola Inc. and vice chairman of the Association for Manufacturing Excellence, an industry group. ''Our people go to meetings where the bastards are up there pounding on the table telling you how it's going to be.'' Just-in-time suppliers need a lot of handholding from their customers. Suppliers must have plenty of advance notice of what and how much to make, and the customers must stick to the schedules. A few smart companies are even bringing suppliers in on the early stages of designing new products. This helps ensure that the supplier can fulfill the contract at a profit, and that the customer gets the quality needed. And when customers help suppliers get on a just-in-time footing with their suppliers, inventories dissolve throughout the manufacturing chain, along with the carrying costs. If inventory just gets pushed down onto someone else in the chain, the cost of carrying it eventually gets pushed back onto the customer.

U.S. companies that enjoy some of the greatest success with just-in-time manufacturing typically have been through an arduous learning exercise. Xerox Corp., for example, pulled a classic boner with suppliers when it first & attempted to get its copier division into just-in-time manufacturing two years ago. The company, which owned most of the U.S. copier market in the early 1970s, had lost more than half the business to cheaper and better Japanese machines by the early 1980s. It then began a rigorous program to improve quality and win back market share. Xerox slashed its number of suppliers from more than 5,000 to just 300, and gave the survivors two- and three-year contracts, long-term by the standards of the industry, in return for big improvements in the quality of parts delivered. Where Xerox ran into trouble was in its attitude toward just-in-time. ''Our view from the beginning,'' says Fred McClintock, materials manager for the copier division, ''was that this was an inventory reduction program for our benefit. And we treated it that way, asking suppliers to hold inventories without compensation.'' Xerox's relationships with the suppliers, carefully nurtured over the years, quickly came under strain as more companies complained about the inventory practices. Xerox and the suppliers won't discuss the details of the rift but, McClintock says, ''the message was loud and clear.'' The lesson Xerox learned: ''There's no free lunch.'' At the beginning of last year, with the help of consultants, Xerox began working to improve relationships with suppliers. The company began reorganizing production, firming up order schedules so that suppliers could plan better. It also put on classes in just-in-time production to help suppliers train their own people. Now some suppliers can't say enough good things about Xerox. ''I think it's one of the leaders in the field. It really forced us to become competitive, to enter the 20th century,'' says Len La Passo. His company, Rockford Dynatorq of Rockford, Illinois, a maker of small clutches and brakes, had only a foggy notion of just-in-time before going through Xerox's training. Thanks to the big company's help, Rockford has cut the time it takes to make one brake part from 3 1/2 weeks to one day. Its $1.5-million inventory has been cut more than 10% since November. Inventories of finished parts are disappearing. Now Rockford is planning classes for its own suppliers and is working with a local community college to develop just-in-time training programs for companies in the area. In learning to deal with just-in-time, Xerox studied closely the experience of Harley-Davidson, whose just-in-time efforts from the beginning included an ) elaborate supplier education and assistance program. Harley, among the best U.S. practitioners of just-in-time, made different mistakes in getting the system up and running. Harley's motorcycle business was on the ropes in 1978 when it tried, and failed, to prove a dumping case against Japanese competitors. But the information Harley gathered in the suit revealed a dismaying fact that galvanized the company into action: Japanese manufacturing techniques were yielding operating costs fully 30% lower than Harley's. Harley managers attributed most of the difference to three Japanese practices: quality circles, the use of statistical process controls to ensure consistently high quality, and just-in-time manufacturing. The company quickly began to imitate the Japanese on all three. The company's overtures to suppliers in the fall of 1981 were ambitious and the initial reactions disappointing. The company called them to a conference at the Hyatt Regency Hotel in Chicago to announce the program. There Harley invited those that wished to continue doing business with it to join it in perfecting a just-in-time manufacturing system. The suppliers, most of whom showed up though the trip was at their expense, knew little about just-in- time. But they knew plenty about Harley and that made