Lean Production Practices: International Comparisons in the Auto Components Industry1

British Journal of Management, Vol. 7, Special Issue, S29-S44 (March 1996)

Lean Production Practices: International Comparisons in the

Auto Components Industry’

Nick Oliver, Rick Delbridge* and James Lowe* University of Cambridge, Judge Institute of Management Studies, Trumpington Street, Cambridge CB2 lAG, UK

and *Cardiff Business School, Colum Drive, Cardiff CF1 3EU, UK

In recent years the application of lean production principles has been forcefully ex- pounded as the route to high-performance manufacturing. This paper examines the relationship between lean production and performance empirically, using data from a benchmarking study of 71 plants in the international automotive components industry. The top performing plants (and their suppliers and customers) showed consistently better process control than did the lower performing plants. UK plants did not perform very well in terms of either quality or productivity, and links between economic context and manufacturing performance are discussed in relation to the UK.

The decline of the U K s share of world markets in manufactured goods has been long-lamented. Between 1950 and the mid-1980s the UK share of world trade in manufactured goods declined from about 25 per cent to a mere 8 per cent (Kirby, 1991). This decline stands in sharp contrast to the rise of other economies, particularly that of Japan. From a base of virtually zero, the Japanese now command about 30 per cent of the world market for vehicles, and over 80 per cent of the world market for some products, such as video record- ers and 35mm cameras (BBUOU, 1986).

The two starkly contrasting trajectories of the UK and Japan have led many UK academics, industrialists and policy makers to look to Japan in search of the secret of economic success. Many explanations for Japan’s success have been put

‘ The data on which this paper are based are drawn from the World- Wide Manufacturing Competitiveness survey. The authors gratefully acknowledge the support of Andersen Consulting, and the contributions of Betty Thayer, Dan Jones, Isabelle Dostaler, Gillian Hunter, Nick Rich, Sandra Rutherford, Paul Ryan and Gianni Zappala to this project.

forward, including corporate paternalism (Dore, 1973), unfair trading practices (Wolfe, 1985), relations between firms (Sako, 1992) and economic structures in Japan (Ackroyd ef af., 1988; Dore, 1986). Despite the potential relevance of all these factors to the performance of the major Japanese corporations, the vast majority of attention in the UK has focused on how the Japanese run their manufacturing operations, with particular interest being shown in practices such as just-in-time production and total quality control. Several sur- veys have reported the widespread adoption of these methods across the UK (Voss and Robinson, 1987; Ingersoll Engineers, 1990; Oliver and Wilkinson, 1992). Most recently, the term ‘lean production’ has emerged as a popular label to describe the approach to manufacturing found in Japan in its purest form at the Toyota Motor Company (Womack, Jones and Roos, 1990). The basic principles of lean production are summarized in Figure 1.

These principles find expression in a distinct set of practices found both inside the factory and along the supply chain. Inside the factory, lean producers are characterized by just-in-time

0 1996 British Academy of Management

S30 A! Oliver, R. Delbridge and J. Lowe

Inside the Factory

0 Lean factory practice

0 Team-based work organization

0 Active problem solving

0 High commitment human resource policies

The Supply Chain

0 Tightly-integrated material flows

0 Active information exchange

0 Joint cost reduction

0 Shared destiny relations

Figure 1. Lean production inside and outside the factory

production, small lot sizes and minimal inventories. Operators on the shop floor are organized into small groups, and these small groups take on many of the responsibilities that have tradition- ally been the prerogative of specialist support functions in mass-production Western factories. This system is overlaid with mechanisms to encourage learning and improvement in the process. Small problem-solving groups, such as quality circles, and employees suggestion schemes represent examples of these. Lean production systems (which were originally dubbed ‘fragile’ by Krafcik and MacDuffie (1989)) are backed up by human resource policies which encourage a sense of obligation to the firm, on the grounds that features such as continuous improvement require more than mere compliance on the part of those who operate the system,

Womack, Jones and Roos (1990) argue that similar principles are found along the supply chain. These are manifested by tightly integrated material flows between firms, with frequent deliveries of small batches and minimum inventories (Nishiguchi, 1989), active information exchange between firms, permitting activities such as joint cost reductions, and ‘shared destiny’ relations

between firms. The idea here is that buyers and suppliers are locked together in long-term, obligational relations as distinct from the historical Western stereotype of short-term competitive relations where contracts are awarded largely on the basis of price. Sako (1992) uses the terms ‘obligational’ versus ‘arms length’ contractual relations to distinguish between these two systems.

