Growth and Development of Post WW II Japanese Industry - Dissertation Example

Growth and Development of Post WW II Japanese Industry Introduction It was not even fifty years ago that Japanese goods were condescended by rest of the industrialised world for their poor quality and the general idea people had about Japan was that of a country manufacturing elementary electrical items and sundry gadgets that carried no guarantee of uninterrupted service. (Juran 1993) People preferred goods of European or US origin and none gave Japan even the slimmest chance of being able to manufacture goods that would one day give the products manufactured in Europe and United States such a stiff competition that some of the producers would almost be driven to extinction. But this metamorphosis of Japanese industry did not take place overnight by the wave of a magic wand; it took years of concentrated application and single minded focus of the captains of Japanese industry who were determined to pull the country back from the brink of economic collapse after Second World War that completely destroyed nearly half of Japanese industrial infrastructure. Indeed Second World War, or more precisely the defeat in it, was simply shocking to Japanese society as a whole and dealt a terrible blow to their self esteem. Stung by the reverse and determined to put the economy back on an even keel, the entire Japanese society, with the industrialists at the forefront, set about on an almost impossible journey of economic revival and ultimate worldwide supremacy that has till now not been duplicated by any other nation in the world. Most economic historians are of the opinion that the unique combination and juxtaposition of various social, political and economic forces that had happened at that point in time would perhaps never be repeated any time in future. United States, wary of increasing Russian supremacy and desperate to halt communist hegemony at any cost, entered into a military alliance with Japan and the US Government encouraged American companies to license technology to Japanese manufacturers so that Japanese industry could get back to its own feet at the earliest. It was obvious that self preservation and creating a strong bulwark against marauding forces of communism was the sole motive behind such generous US behaviour. The US military also started getting their vehicles repaired by Japanese companies. These gave a unique opportunity and boost to Japanese industry and in particular its automobile sector. The automobile manufacturers in Japan got an opportunity to know in detail the technology implemented by US automobile majors. Japan was already having a well educated, disciplined and committed workforce and this was augmented by ex-soldiers who were not only technically equipped but also supremely disciplined and ready to bend their backs to achieve higher levels of productivity. The additional catalyst that speeded up Japanese industrial recovery was the awareness among industrialists that the surest and shortest way to industrial supremacy is producing quality output since quality is the only criteria that sets one manufacturer apart from another. Japanese industrialists, especially Kiichiro Toyoda, president of Toyota Motor Company, realised pretty early that unless they could beat the Americans in quality there was absolutely no chance of a revival. (Ohno 1988) This realisation that quality is not one among many problems but the only problem the solution of which takes care of all other problems, gave Japanese industrialists a head start over their American and European counterparts and Toyota became the mascot of Japanese industrial revival that started the era of supremacy of Japanese automobiles. Toyota shows the way away from Ford’s assembly line of production Ford Motor Company was the leader in automobile industry during the 50s and 60s of the previous century and Eiji Toyoda, cousin of Kiichiro Toyoda, the then president of Toyota Motor Company, was sent to the US in the early part of 50s, to observe minutely the famous mass production system of Ford Motor Company that managed to produce phenomenally large volumes that allowed the company to enjoy economies of large scale. A part of this economy was routinely passed on to the customers who enjoyed automobiles of very good quality at unbelievably low prices. Ford Company thus was a model that every aspiring automobile manufacturer wanted to analyse and duplicate and Toyota was no exception. An example of the exceptional productive capacity of Ford Company can be understood from the fact that while Toyota could produce 2,685 automobiles in thirteen years since its inception, Ford Motor Company was producing 7,000 units daily in its Rouge plant in Detroit. (Womack, Jones and Roos 2007) The secret to such an astounding level of output was the revolutionary concept of assembly line production pioneered by Henry Ford. He had discovered that if a worker performed only a single task, his expertise in that task increased and this specialisation ensured a higher level of productivity of that particular worker. Thus he broke down the entire job of manufacturing an automobile into several identifiable jobs and entrusted each job to a particular group of workers. Initially these workers used to move from one semi finished car to the other doing only that part of the job they have been entrusted with. The cars remained stationery while workers moved from one point to the other. Ford observed that level of output increased substantially with the introduction of this form of stationery assembly line. The output level, however, really got a quantum boost when the cars were placed on a mobile assembly line where the workers remained stationery while the semi finished cars came near the workers. The production time required for manufacturing a complete car reduced by a massive 88% this, quite obviously, increased the output volumes many time over. An added advantage of a moving assembly line was a reduced level of inventory of parts waiting to be assembled that reduced levels of working capital quite markedly and this financial advantage only added to the financial stability of an already stable organisation. (McKay