BUS 541: INTERNATIONAL FINANCIAL MANAGEMENT



IT 510: Industrial Planning and Control

Spring Semester 1997

Dr. E. Maydock

Critical Essay:

How Management Changed An Industry

by

Frei Messow

1. Introduction 2

2. The Origins of Lean Production 3

2.1 The Rise and Fall of Mass Production 3

2.2 The Rise of Lean Production 7

3. The Elements of Lean Production 9

3.1 Running the Factory 9

3.2 Designing the Car 12

3.3 Coordinating the Supply Chain 14

3.4 Dealing with Customers 16

3.5 Managing the Lean Enterprise 18

4. How Mass Producer Learned from Lean Producer 20

5. Conclusion 20

6. References 23

7. Appendix 23

7.1 Figure 1 1

7.2 Figure 2 1

7.3 Figure 3 2

7.4 Figure 4 2

7.5 Figure 5 3

7.6 Figure 6 3

7.7 Figure 7 4

7.8 Figure 8 5

Introduction

This essay is basically a summary of the book “The Machine that Changed the World” by James P. Womack, Daniel T. Jones and Daniel Roos.

In 1989 the Massachusetts Institute of Technology (MIT) shocked the world with their 5-year 5-million dollar study “International Motor Vehicle Program” (IMVP). It was the first time when the word “Lean production” was used. It is called “lean production” because it uses less human effort, manufacturing space, investment in tools and time to develop a new product than mass production. The main statement is that Japanese car manufactures are not better, because of cheap labor costs but better management ideas.

“The Machine that Changed the World” is a book based on the MIT study. It especially shows in detail the difference between the mass production of car manufactures in North America and Europe and the lean production of the Japanese car manufactures. Members of the study were specialists from all over the world with academic backgrounds. During the study they visited factories for weeks or months to gather detailed information. Ninety auto assembly plants in fifteen countries were surveyed. The $5 million were contributed by thirty-six organizations. Each contribution was limited to 5 percent, which guaranteed independence.

The idea for the study was born after the publication of the book “The Future of the Automobile” (Altshuler 1984). The authors concluded that the auto industries of North America and Europe were using techniques strongly related to the techniques from Henry Ford’s mass-production system. But these techniques seem to be not competitive anymore to the new ideas from the Japanese companies. Instead of learning from the Japanese the Western companies were focusing on erecting trade barriers and other competitive hindrances. But this would only delay the downturn of Western companies and not solve their competitive weakness.

2. The Origins of Lean Production

2.1 The Rise and Fall of Mass Production

Before mass production paved its way, hand-made cars were the usual manufacturing technique. Hand-made cars had the advantage that exact specifications by the customer were no problem. For today’s mass-producer modifications require years and millions of dollars to engineer. In 1989 American companies still offered no right-side-drive option on cars, because they believed the cost of engineering would be too high.

Craft production had the following characteristics:

- Highly skilled work force, often self-employed contractors to an assembler firm.

- Extremely decentralized organization coordinated by an owner/entrepreneur.

- Use of general-purpose machine tools.

- Very low production volume.

Some craft-production firms are still existing. For example Aston Martin produced fewer than 10,000 cars in sixty-five years. But these companies are only competitive in the upper, luxury end of the market with prices around $500,000 per car. In the 1980s, technological advances in areas like emission controls and crash safety made it necessary for firms like Aston Martin, to ally with big companies like Ford. The authors think that in the 1990s another threat will emerged these craft firms. Lean production could pursue their market niches, because they can cut down design and manufacturing costs and produce very individual cars for low costs. But I think that the past years showed that cars made by luxury firms still have a market. The authors do not see the psychology behind buying an expensive car. People do not buy a Ferrari, because it is a good car, they buy it because it shows a special level of life standard. The image for expensive cars is much more important than the quality. The drawbacks of craft production are that the production costs did not drop with volume, consistent and reliability was elusive, lack of systematic testing and no systematic research were usually the case.