many skeptical. ''We figured it would never work,'' says Walter S. Lutz Jr., president of Signicast, a Milwaukee company that supplies shifter cams and other parts to Harley. ''Harley was notorious for juggling production schedules and was one of the worst customers when it came to last-minute panic calls for parts.'' Harley erred initially by taking a legalistic approach in trying to sign up suppliers for a just-in-time system. The company insisted on contracts that were 35 pages long, devoted largely to spelling out suppliers' obligations to Harley. Months went by, with only a couple of companies signing up, before Harley went back to more informal arrangements; the new contracts are two pages long. By then Harley was taking other steps to cement supplier relationships. Teams of its buyers and engineers fanned out to visit suppliers; they began simplifying and improving designs and helping suppliers reduce setup time between jobs by modifying equipment to permit quick changes of dies. To improve the quality of the parts, Harley gave suppliers courses in statistics to teach workers how to chart small changes in the performance of their equipment. The practice provides early tip-offs ! when machines are drifting out of tolerance. The results for Harley and its suppliers have been good, although the company still has not achieved all its goals. ''We are very inefficient,'' says Patrick T. Keane, a project engineer at Harley's York, Pennsylvania, plant. ''But the comparison of where we were five years ago is phenomenal.'' While the motorcycle business has become profitable once again, Harley, which is a private company owned by its managers, won't say precisely how well it's doing. But thanks to improvements in the quality of its machines, as well as vastly improved manufacturing techniques, its tab for warranty repairs, scrap, and reworking of parts has been reduced 60%. Harley's program included measures that probably represent the next step for many U.S. companies that have gained some experience with just-in-time: improving what might be called the infrastructure of the system. As Harley reduced the number of suppliers, it also shifted business to suppliers closer to its plants. About three-quarters of the suppliers to its Milwaukee engine plant, for example, are within a 175-mile radius of the city's suburbs. By closing the distances from its suppliers, the company has reduced the need for safety stocks -- inventories kept as insurance against breakdowns in transportation. The big three U.S. automakers have been pushing to get suppliers to relocate plants. They have succeeded in a few instances. The automotive systems division of Johnson Controls has located five plants near auto factories -- for example, a plant at Lapeer, Michigan, serves Chrysler's Sterling Heights, Michigan, assembly plant, and one at Belcamp, Maryland, serves General Motors' minivan assembly plant in Baltimore. Dana Corp. supplies drive shafts and axles to several auto and truck makers from a dozen factories near their facilities -- a plant at Louisville, Kentucky, for example, makes parts for a Ford truck plant in the same city. But many auto industry suppliers are not eager to start duplicating their costly, capital-intensive plants wherever Detroit decides to put up a factory. THE ALTERNATIVE to having suppliers close at hand is a finely tuned delivery system. New United Motor Manufacturing Inc. of Fremont, California, the Toyota-General Motors joint venture formed to produce the Nova automobile, has established such a system with some suppliers, many of whom are in Indiana, Ohio, and Michigan. Each day the company has delivered to its doorstep the parts needed for exactly one day's production -- enough to build 900 cars. The system is run by Leaseway Transportation Corp. using Union Pacific trains and piggyback truck trailers. The trucks ply 15 daily routes, picking up parts from suppliers and hauling the cargo to Chicago, where the trailers are loaded onto a train for the trip to Fremont. New United Motor keeps a three-day inventory to guard against delays. It says it will eventually reduce this stock to one day. The system failed to deliver parts on time only once in the year it has operated. Other transportation companies hope to offer comparable services soon. Improvements in transportation should broaden the markets of just-in-time suppliers and increase their opportunities to sell their new expertise. But for all their efforts to build close ties to customers, the day seems to be approaching when a new devil must be paid his due. This spring, for the first time, Harley-Davidson began pressing some of its suppliers to start passing up the line more of the cost savings that just-in-time affords. ''It's time,'' says Keane, ''to enter an era of negotiated price decreases. And right now we are holding meetings to accomplish that.'' Call it a new, much improved adversarial relationship.