and Wiers August 2004) Ford was already enjoying the benefits of assembly line production and its method of production was already copied by almost all major manufacturers of Europe. Eiji Toyoda was no doubt impressed by the efficiency of the system but thought it needed certain adjustments if it was to be a success in Japan where automobile markets were fundamentally different from those in US. Moreover, US automobiles had a ready market all over the world whereas Toyota could only aspire to sell in Japanese markets. It did not till then have the goodwill to command any clientele anywhere else. Thus, the economies of large scale production that Ford could enjoy were not there for Toyota to take advantage of. It still did not have that many prospective customers to cater for. So, Eiji Toyoda thought of other ways to enjoy the fruits of economies of large scale and that came not through producing large volumes of a single product but relatively much lesser volumes of quite a large number of products on the same production line. This was how the famous Toyota Production System came into existence. (McCoby 1997) Almost during the same time, Taiichi Ohno, production manager at Toyota, discovered that cost per part manufactured reduced substantially when such manufacturing is done in small batches instead of large lots. This was no black magic as such and had definite economic reasons for such an occurrence. The most important reason was there for all to see and it related to the small volume of inventory of inputs that was necessary to manufacture a small lot. Such reduction in inventory substantially reduced working capital locked in inventory and, considering the high rates of interest that were prevalent at that time, led to a substantial reduction in total cost of production. There was another benefit of manufacturing in small batches. As the workers dealt with relatively less volumes, it was easier for them to identify manufacturing defects almost immediately and restrict any further expense of material and labour on a defective product. The other benefit, though indirect, was an additional awareness on the part of the workers to produce defect free output as they knew that production defects if any would immediately be identified. Thus Toyota enjoyed a twin gain when it produced in small batches. But before we go into further detail about the innovations made by Ohno, it must be mentioned that a large part of his success was due to the Japanese work cultural and a dedicated and disciplined environment. Toyota Production System – How it bettered Ford’s Assembly Lines Ohno visited several times Ford’s factory at Detroit and observed the assembly line method of production from close quarters and felt it was not as lean and taut as it should be – there were still many areas where unnecessary wastages were taking place. Ford’s assembly line had a foreman who ensured workers were working according to predetermined schedules and procedures and there were housekeepers who periodically came and cleaned the work area to remove any unnecessary oil and chemicals that may or may not cause slippage, fire or any other possible hazard. There was a separate group of workers entrusted with the responsibility of repair and maintenance of both machines and tools and they visited the work area according to a preset frequency to ensure that there was no stoppage in production due to sudden breakdowns. There were several quality inspectors who examined at random finished units to verify that output conformed to standards. There was a rework area right at the end of the production line where workers rectified defective outputs and there were a gang of workers who acted as a backup to cover up unanticipated absenteeism. Ohno felt such a system was full of muda, the Japanese equivalent of non-value added activities that resulted in expenditure without any corresponding benefit. (Rother and Shook 2003) He modified the assembly line setup to make it more efficient by shedding some of its fat. Ohno did away with the foreman and clubbed workers into teams where team leaders played the role of the foremen. Thus, while the team leader himself worked he also ensured that work is proceeding according to predetermined parameters. Each team also had the responsibility of keeping the work area clean thereby removing the requirement of the group of workers who perform only housekeeping jobs under Ford Company’s system of assembly line production. Ohno also entrusted this team with undertaking minor repairs of machines and tools and undertaking quality checks of outputs produced. Thus, at one stroke Ohno removed four categories of workers that populated the shop floor in assembly line production system without directly being involved in the production process. Ohno envisaged a scenario where only those that are directly adding value should be present on the shop floor. This removed unnecessary crowd on the shop floor and, what is most important, reduced a substantial amount of production overhead. (Tolliday 1998) But the most innovative introduction of Ohno was setting aside some time for each group of workers when they would collectively discuss and suggest ways and means of further improving the current levels of production efficiency. This became known as ‘Quality Circles’ in Western industries that eagerly picked up this innovative idea as all knew that this would surely increase productivity in shop floor. This process of continuously thinking about ways to further improve the current procedures at workplace is known as kaizen in Japanese and it became one of the mainstays of Toyota’s production process and philosophy. (Imai 1986) Ohno also proved his innovative genius while dealing with rework and rectification of damaged and defective units. Under assembly system the damaged and substandard outputs were reworked at the end of the assembly line but Ohno would have none of this. He was absolutely right in insisting that defects should be rectified right at the very moment they are identified else a late rectification would be much more costly and cumbersome. To ensure that a defective piece of output does not proceed further up the production line, he envisaged