“The key to mass production ... was the complete and consistent interchangeability of parts and the simplicity of attaching them to each other.” (Womack 1990, p. 27) In 1908 Ford achieved perfect part interchangeability. Then he decided that the assembler would better have only one task and move around from vehicle to vehicle around the assembly hall. In 1913 the task cycle for the average Ford assembler had been reduced from 514 to 2.3 minutes. In the spring of 1913 Ford introduced the moving assembly line, which cut down the cycle time from 2.3 minutes to 1.19 minutes. His new technology reduced capital requirements and the amount of human effort needed to assemble a car.

Craft Production versus Mass Production in the Assembly Hall:

1913 versus 1914

|Minutes of Effort to Assemble |Late Craft Production, Fall |Mass Production, Spring 1914 |Percent Reduction in Effort |

| |1913 | | |

|

|Engine |594 |226 |62 |

|

|Magneto |20 |5 |75 |

|

|Axle |150 |27 |83 |

|

|Major Components into a |750 |93 |88 |

|Complete Vehicle | | | |

|Note: “Late craft production” already contained many of the elements of mass production, in particular consistently interchangeable parts and a minute division of labor. The big change from 1913 to 1914 was the transition from stationary to moving assembly.

Source: Calculated by the authors from data given in David A. Hounshell, From the American System to Mass Production, 1800-1932, Baltimore: Johns Hopkins University Press, 1984, pp. 248, 254, 255, and 256. Hounshell’s data are based on the observations of the journalists Horace Arnold and Fay Faurote as reported in their volume Ford Methods and the Ford Shops, New York: Engineering Magazine, 1915.

With this new technology Ford was able to sell the automobiles to much lower prices than the competitors and buyers were able to repair the car on their own. But the quality was usually lower than for hand-made cars. Ford had no end-control for the Model T, but later end-control was necessary to guarantee the right quality, which was quite expensive.

The new mass production also did not make it necessary to employ highly skilled workers. The job tasks were so easy that everybody could do it. Many assembly workers at Ford did not speak English. The only people who had to be skilled were the fitter who were responsible for gathering necessary parts, obtain tools, repairing machines and quality checking, and the industrial engineers that were responsible for the whole planning process.

Henry Ford also changed the organization. He started to produce every part in his factory. Reason for it was not only the advantage of mass-production, his suppliers did not have, but also Ford’s distrust against everyone but himself. However the most important reason was the necessity of parts with closer tolerances and tighter delivery schedules than ever before.

Mass-production also requires different tools. Ford dramatically reduced set-up time by making machines that could do only one task at a time. Because set-up times were reduced to seconds, Ford could get much higher volume from the same number of machines. The only problem was the inflexibility in changing to a new task. Therefore machines often had to be replaced with a new model.

Ford believed that he would have great success if everything was mass-produced by himself. In the end Ford mass-produced everything from food to tractors to airplanes in a standardized form and high volume. He financed all his projects internally to maintain total control of his company. But he was not able to organize a global business except by centralizing all decision-making in his hand. This concept was unworkable and nearly drove the company under when his mental powers declined in the 1930s.

Alfred Sloan, president of General Motors in the 1920s, found a solution how to manage a mass production organization. He decentralized divisions and oversaw each with a separate profit center. In the 1930s unions became an important part of mass-production companies. They started to control job assignments and work tasks that reduced the efficiency of Ford’s mass-production factory. Key determinant of who would go and who would stay became seniority and not competence.

In the 1950s many new and existing car manufacture in Europe started to use mass-production ideas as used in the US already for more than thirty years. Europeans had success with exporting cars in the 1950s into the 1970s, because they produced cars not offered by the US companies. Most European cars were smaller and lighter and therefore more economically. They also used some new technologies like front-wheel drive and fuel injection. But in the 1970s production costs rose due to higher wages and lower weekly hours of work.

Mass production in the US and Europe might have continued indefinitely if a new motor industry had not emerged in Japan. “The Japanese were developing an entirely new way of making things, which we call lean production.” (Womack 1990, p.47).

2.2 The Rise of Lean Production

In the spring of 1950 Eiji Toyoda, engineer at Toyota and member of the founding family, visited Ford’s Rouge plant in Detroit. Rouge was at this time the largest and most efficient manufacturing facility in the world. But Eiji thought that “there were some possibilities to improve the production system” (Toyota 1967) and that mass production could never work in Japan.