Inevitably, studies into how the Japanese run their factories and their economy have fed into debates about industrial policy in the West. Here commentators are divided on a whole series of issues. At its simplest, the main division in the field is between those who adopt a firm-level analysis, and whose attention and prescriptions centre on what individual firms can learn from Japanese practice (Womack, Jones and ROOS, 1990; Schon- berger, 1982; Kenney and Florida, 1993) and those who favour structural explanations of Japanese success (Williams el al., 1992, 1994a). The former of these two camps tend to be advocates of the adoption of Japanese methods by Western firms. The latter are sceptical of the applicability of these methods, maintaining that ‘lean production techniques are irrelevant and unattainable’ in mature Western economies (Williams et al., 1994b).

Lean Production Practices S3 1

The argument of the advocates is that lean production practices represent a universal set of principles which, properly applied, can yield similar results in environments outside Japan to those found in Japan itself. Critics such as Williams et al. (1992) argue that lean production methods are not universally applied across Japan, but in fact evolved at Toyota, a company which enjoyed a unique set of social and economic circumstances during the latter part of the twentieth century. These social circumstances included strong managerial prerogatives, and the specific market conditions entailed consistently rising demand which enabled Toyota to sustain a high flow, both through its own factories and through those of its suppliers. According to this argument, Toyota will eventually hit the same restrictions of market demand that all other car companies have encountered, reducing manufacturing flow and hence undermining performance.

So far, many of these debates have centred on the motor industry. There are a number of reasons for this. The motor industry has been the subject of many of the most detailed studies into the relative performance of Japanese and West- ern manufacturers (Womack, Jones and Roos, 1990; Boston Consulting Group, 1993; Lewis et al., 1993; Andersen Consulting, 1993, 1994). It is an industry which comprises a significant proportion of the manufacturing sector in many de- veloped economies, and one which evokes strong feelings of national pride and identity. It is also an industry where the Japanese have made major advances, particularly in the USA. Performance comparisons between Japan and the West have revealed substantial performance superiority on the part of the Japanese. For example, Womack, Jones and Roos (1990) claimed a two-to-one superiority for Japanese car assembly plants in Japan compared to their European counterparts in terms of labour hours per vehicle and a fifty per cent superiority in terms of defects per vehicle.

In 1993 two further reports reinforced the view that the European motor industry was trailing its international counterparts. The Boston Consulting Group (1993) branded the European industry as uncompetitive, and predicted up to 400 000 job losses. Andersen Consulting (1993) found that Japan was out-performing the UK in the auto- components sector by a factor of 2:l on productivity and a much greater margin on quality. This latter finding was a matter of particular concern

to the European industry, as some commentators have argued that the UK automotive industry has certain advantages over its continental European counterparts. The crux of this argument is that the UK automotive industry is benefiting from the presence of the transplant car-assembly plants of Honda, Nissan and Toyota. These Japanese transplants, so the argument goes, are providing local demonstrations of lean production methods for indigenous car producers, and are also teaching their local suppliers about these principles. If this interpretation is correct, then one would expect plants in the UK to perform well relative to their continental counterparts, other things being equal.

Given this backcloth of apparent Japanese superiority, a high awareness of Japanese methods and an apparent enthusiasm on the part of UK firms to emulate Japanese practice (Voss and Robinson, 1987; Oliver and Wilkinson, 1992), to what extent are these circumstances being trans- lated into actual performance on the part of the UK automotive industry? It is this basic theme which this paper seeks to explore. More specifically, four main questions are addressed:

(1) To what extent is high-performance manufacturing explained by the application of lean production principles?

(2) Compared to their counterparts in Japan and the rest of Europe, how do UKplants perform?