introduction of some form of automatic self regulation or jidoka similar to the power loom designed by Sakichi Toyoda that automatically stopped the moment one thread broke. Ohno knew it would not be easy to manufacture machines that would be intelligent enough to spot defects in such a complicated manufacturing process as in automobile production and so he introduced another equally novel concept called andon system. It was basically a system where every worker had the right to stop the assembly the moment any one of them spotted a defect. It was in direct contrast with American methods of assembly line production where only a senior supervisor had the right to stall the assembly line. The moment the assembly line is stopped by a worker in a Toyota factory all related workers gather around to solve the problem and the assembly line is restarted only after the problem has been fully resolved. Ohno also introduced ‘five whys’ method of solving a problem that went to root of a problem to ensure that it never occurred again. Initially andon system caused numerous stoppages of work but as workers got used to it the assembly lines hardly stopped since 1990 even though every worker had the right to stall the assembly line if the need arose. Thus, quality of output increased dramatically while cost of rework and rectification fell equally drastically. Inventory levels have always remained pretty high in Ford’s assembly line system and Ohno realised it like none else that the unnecessary increase in overhead costs that occur as inventories keep piling up can prove to be a very heavy burden on the working capital of a company. Hence he devised a novel method of reducing inventory levels on the shop floor by introducing Just-in-time (JIT) inventory system which is described as “Producing only what is needed, in necessary quantity and at necessary time.” (Toyota Production System 1995) Ohno was determined to reduce shop floor inventory of components and decided that at each stage of production the previous stage should produce only those components and in that specific quantities that would be required by the succeeding stage. There would be no unnecessary production and consequent stockpiling of WIP inventories. This undoubtedly was a very ambitious target and the most important tool to achieve such a target was the famous kanban system which Toyota often refers to as the ‘supermarket concept’. Supermarket authorities always ensure that shelves are full with items in proper quantities and varieties to satisfy demands of customers as and when they visit the supermarket. Ohno equated subsequent processes as customers and preceding processes as supermarket that is ready to supply components in exact quantities and at the exact point of time when they are needed. An analogy with a McDonald’s outlet would make the issue clearer. A McDonald’s outlet never prepares burgers in anticipation of customer as there would always be a possibility of demand not matching with quantity produced leading to either inventory stockpiling or a stock-out situation. As a customer places an order, a pull is exerted on the production system signalling it to get started. Here the entire production process depends on the order quantity and in a way works in the reverse direction. A similar situation takes place in Toyota manufacturing units where all subsequent processes send signals to the preceding processes indicating the exact quantity that needs to be manufactured and the accurate time when it needs to be supplied by those preceding processes. These signals are conveyed through cards called kanban which in Japanese means signboard. This form or ordering production in reverse is not only carried out between different production departments of the company but also between its vendors thereby bringing inter-process inventory to a minimum. However, such a fine-tuned production process can run with clockwork precision only when each process unambiguously defines the exact permissible duration during which a particular job has got to be fully finished by that particular process. This is done by measuring Takt (a German word meaning meter) time which is measured using the formula: Total Daily Operating Time ------------------------------------- = Production time for one unit of output Total Production Requirement If there is a demand for 50 vehicles per day and if the available production time is 8X60 = 480 minutes, the Takt time available at each production station is 9.6 minutes. A job must not stay for more than 9.6 minutes at each production node to ensure that requisite numbers of vehicles are produced to satisfy the existing demand. Some other techniques used by Toyota Toyota not only modified the famous Assembly line system of production that has been applied so successfully at Ford but also introduced some features in its very own Toyota Production System that were quantum improvements over the production process followed by western manufacturers. One such process is known as Value Stream Mapping. It is a visual method of following the material flow in a factory – right from the entry of raw materials in the factory premises to the despatch of finished goods outside the factory gates while noting the quantum of value added at each step. It generally consists of four main steps with numerous sub-steps thrown in between that depend on the level of complexity of the production process. The four main steps are: “Preparation”, “Current State”, “Future State” and “Planning and Implementation”. This system thus allows one to clearly identify activities that add value and activities that do not do so. Management thus can focus more on activities that add value and devise logical steps to ensure that higher productivity levels are attained. The desired status is described in the “Future State” template and constant reference to it highly motivates the workforce to reach the target. (Locher 2008) The other equally innovative introduction is the concept of 5S that provide a methodology to ensure that the workplace is cleaner, orderly and more organised. Though an orderly and clean workplace does not directly improve efficiency as say reduction of waste but a favourable