Toyota faced some problems the Western counterparts did not have. Problems who became later advantages:

- Domestic market was tiny, but requested a wide range of small, economically cars.

- The labor force was strongly organized and Japan had no immigrants who would work for less money.

- Capital lack.

- High foreign competition.

Taiichi Ohno, responsible for the production of Toyota, invented a new technique reducing the time required to change dies from a day to three minutes. In Western companies the dies weighed many tons, therefore specialist had to align them with absolute precision. But Toyota made small batches of stampings and they discovered that actually the cost of making small batches is less per part than for huge batches. The two reasons are that inventories of finished parts are lower and stamping mistakes were shown immediately. But to make this system workable Toyota needed skilled and highly motivated worker, who anticipates problems before they occur. Ohno formed teams and gave them the responsibility for assembling, housekeeping, minor tool repair, and quality-checking. Each member of the team was able to do the job of the other one. He also allowed each worker to stop the line, if a problem occurs. When a problem was to fix, everyone from the team came to fix it and searched for the reason. At the beginning the line stopped all the time, but nowadays Toyota’s lines never stop and rework at the end of the line is not necessary to guarantee high quality. Toyotas middle class automobiles had the lowest number of defects in the last years, even less than BMW or Mercedes.

Toyota also worked together with suppliers different from mass producer. Mass producer like Ford gave their suppliers exact specifications of the part with given number of parts of given quality. But Toyota just specified the performance specifications and not how to design them.

A manufacturing manager in Detroit believed that the secret of Japanese success is: “They are making identical tin cans; if I did that I could have high quality and low cost, too.” But actually Japanese firms offer almost as many models as all of the Western firms combined. And Toyota needs half the time and effort as a mass-producer to design a new car. In 1989 the product life of a Japanese car was only four years compared to ten years of Western cars. Therefore Japanese make an average of only 500,000 copies per model while Westerns make 2 million copies.

Toyota’s connections to dealers were quite different to Western companies. The dealer became part of the production system. When demand began to drop the sales staff went to the households who likely want the type of car the factory wants to built more of. The sales persons were supported by a data base of Toyota with every household ever showing interest in a Toyota product.

Not all Japanese companies are as lean as Toyota and several of the old mass-producer are becoming lean as well.

3. The Elements of Lean Production

3.1 Running the Factory

The authors started the survey with comparing a classical mass production plant at GM’s Framingham, Massachusetts, and Toyota’s assembly plant at Takaoka. A typical mass production plant has the following symptoms:

• many indirect workers -- machine repairers, housekeepers, inventory runners -- which are adding no value

• next to each work station piles of inventory

• unevenly distributed work

• correcting poorly fitting parts

• area full of finished cars riddled with defects

• large buffers of finished bodies waiting for the next production step

• massive stores of parts

• only senior managers can stop the line

• dispirited work force frightened to get layed off

A typical lean production plant is as followed:

• no indirect workers (hardly anyone in the aisles); practically every worker is adding value to the car

• as little space as possible (no room for inventory; better communication)

• less inventory next to each worker

• every worker works at about the same pace

• defective parts send direct to the quality-control area

• anyone can stop the line, but it almost never stops

• almost no rework area

• practically no buffers

• no parts warehouses

• full commitment to work by lifetime employed workers

The initial plant survey form asked how many days of inventory were in the plant. “A Toyota manager politely asked whether there was an error in translation. Surely we meant minutes of inventory.” (Womack 1990, p.80).

General Motors Framingham versus Toyota Takaoka versus NUMMI Fremont, 1987

| |GM Framingham |Toyota Takaoka |NUMMI Fremont |

|

|Assembly hours per car |31 |16 |19 |

|

|Assembly Defects per 100 cars |135 |45 |45 |

|

|Assembly space per car |8.1 |4.8 |7.0 |

|

|Inventories of parts (average) |2 weeks |2 hours |2 days |

|Note: “Adjusted assembly hours per car” incorporates the adjustments in standard activities and product attributes described by John Krafcik in “A Methodology for Assembly Plant Performance Determination,” IMVP Working Paper, October 1988

Defects per car were estimated from the J.D. Power Initial Quality Survey for 1987.

