Lesson 4
Japanese Management Principles
Read and translate the text and learn terms from the Essential Vocabulary.
From JIT to Lean Manufacturing
The History of Just in Time
Around 1980 we were all just getting used to the concepts of Material Requirements Planning (MRP) and Manufacturing Resource Planning (MRPII) with their dependence on complex computer packages when we began to hear of manufacturers in Japan carrying no stock and giving 100% customer service without any of this MRP sophistication.
Japanese car manufacturers ensured that every steering column was assembled and fed onto a production line just as the car into which it was to be fitted rolled up at that particular stage. This was all managed by something called a kanban which meant «tag» and was the mechanism by which the assembly line told the feeder areas that they wanted another component. The first visitors to Japan came back to tell us that the kanban replaced MRP and was the key to Japanese success.
In time, we learned that the kanban was the last improvement step of many, not the first. The conceptual goals of minimised lead times and inventories rated above all else. The Japanese aim was having everything only when required and only in the quantity required – in other words, just-in-time (JIT).
We then learned that Toyota led the way in the development of the Japanese approach. We heard of something called the Toyota Production System which was the model for all that had happened in Japanese manufacturing. We heard of Taiichi Ohno, the production engineer responsible for this breakthrough.
The list below highlights what our Japanese counterparts had done.
1. Batch Quantities
Making something in large batches has several negative effects. The first thing which Westerners recognised was that stock levels are partly a function of order sizes. We had a formula for economic batch sizing in which the cost of set-up was offset against the cost of holding the stock. Our theoretical average stock level was half the order quantity + whatever element of safety stock we had built into our plans so reducing the order size would reduce our average stock.
There were, however, other considerations. A piece of plant cannot be immediately responsive to all demands upon it if it makes parts in greater quantities than are required at the time. Responsiveness, and hence service to our customers (whether they be external or the subsequent operations within our own plant) requires that we manufacture components in small batches.
We knew that smooth workloads make management of the manufacturing process far easier and had established smooth finished product plans with the adoption of Master Production Scheduling. However, no matter how smooth our final assembly plans, we still had lumpiness elsewhere.
The major contributor to parts being made in large batches is, of course, set-up times. Shigeo Shingo, a quality consultant hired by Toyota, had set about effectively eliminating set-ups. The accounting conventions that led Western businesses to make significant quantities of parts that may not be used were also shown to be ludicrous.
2. Safety Stocks / Quality
A major element of Western manufacturing’s inventory was that which we held in case of problems. We held safety stocks to allow us to continue manufacturing should some of the components or raw materials in our stores be found to be defective.
Ohno and his colleagues, ironically, had listened to the American quality gurus, W. Edwards Deming and Joseph Juran, who had advised Japanese industry as it recovered after World War II. Among the key concepts learned by the Japanese and neglected for many years in the West were:
Deming’s teaching that we cannot inspect quality in a product but must build it into the manufacturing process.
Juran’s definition of the internal customer. If we each give service to our internal customer then we will ultimately take care of the end customer.
By applying these teachings and aggressively eliminating all sources of non-compliance the Japanese moved quality onto a completely different plane. Where the West continued to measure percentage defect rates our competitors were working in parts per million.
As well as addressing the manufacturing processes, we learned that the JIT approach considered other contributors to improved quality. Is the component designed in such a way as to make it easy to produce or can we simplify it and reduce the chances of a defect? We began to think of «design for manufacture» and combining the previously separate functions of design engineering and production engineering.
We heard about things called «quality circles» where people in different areas of the business came together to investigate problems and work as a team to solve them – rather than follow our own approach of each area attempting to blame another. Perhaps most disturbingly we heard that inspectors were a thing of the past. All had now been trained as quality engineers and were in fact working as process improvement specialists so that their old function was no longer required.
3. Supplier Partnerships
Perhaps the most challenging concept for many companies was that of working with suppliers as partners. Buyers who spent their lives playing one supplier off against others and switching from one to another to save pennies heard that their Japanese counterparts single-sourced in nearly all cases. What is more, large corporations such as Toyota sent out their own specialists in manufacturing improvement to help their suppliers. Where savings were identified then benefits would be shared amicably.
The most readily-visible consequence of this was better service from the company’s suppliers. If we were working together on agreed plans and the supplier could arrange activities based around a long-term relationships then we might avoid a major problem that plagued us in the West – that just as we played off suppliers against each other, they played off their customers. They never knew what demand they may get so they sought more orders than they could, in reality, fulfil. They then reacted to screams and shortages and tried not to fall out too often with each customer. All of this meant all customers holding safety stock to cope with the repeated failures.
Partnership approach brought other benefits – if we worked as true partners then we would not need to spend so much effort in continuously expediting. We could leave behind this ludicrous situation where we had to keep asking «is that order going to be on time?». We could also expect our suppliers to warn us of problems in advance. If their key piece of plant broke down and they told us now of the impact this might have in a week or two, then we could set our own plans to work around the problem.
4. The Elimination of Variety
Variety was recognised for its cost in that it complicated the manufacturing process. A sunroof on every Toyota Corolla was not only a marketing trick but a practical manufacturing improvement as having to make two different types of roof and two different types of headlining introduced potential problems.
5. Shortened Cycle Times