environment most surely creates an ambience where the workforce feel more motivated to put in their best. The 5S are derived from the initials of five Japanese words: Seiri (Sorting out what is necessary and what is not), Seiton (Orderliness where there is a place for everything and everything is in its place), Seiso (Cleanliness), Seiketsu (Ensure everything conforms to standards set) and Shitsuke (Constant application of the previous four Ss to ensure that levels attained are sustained). The other innovation of Toyota was the implementation of Quality Function Deployment (QFD) that tries to incorporate the customers’ requirements while designing the products. This is indeed a watershed in production planning and marketing where till now a company produced what it felt it was best in and its marketing team tried to convince customers into accepting whatever the company has produced. But with the implementation of QFD, a company would no longer have to be bothered about a consumer demand since it has produced what exactly the consumers want. This method also guarantees a massive savings in cost as all the problems are solved at the drawing stage only. (ReVelle, Moran and Cox 1998) A survey of Toyota’s path breaking innovations in production systems would remain incomplete if a mention is not made about Total Productive Maintenance (TPM) approach to production processes. Toyota elevated the job of maintenance from a necessary nuisance that only added to downtimes to an essential activity that is as much a part of production as is the act of churning out finished jobs from machine bays. It also incorporated the maintenance downtime within the normal time required for production and thus reduced machine breakdowns and consequent production losses to near zero levels. (Wireman 2003) Kunio Nakamura and the amazing story of turnaround in Matsushita While the world stares wide- eyed in awe at the stupendous success of Toyota Production System, one should not lose sight of another equally fabulous turnaround in another Japanese behemoth Matsushita that took place under the guidance and leadership of Kunio Nakamura who came at the helm of affairs in 2000 as CEO. Nakamura did certain things that were not only never heard of in Japanese industries but also considered to be directly contrary to the long-held Japanese corporate ethics. Japan has the tradition of life time employment but Nakamura broke it when he trimmed the workforce at Matsushita by 19% and brought it down to 112,000 and ruthlessly closed down 30 factories. (Buisness Week 2005 ) He dared to break another age old custom of Japanese industries where promotion and increments depended entirely upon seniority rather than talent and innovativeness. He started rewarding talent and promoted the energetic and talented employees out of turn so that the company had those people at decision making positions that really deserved to be there because of their inherent abilities and not because they had years and years of undistinguished service behind them. Over the years Matsushita had grown into an unwieldy giant with numerous divisions and management layers that made rapid decision making and quick communication, even in times of emergency, an impossible affair. Such a huge and multilayered management structure also resulted in duplication of efforts and unnecessary wastage at various stages. Kunio Nakamura quickly realised this and slashed the management layers from thirteen to three. He also merged quite a few subsidiaries with the parent company to have an integrated R&D facility that catered to the entire company. He knew extensive R&D is the only way to stay ahead of competition and insisted on development of technologies that would be rather difficult for competitors to copy quickly. To improve the level of communication among company managers, he provided four hundred top managers with internet equipped mobile phones and also introduced a novel production system called Cell-style production system that was far more flexible and adaptable to fast changing market scenarios that was a norm of consumer electronics market that Matsushita was operating in. Kunio Nakamura showed exemplary courage and innovativeness when he shifted away from the more established production systems adopted by Ford or Toyota and charted out a system that uniquely suited its requirements. The results of such innovations began to show after initial hiccups and Matsushita turned around from the brink of an economic collapse to once again become a financially sound market leader it once was. Kunio Nakamura – A manager or a leader? There has been a long standing debate among management experts who are not quite sure whether Nakamura was a manager or a leader. This issue was probably laid to rest by John P. Kotter in his epochal article “What Leaders Really Do”. (Kotter 2001) He clarifies at the outset that leadership is neither mystical nor a substitute of sound management but is a distinctive and necessary function that is imperative for commercial success in the current highly competitive market scenario. Though good management brings about a degree of stability and surely improves productivity and profitability of products, in times of volatility and uncertain market conditions with competitors and technological improvement simultaneously nibbling away at profit margins, a company requires sound leadership which is nothing but the ability to manage change. Kotter has given a very appropriate example of an army that can function pretty efficiently during times of peace if it has a sound and effective management and administrative setup. But that same army would require effective leadership at all levels if it has to defeat an enemy and win a war where things change so frequently that neatly devised and well laid out procedures of decision making often become redundant or too time consuming to be effective in any way. A leader gathers a broad range of data and tries to decipher the underlying linkages and relationships between the variables to arrive at a quick and decisive conclusion about the direction the organisation must adopt in order to survive times of uncertainties and tribulations. Nakamura did not try to