Assembly space car is square feet per vehicle per year, corrected for vehicle size.

Inventories are a rough average for major parts.

Source: IMVP World Assembly Plant Survey

The IMVP research team then compared these two plants with the New United Motor Manufacturing Inc. (NUMMI) plant in Fremont, California, a joint venture between GM and Toyota. They found that NUMMI matched Takaoka’s quality and nearly matched its productivity. It showed that lean production can be successfully transplanted into a different environment and will replace mass production since Framingham was closed for good in summer of 1989.

After this initial survey the team visited plants all over the world. They compared the assembly plant quality and productivity. For detailed results see Figure 1 and 2 in the Appendix. In general they found that the best-performing companies in Japan run the best-performing transplants in North America. Indicator that the most of the variation is due to differences in management. Automation accounts only for about one-third of the total differences. Lean organization must come before high-tech process automation. In average the best plants are found in Japan, but the best assembly-plant quality in the entire volume plant sample was found at Ford in Hermosillo, Mexico. This shows that lean production can be introduced anywhere in the world by anybody.

IMVP made a special study of luxury car assembly plants. The results were very similar (see Figure 3 and 4). “Japanese plant greatly exceeds the quality level of all plants except one in Europe -- and this European plant requires four times the effort of the Japanese plant to assemble a comparable product.” (Womack 1990, p.89). A third of the total effort in this German plant was involved in the rework and rectification area. Reason for this waste is the failure to design easy-to-assemble part and failure to track down defects as soon as they are discovered so that they never recur.

The authors conclude that a perfect lean-production plant should have:

• teamwork

• share of information

• skilled, proactive workforce

Teamwork in this sense does not mean rotation of the job every hour but every couple days. It is very important for lean production that the worker is at the job with his mind, because no safety net exists which could replace many workers not coming to work. If management fails to lead, lean production will revert to mass production.

3.2 Designing the Car

GM needed seven years to launch its new model, called GM-10, in 1988. It lost 700,000 units and its most profitable area, because it came out with the new model much later than the competitors. Honda needed only four years. The main difference was that the leading product developer had more power. The team working for him in a Japanese company is clearly under his control. Each team member has the knowledge of the total production. At Honda for example every entry-level engineer spends his first three months on the assembly line and the next months in several engineering departments. Even the advanced engineers have to spend a month of each year in a different functional area. “While visiting the Honda plant in Marysville, Ohio, we asked to meet with the external affairs director. He was unavailable, we were told as, He had just joined the company and was busy assembling cars.” (Womack 1990, p. 199). On average Japanese firms needed only 485 team members while Western companies had 900, and up to 1,421. One reason for this is better communication reduces the needs of many people which also reduces the time of product development. In Japanese firms product development starts at the same time as body design. This is called simultaneous development or engineering. Therefore product development in Japanese companies needs only half the time needed in mass-production companies. Another big problem for American companies is to return to normal productivity after launching a new model. In the mid-1980s Japanese producer needed 4 months, while Americans needed 5 months (Womack 1990, p. 119). In 1994 the difference was even greater. GM needed 11 months for its new Chevrolet Lumina. Chrysler had a lack of productivity for 6 months when they changed the Neon, but Honda needed only 6 weeks for their change of the new Accord (Treece 1994).

On average Japanese companies needed 46 months, US and European companies 60 months from first design to customer deliveries (Womack 1990, p. 111). Even in 1996 Western companies needed an average of 4 years while Toyota was able to reduce the development time to 18 months (Taylor 1996). The result was an increase of new models launched by the Japanese companies (see Figure 5). Japanese models were usually four years on the market while Americans were ten years. This results in even fewer copies per Japanese model than for specialty cars, which have a lower production rate per year. In the future lean production will probably offer vehicles suited to the needs of each customer (Figure 6). Some people say one reason for Japanese success is that they copy or buy patents. But since 1983 the Japanese motor vehicle industry is patenting more innovations than the Western companies (see Figure 7).

