Japanese Economy and Management - Essay Example

Japanese Economy and Management The Case of Cargo Car Company 'Cargo' is small British engineering company, which sells mainly to the car industry. Recently, you have been taken over by a large Japanese sub-contractor. Three years have passed and 'Cargo' now intends to introduce just-in-time. Advise Cargo as to the main problems they are likely to face and examine how they should overcome these problems. Specify any assumptions you have made. This question pertains to a critical discussion of the problems facing an engineering company which was formerly of British origin and ownership and is now under the control of a Japanese stakeholder for the past three years. As the company sells mainly to the Car industry it has to be noted that a change of ownership(especially in a foreign context) will lead to a clash of management and production culture. Some academics have spoken favourably of the incidents of such a takeover as Graham (1988) notes that 'just-in-time' production is an "innovative paradigm for manufacturing control". This production technique is the brainchild of the Japanese management philosophy and Graham (1988) has expressed the view that British and American systems can benefit from this in order to remain internationally competitive. The previous decades have seen a radical modification in the Manufacturing techniques through the interaction and intersection of Western and Japanese techniques. (Graham 1988, Yamashina 1996) It is worth noting that the political atmosphere of the decade of the eighties made the United Kingdom a conducive political environment for the Japanese foreign manufacturers. (Graham 1988, Yamashina 1996).This gave them a chance to transfer their highly competitive manufacturing processes and management techniques to the United Kingdom's production culture and a unique permeation of their specialities like Just-in-Time to their production culture.(McDermott 1996). When we speak of Just-in-Time technology, it is a reference to only one the many innovative production cultures/methods of Japanese production which revived and saved the ailing UK automobile industry in the mid-eighties.(Mc Dermott 1996). Just In time technology focuses on the elimination of wastage with in production processes through continued refinement. Therefore the output is cost reflective and any accumulation of excessively low level production and inventory methods is highly discouraged.(Epps 1995).The system involves the establishment of highly balanced work flows with sophisticated linkages between the production stages.(Epps 1995).The process will involve the reduction of inventory buffers and a heightened emphasis on the economies of scale from wise efficient procedures.(Mc Dermott 1996). Just In Time owes its origins to the development innovations by Toyota Car Company in the mid fifties and later influenced many major western companies/engineering business concerns like General Electric and Rover.(Mc Dermott 1996). Mc Dermott 1996 and Yeung 1997 have stated in reference to Rover that this British Car company had a lot to learn from its Japanese influence as it benefited immensely by reducing the new product development cycle and reduction in and management levels.Also prominent is the introduction of the minimal inventory control (MIC), a just-in-time system as it embraced its Japanese influence in its new slogan- "Prevention not detection: part of Rover's total quality commitment". (Mc Dermott 1996).Therefore the positive western experience has led to the Just In Time systems to be widely used in British Car manufacturing today.Cargo Engineering Company will have to adopt itself to a number of salient features of the Just In Time innovation. At this point we are assuming that the British car company is neither familiar with the Just-in time culture nor has employed any foreign technical staff. However the presence of British labour laws is acknowledged along with an absence of any major technological changes in the past few years. Based on the analysis by Nataraajan & Sersland, (1991) the salient features of such a switch over will therefore include and emphasis on uniform plant loading, constant daily production, mixed model assembly, reduced or eliminated setup times, reduced lot sizes and lead times, preventative maintenance. Just In Time systems have also been known to display an emphasis on shared product design with suppliers and customers, , reliance on analytic tools (such as fishbone diagrams) to identify sources of defects in products and processes, demand-pull support, and cellular plant layout, among others (Droge & Germain, 1998).The labour supply in a Just In Time based production system will supply each process with its requirements within the required time frame thus promoting a culture of waste reduction by streamlining the entire process. (Hay, 1988).Last but not the least empirical results have demonstrated a heightened reduction in the Car Production systems in the United Kingdom thereby improving the business' return-on-investment (Hay, 1988).For comparison of the two systems it is worth looking at the diagrams below. Figure A (courtesy of Martin 2007) shows the traditional factory layout in the British Car company as the departments are organised by function and (in a rather crude assumption) inventory is transported through "forklift" trucks Figure B below shows just how this system will affect the layout in the British production (courtesy of Martin (2007) to give it a rather "cellular effect" which involves thorough organisation and sequencing. Before moving on to a critical analysis of the problems that can be caused by switch-over to the Just In Time technology it would be worth evaluating the benefits a switchover to this technology can bring. Academics have consistently spoken of the dramatic improvements in a manufacturing organization's return on investment, quality, and efficiency brought about by this system.