manage Matsushita efficiently; instead he ushered in fundamental changes not only in the organisation structure but also in corporate culture and production processes that at times went against the very essence of Japanese corporate ethics and quite predictably created initial storms of resentment among stakeholders. Such an ability to usher in change and manage it admirably surely pivoted Nakamura to the role of a phenomenal leader rather than a mere manager. Toyota’s success – does it lie in its cultural roots? Many companies tried to duplicate Toyota’s Production System but failed to do so thus forcing many management experts to believe that Toyota’s success lay in its cultural roots that would simply not be possible for any western organisation to imbibe and implement. These experts pointed out that Japanese companies, for example believe in life-long employment and Japanese workers value long term economic stability far more than immediate benefits, promotions and incentives. Western workers on the other hand are not that much enamoured by such long term benefits and prefer immediate benefits instead. While Japanese companies lay a lot of emphasis on loyalty, Western employers value the varied exposure and experience that an employee gathers if he switches quite a few jobs. Japanese workers pride themselves as being team members and exult at the success of their team, but Western workers are more individualistic and are more interested in personal development and enhancement. These arguments seem very convincing initially but if these were to be the only reasons for the success of Toyota then other Japanese companies as Nissan and Honda should have also been able to replicate this system with ease which, strangely enough, is not the case. The basic reason for Toyota’s success lies in its inimitable system that marries strict rules, rigid procedures and meticulously delineated routes of material and information flows throughout the production process with an unmatched element of adaptability and flexibility. Every activity in Toyota is specified down to the smallest possible detail. When seats are bolted to the body of a car, the order in which the bolts would be tightened and the torque to be applied and the number of turns to given are strictly specified and any change to the given specification can be done only through a rigorous problem solving procedure that requires a detailed scientific analysis of both the current and the desired state of affairs and a thorough evaluation of the benefit that can be derived from the proposed change. Such a scientific rigour automatically removes all forms of wasteful activity. This scientific rigour is so ingrained in Toyota’s workforce that in spite of such rigidity in specifications and structure, an environment of regimentation or strict command and control that one would normally expect does not exist in Toyota’s factories. The other unique factor of Toyota’s Production System is that it evolved through decades of conscientious labour of workers and was not imposed by the top management and thus has become an organic part of the company culture so much so that nothing is written down and hence it becomes very difficult for an employee if he is asked to articulate the uniqueness of this fabulous production system. It thus becomes even more difficult for outsiders to grasp the conundrum of simultaneous existence of flexibility and rigidity. This can be better understood if one glances at the four rules that are strictly adhered to in every production facility of Toyota and they are: Rule 1: All activity should be highly specified with clear descriptions of content, sequence, timing and outcome of each single activity and, every single worker at the factory, irrespective of their seniority or experience, are supposed to meticulously follow the instructions. At a first glance it might seem to be the handiwork of a control freak but if one ponders a bit, the obvious benefit becomes apparent – there would never be any variations in quality of output as all units will be processed in exactly the same manner. Rule 2: The communication between departments and with outside agencies must be direct and the responses must always be unambiguous in terms of “yes” or “no”. Rule 3: All production lines in Toyota are set up in a simple well defined path without any forks or loops that might complicate the uninterrupted functioning of supply chains. Rule 4: Toyota has a continuous programme for teaching people how to improve and ensures that improvements are initiated right down at the lowest level under the guidance of a teacher and is vetted through an elaborate and scientific evaluation process. This ensures that the spirit of innovation keeps burning brightly among the labour force in spite of such rigidity in specifications and procedures. (Spear and Bowen 1999) Conclusion The story of the continuous development of Japanese industries and their rise to international eminence, especially in spheres of automobile and consumer electronics, is something every country would love to emulate but have till date found rather difficult to do so. The reason is not very difficult to unravel. Japanese industries have developed a work culture that analyses threadbare each single activity and lays down rigid procedures that are religiously followed by every worker. But the magic lies elsewhere. In spite such strict regimentation, the desire to improve is systematically kept alive in every worker through company sponsored training and top management ensures that every improvement takes place from the bottom instead of being imposed from the top. Bibliography Buisness Week. "Lessons from Matsushita's Playbook." Buisnessweek.com. March 10, 2005 . htlp:llwww.businessweek.com/technology/contentimar2005/tc20050310_3634Jc024.htm?campaignjd=search (accessed May 31, 2009). Imai, Masaaki. Kaizen: The Key To Japan's Competitive Success. Irwin: McGraw-Hill, 1986. Juran, Joseph, M. "Made in USA: A Renaissance in Quality." Harvard Buisness Review, July-August 1993. Kotter, John P. "What Leaders Really Do." Harvard Business Review, Vol. 79 Issue 11, Dec 2001: 85-96. Locher, Drew. 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