3.3 Coordinating the Supply Chain

Suppliers and assemblers of mass production companies mainly discuss the price, therefore the lowest bid is usually accepted. The supplier knows this and therefore will give a low prize, even below costs, but they will come back later when they get the contract and ask for price adjustments. The only information the supplier and assembler are sharing is the bid price per part. Another problem is that many mass producers produce their own parts, therefore many companies prefer to make contracts with in-house suppliers to use the economies of scale. But this lead to the phenomena that GM had the world’s highest production volume and the world’s highest costs.

If the production did not reach the planned volume another problem occurs. The assembler may well look for suppliers with lower prices, but this leads to the belief of the supplier that information must be guarded from the assembler. Mass producers also may cancel orders due to fluctuating demand. Suppliers therefore tend to have very large stocks and build overstock contingencies into their bids.

As we saw, suppliers are under intense cost pressure from a buyer who does not understand their problems. Therefore implausible bids win contracts, followed by adjustments, which may make the cost per part higher than those of realistic but losing bidders. No one really communicates with anyone else.

Lean producers usually have suppliers for a whole component while mass-producers often assemble all parts of the component in the plant. Therefore leading Japanese lean producers have fewer than 300 suppliers in each project compared to 1,000 to 2,500 at Western mass-producers. Suppliers of lean producers assign staff members to the development team of the assembler shortly after the planning process starts. The technical details are the problem of the supplier, and the assembler usually does not make drawings. During the early 1980s Japanese lean producers on average did detail-engineering on only 30 percent of the parts while American mass producer did it for 81 percents of their parts. Toyota added only 27 percent of the value with 37,000 employees to produce 4 million vehicles. GM however needed 850,000 employees to add 70 percent of the value to 8 million vehicles. Parts of lean producer are obviously more often produced by suppliers than at mass producers. But in 1987 GM had 6,000 people employed for purchasing parts while Toyota had only 337.

Suppliers of lean producers are not selected on the basis of bids, but rather on the basis of past relationships and performance. Assemblers usually divide their parts' order between two or more suppliers. When a supplier falls short on quality or reliability the assembler shifts a fraction of the business to a different supplier as a penalty. This punishment is highly effective, because it effects the profitability, but it keeps the long-term contact. Suppliers and assemblers in the lean production system establish a target price and then figure out how the vehicle can be made for this price while allowing a reasonable profit for both. To achieve the target cost they use value engineering, value analysis and in the long run kaizen. Assembler and supplier go over every detail of the supplier’s production process to improve quality and cut costs. In return the assembler must allow the supplier to ask for a reasonable profit. This system also allows the assembler to omit the proofment of incoming parts, because the assembler already proofed the quality of the supplier’s production process. When a problem occurs the assembler will visit the supplier and together find a solution. Therefore suppliers do not need a large inventory and can deliver directly to the assembly line. In 1982 52 percent of Japanese suppliers were delivering daily and a further 31 percent hourly. In the US, only 10 percent of suppliers were delivering daily or hourly combined by 1988.

In the 1980s mass producers tried to copy the Japanese supplying system. But most assembler companies made three mistakes. They thought outsourcing was cheaper, because the wages in supplier companies are lower; they thought single-sourcing is the key to success and believed just-in-time means shifting the inventory from the assembler to the supplier. However Japanese suppliers are cheaper because they produce lean as the assemblers do, and Japanese long-term relationships do not depend on single-sourcing but on a contract framework that encourages cooperation. Japanese suppliers do not have inventories, because the assembler tells them in advance how many parts are needed (usually with kanban). The mass producers failed to establish a new set of ground rules with the suppliers for joint cost analysis, price determination, and profit sharing.

3.4 Dealing with Customers

Mass production companies' are geared to the needs of the manufacturing and design process so that the customer comes last. The sales division’s key activity is to juggle incentives for both consumers and dealers so all the cars are sold. But the dealers of mass producers have almost no links with the sales and marketing divisions. Therefore the sales and marketing division do not really know what the customer wants. It is again a lack of communication and information. Even in-house of the mass producer are often no links between the product-development team and the sales and marketing department. Often the company produces different cars than the marketing department agreed to, because of adjustments for easier manufacturing. The problem is that this car does not fit to the consumer appeal. Mass producers also think that a high level of service is too expensive for average cars. Especially in the US sales personnel often lack knowledge of the product.