(Martin 2007 , Weintraub & Martineau, 2002).Just in Time employs a needs based supply system of labour and capital to eliminate or reduce warehouse expenses.(Moser, 1998; Daniel & Reitsperger, 1991; and Weintraub & Martineau, 2002).The technique has been known to improve the flow of goods between the warehouses and the shelves and can improve the work schedules can be made more consistently and employee work hours can be held more consistently (Weintraub & Martineau, 2002).Empirical studies have shown that post switch-over the workers have become workers are more productive and focused with supplies coming in continuously, which means managers can concentrate their energies on turnover.( Weintraub & Martineau, 2002).This has led to an increase in the productivity of the companies as tedious and repetitive steps are better taken care of better(Weintraub & Martineau, 2002).Studies also show that when employees are focused on one area in which they are to perform tasks, they have the tendency to be more productive than they would be trying to multi-task and complete many different jobs at any given time throughout the day.(Martin 2007, Graham 1998)..Also when their various job tasks are significantly reduced, they are less likely to suffer from fatigue and require downtime. Simply put, everything flows better from the warehouses to the shelves because lot sizes are reduced and, as a result inventory and movement becomes easier and more manageable.(Mc Dermott 1996).The JIT system allows cross-trained and multifaceted individuals to operate at their peak. (Graham 1988, Yamashina 1996) If on any day there is a shortage of workers at Cargo, employees with multiple skills can step up to the plate and fill the gaps. This is an often overlooked bit of protection that many companies have and fail to utilize.(Graham 1988, Yamashina 1996). Another benefit is better consistencies and balance in general with regard to employee scheduling and employee work hours. Money can be saved through this process because, when there is no demand for a product or no need for an employee to be at work making it, then there is no need for the company to pay that employee. Another option would be to divert those employees to other areas of the company to complete tasks that would not normally get done (Graham 1988, Yamashina 1996).The next benefit is that JIT allows companies like Cargo to emphasize upon supplier relationships. Having a break in the inventory system that resulted in empty shelves when a product was in high demand would be a catastrophe. A company must be able to count on its supplier and on the goods being delivered on time. This relationship is a crucial part of building a good reputation with the public (Graham 1988, Yamashina 1996). However all has not been well during switch-overs to Just in Time production technologies. Just in time systems have been known to cause vulnerability to large ups and downs in demand and the raw materials and it cuts away the benefits of anticipation( Conti, R & Warner, M 1993).This is why Toyota(whose brain child the JIT car system was) has been criticised for its failure to benefit from anticipation (Anon, 1996). The methodology over looks that there may be delays in delivery by the suppliers and that sometimes it is more beneficial to import /buy supplies in bulk rather than on a needs basis as the supply market may be unpredictable.(Anon 1996).This is particularly true when these factories will be located in Urban areas.Therefore if we are looking at the British car factory being in London or closer we are looking at large delays due to traffic congestion (Conti, R & Warner, M 1993).Critics have even gone ahead to point (and this might be true in the case of the Cargo car company ) that utilising the Just in time system will lead to the swapping of 'waste' of excess stocks for the 'waste' of excess machine capacity. (Oliver, 1988).Other critics have labelled this system as too perfectionist and making the production process the proverbial "hello on earth"( Inukai 1997,Mc Dermott 1996) through its intensified labour surveillance and emphasis on quality development.Frankly the labour attitude of Britain,much spoilt by its trade unions and benefits will find it hard to be devoid of any material and human slack as the Just In Time system focuses too intensely upon a high labour turnover.There is even a danger that the labour at the Cargo company might find themselves utterly frustrated and history has shown similar trends (for example the national strike at Ford in 1988. (Delbridge,Mc Dermott 1996). For Cargo this is going to be a rather expensive switchover since there will be heightened costs of training as well as those of preventative