Car dealers of lean producers get their staff trained and a full range of services by the car company. Many sales persons are college graduates and the training provides them with a wide range of skills. Japanese companies work with fewer dealers than Americans, therefore the average sales per dealer are higher. In Japan selling cars door-to-door is common. The sales person draws up a profile on every household within the area around the dealership. Periodically they visit every household and update the household profile. Therefore they can offer cars very accurate fitting to the needs of the household. A vast majority of cars in Japan are customer ordered. The vehicle order also includes financing package, trade-in on the old car and insurance. When the car is ready the sales representative personally delivers it to the new owner’s house.

The car assembler in Japan gets much faster feedback from the customer than a mass producer. The elaborate data collection on owner preferences for new vehicles is fed systematically to development teams for new products. This is an additional reason to lean production and why lean producers can deliver a customer-ordered car in under two weeks while mass producers need six weeks and up to one year as Mercedes-Benz needed for their new model 600. Dealers in Japan have a stock of finished cars in average of twenty-one days while in the US the average is 60 to 70 days. Of course this system needs a lot of sales personnel. In average a US sales representative sells ten cars per month while the average Japanese sales representative sells only four cars per month. But the selling system of a lean producer is seen as the first step of the production. The periodic surveys of practically all consumers in the Japanese market, is the first step in the product-development system. It avoids the need for the time-consuming, expensive, and frequently inaccurate market assessment surveys of the Western mass-producers.

In the future information technology could even improve this selling system. Each Corolla owner in Japan already has a membership card. When he enters the dealership he puts his card in a machine and gets all information about him on the display and can change them. The system then makes a suggestion about the models most appropriate to the household’s needs, including current prices. In the future the information will be available at every owner’s home on a computer or television screen. When the lean production system has improved in the next few years it seems to be also possible that a customer creates his own car with standardized components at home on his computer and in one week he receives his individualistic car. The best is that it will be not more expensive than a standardized car.

3.5 Managing the Lean Enterprise

Multinational companies in the future need to produce in the three most important regions of the world which are North America, Europe and East Asia. Lean producers must be close to the customer and need supplier near to the assembling line. Lean production is based on doing as much manufacturing as possible at the point of final assembly. Consumers in the three regions continue to demand different types of products. Tariff barriers and currency fluctuations make it necessary to produce in all three areas. Most Japanese companies already went this way and Volkswagen also produces in all three regions. The authors think that Ford is a more global company than Volkswagen, but Volkswagen is producing cars in Mexico and China, while Ford is producing only in England and Germany. On the other hand the authors are right when they say Volkswagen is not a lean producer. People working at Volkswagen in Germany still tell the joke that, when archaeologists will find the plant in one thousand years they will think it was a paper factory with a big car fleet, because Volkswagen is so bureaucratically. It will be important for each car company to be strongly present in the home market of the other car companies. Because the home market is usually the market where the car companies have the highest profits, therefore to be competitive worldwide they have to weaken the other company in their strongest market.

The key features of a multinational company will be in the future:

1. An integrated, global personnel system with personnel from all over the world without consideration of the nationality. Managers must be fluent in several languages and willing to work for much of their career outside their home country.

2. A way to create a global flow of knowledge between departments and regions. Information technology will be able to support this.

3. A mechanism for coordinating the development of new products in each region and cross shipment of products wherever demand warrants.

4. How Mass Producer Learned from Lean Producer

One popular explanation in the 1970s of the Japanese success was that Japanese wages are lower. A second explanation is the government’s protection of the domestic market and its financial support for Japanese car companies. However when Ford and GM started joint-ventures in the 1980s with Japanese companies they discovered the true reasons for Japanese success. Ford found that Mazda could build its 323 model with only 60 percent the effort Ford needed to manufacture its Escort selling in the same market segment and even had less manufacturing errors. In 1983, senior GM executives spent a lot of time at Toyota City to establish the NUMMI Joint-venture. Jack Smith, GM’s vice chair, noted: “The data [on productivity] was just unbelievable.” (cited p.238 in Womack 1990). But transferring these new ideas into GM’s organization made fundamental problems, because lean production changes the job of every worker and every manager.

It must be said again that lean does not equal Japanese. Some Japanese companies are less lean than for example Ford. But the lean Japanese companies have an advantage in experiences. As a senior executive from a Japanese company said: “We believe that our production system can be learned by anyone...but it takes ten years of practice under expert guidance.” (cited p.243 in Womack 1990)

5. Conclusion

Lean production combines the best features of both craft and mass production -- the ability to reduce costs per unit and dramatically improve quality while at the same time providing an even wider range of products and more challenging work.

Something Japanese companies are often missing even nowadays is a lack of thinking globally. This could be an advantage for Western companies. “I can hope to get to the top at GM, but I can never hope to rise above the middle level of one of the Japanese foreign subsidiaries, no matter how superior my performance.”, as one manager as GM remarked (cited p.273 in Womack 1990).

One of the greatest changes from mass to lean production is the challenge of the worker. Somebody working in a lean production plant has to think during work and does not do monotonous tasks. Therefore skilled workers that can communicate will be necessarily. On the other hand, workers will get more security with nearly life-long employment. Labor force in lean production is seen as the most valuable asset that has to be well cared-for and protected. Every employee is a part of the whole knowledge of the company.

Another great difference between mass and lean production is information and communication. In lean production companies' communication is very important throughout the whole process from the supplier to the customer. It is also important that nobody hides information. Especially suppliers and assemblers in Japan understand that it is more profitable for both when they work together instead of competing. Companies in the West still have to learn what most politicians gladly already understand. You do not have to love other countries but it is better for your own country if you work together in organizations like Nato and UN to prevent war. And it is the same between supplier and assembler. Assemblers do not have to like the supplier, but it is better for both to work together and change information instead of working against each other.

In 1997 it seems to be that many American car-manufactures already produce lean since the quality seems to be better. Whether US cars are already as reliable as Japanese cars will be seen in the next years, when the now produced cars are getting older. But even if the quality is now better American companies lost a lot of market share and image, because of the poor quality in the 1980s. Most Americans prefer Japanese cars, especially Honda, since the reputation is much better and the resale price for used cars are much higher.

The authors are convinced that the principles of lean production can be applied in every industry in the world and that lean production will have a profound effect on human society and change the world. But to succeed, money must be available, a highly trained and motivated staff must be in place, and activities around the world must be coordinated. I agree that the production line must be changed in many companies, not only at car manufacturers. I worked in three different chemistry plants on the production line and most of the work was very unchallenging. The workers did not communicate with each other and suggestions from the workers were not welcomed by the supervisor. The whole process often stopped, because materials were missing or the machine worked faster than the worker was able to. I assume that these experiences occur in many companies. Therefore it would be interesting to know if Japanese companies work differently and what effect it would have if the whole lean production system was implemented. I also think that the idea of lean production only works if you implement the whole system and do not pick out only the parts you like or understand.

6. References

Altshuler, Alan, Anderson, Martin, Jones, Daniel, Roos, Daniel, Womack, James, The Future of the Automobile, Cambridge: MIT Press, 1984

Taylor, Alex III, “Toyota’s boss stands out in a crowd,” Fortune, Nov. 25, 1996, 116-122

Toyota: The First 30 Years, Tokyo: Toyota Motor Company, 1967, pp.327-328

Treece, James B., “Motown’s struggle to shift on the fly,” Business Week, July 11, 1994, 111-112

Womack, James P., Jones, Daniel T., Roos, Daniel, The Machine that Changed the World, New York: Macmillan, 1990

7. Appendix

7.1 Figure 1

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7.2 Figure 2

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7.3 Figure 3

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4 Figure 4

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7.5 Figure 5

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7.6 Figure 6

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7.7 Figure 7

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