maintenance, and, significantly, consultants (Zipkin, Yamashina 1996,Wells 1994, Inukai 1997,Mc Dermott 1996).The customer base is likely to feel vulnerable to supply disruption .The system has also caused environment controversy from its increased use of transport vehicles and time wastage in the transport of raw materials(Yamashina 1996,Wells 1994, Inukai 1997,Mc Dermott 1996).Thus it can said these interruptions in flow make companies such as Cargo especially vulnerable to running out of inventory at a highly crucial time and wasting valuable production time waiting on some parts to arrive so that workers may continue on with their jobs. (Graham 1988, Yamashina 1996) It is highly likely that they receive several shipments of the same part per day. A way to solve that problem would be to use two suppliers for prone or highly important assemblies, as well as to make sure to always have good relations with suppliers of parts that could fit into the assemblies (Yamashina 1996,Wells 1994, Inukai 1997,Mc Dermott 1996). The Nissan experience in the UK was widely acclaimed yet a few academics like Wells(1994) pointed out the obvious problem with the system.The system was strictly team based and focused on peer evaluation results in intense stress on the predominantly male workforce.The recruitment policy was criticised as too choosy and ignored the disabled and women(which goes against the British image of welfare and equal opportunity). There is also an increased danger based on this experience of large amounts of job losses at the Cargo plants( learning from the experience of Ford, General Motors, Peugeot and Rover who all chose adopt Japanese working practices in order to boost efficiency).All in all it is doubtful that the British Trade Unions will be able to get over such a demanding production philosophy. (Graham 1988, Yamashina 1996). My final advice for Cargo Company would be however that they should go ahead and implement this system only if they can afford the cost of management and training for the switch over during the current/designated fiscal year for the switch-over.There is indeed much to be gained from this change as Monden has nicely summed up that "JIT works best in repetitive manufacturing businessesand is not 'Japanese' as such, but rather, universal principles of good manufacturing that have been well packaged by some Japanese manufacturers" (1988). However even at this point the cultural differences and labour set up in the United Kingdom cannot be ignored and Cargo is warned of a rather turbulent journey ahead in terms of transitional costs and considerations expressed above. References 1. James Martin 2007, Management Accounting: Concepts, Techniques & Controversial Issues, Just-In-Time, Theory Of Constraints And Activity Based Management Concepts And Techniques 2. Aoki, M. 1990 'Information, Incentives, And Bargaining In The Japanese Economy' 3. Daniel, S.J. And W.D. Reitsperger 1991 'Management Control Systems For JIT: An Empirical Comparison Of Japan And The U.S.' Journal Of International Business Studies, Vol. 22. 4. Droge, C. And R. Germain 1998, 'Just-In-Time Inventory Effect: Does It Hold Under Different Contextual, Environmental, And Organizational Conditions Journal Of Business Logistics. 5. Epps, R.W. 1995 'Just-In-Time Inventory Management: Implementation Of A Successful Program' Review Of Business, Vol. 17. 6. Hay, E. 1988 'The Just-In-Time Breakthrough: Implementing The New Manufacturing Basics' 7. Moser, J.T. 1998 'Credit Derivatives: Just-In-Time Provisioning For Loan Losses' Economic Perspectives, Vol. 22. 8. Nataraajan, R. And D.R. Sersland 1991 'The Just-In-Time Philosophy: A Legacy Of An Obsession' Review Of Business, Vol. 13. 9. Walberg, G. 1997 'Everything Old Is New Again: Reaching The Limits Of INDOPCO's Future Benefits With The Just-In-Time Management Philosophy' William And Mary Law Review, Vol. 38. 10. Weintraub, R.S. And J.W. Martineau 2002 'The Just-In-Time Imperative: The Imperative-And The Problems' T&D, Vol. 56. 11. Japanisation As Mythology ,Ian Graham,Industrial Relations Journal, Volume 19, Issue 1, Page 69-75, Mar 1988Japanese Manufacturing Strategy Competing With The Tigers,Hajime Yamashina,Business Strategy Review, Volume 7, Issue 2, Page 23-36, Jun 1996, Doi: 10.1111/J.1467-8616.1996.Tb00120.X 12. Not Very Productive: Did The 1980s Really Make British Manufacturing And Productivity Much More EfficientJOHN WELLS,New Economy, Volume 1, Issue 3, Page 185-189, Sep 1994, Putting Japanese Investment In Europe In Its Place 13. Note On Dynamic Growth Of Catch-Up Capitalism In Japan: Enterprise Networking And Its Relevance ,Ichiro Inukai 14. African Development Review, Volume 9, Issue 2, Page 88-104, Dec 1997, 15. European Industry: The Emerging Market Competitiveness Challenge ,Economic Outlook, Volume 30, Issue 3, Page 11-17, Jul 2006. 16. Engineering Careers And Technology Transfer: Japanese Companies In The UK ,Kevin Mccormick, David Cairncross, Yumiko Hanstock, Brian Mccormick, Alan Turner,New Technology, Work And Employment, Volume 11, Issue 2, Page 96-106, Sep 1996, 17. Michael C. McDermott (1996),The Revitalization Of The UK Automobile Industry ,Department Of Marketing, University Of Strathclyde, Glasgow, UK , Industrial Management & Data Systems ,Volume 96 Number 5 18. 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