(3) How ‘lean’ are UK plants? (4) What are the obstacles to performance

improvement in the UK?

The methods which generated the data to answer these questions are described in the section which follows. Although eight countries were covered by the study, the focus in this paper is on Europe, and specifically on how the UK performance compares to other European countries. For comparison purposes, Japan is included as a benchmark.

Methods

The data described here are drawn from two studies, one carried out in 1992 and one in 1994. The 1992 study covered 18 autocomponent plants, nine in the UK and nine in Japan, in four product areas: brakes, seats, exhausts and wire harnesses.

S32 N Oliver, R. Delbridge and J. Lowe

The 1994 study covered 71 automotive component plants in eight countries - France, Ger- many, Italy, Japan, Mexico, Spain, the UK and the USA. A total of 44 plants in Europe took part in the study, 9 plants in Japan, 18 plants in North America and 12 plants in the UK. All plants were first-tier suppliers to the vehicle assemblers. In the second phase three products were covered - complete seats, exhaust systems and brake cali- pers. In total, 33 seat plants, 18 exhaust plants and 20 brake plants took part.

The data-collection process involved an initial visit to each plant by members of the research team. At this visit the research team introduced the project, carried out an inspection of the plant and briefed the plant management on how to complete the questionnaire. The questionnaire was then left with the plant for a period of four to six weeks. It was a substantial document, with approximately 880 data fields, and typically took four days of management time to complete. The research team then made a second visit to each plant and reviewed the completed questionnaire with the plant management, a process which could take anything up to one day. Preliminary calculations of key performance measures were then fed back to each plant for verification, after which the data were fed on to SPSS for Windows for analysis.

The questionnaire covered three main areas: plant performance and characteristics; process control and the management of the supply chain; and human resource policy. The main purpose of the questionnaire was to yield data that would permit systematic comparisons of performance between the plants in each product area, but also permit the profiling of management practices of each plant in order to gauge the extent to which lean production principles were in use.

Plant performance was measured by physical productivity, in terms of units per labour hour. This was calculated by taking the annual units of output of each facility and dividing it by the annual labour input. Adjustments were made for ver- tical integration, for the length of the working day, for overtime, absenteeism and product complexity (for exhaust plants only). Quality was measured as defective units in parts per million as reported to the plants by their customers (the car makers) over the same twelve-month period. The measures of management practice represented quanti- tative indicators of the use of lean production

principles. The ‘leanness’ of factory operations was measured by counting the hours of inventory of specific named parts at various stages along the production process, and by the amount of effort going into reworking repair versus first-time production.

The presence or absence of production teams on the shop floor was assessed, as was the amount of responsibility vested in these teams versus specialist support departments. Continuous improvement activities were measured by asking about the presence or absence of suggestion schemes, the number of suggestions per employee and the use, membership and activity rates of problem- solving groups such as quality circles. Human resource policy was gauged by asking a number of questions to detect the presence or absence of certain ‘high commitment’ human-resource policies. Similar principles were applied along the supply chain, on both the customer and supplier side. Thus, data were gathered on the inventories of raw materials and finished goods, on delivery frequencies both by suppliers and to customers, on information exchange, joint problem solving activities between firms and so on.

Given that several measures of performance had been taken, an immediate issue was the need to condense these into a smaller number of more comprehensive measures. Here the concept of ‘world-class’ performance was used, where world- class performance was defined in terms of simul- taneous high performance on the main measures of both productivity and quality. Identification of world-class performance was achieved by plotting scattergrams of the plants on these measures for each of the three product areas. These scattergrams are shown in Figures 2 ,3 and 4.

As may be seen, a number of plants stood out as exceptionally high performing on measures of both productivity and quality in all three product areas. In the case of exhaust plants, the separation between the world-class plants and the rest was fairly clear; it was less so in the case of the other two product areas. Six seat plants, three exhaust plants and four brake plants were identified as world-class performers. The highest concentra- tion of world-class plants was found in Japan, but world-class performance was also attained in

Lean Production Practices s33

1.8

1.6

1.4

.- 3 1.2 > 0 3 .- e

3 0.aqt

0.6

0.4

0.2

0

a

High productivity World class

-

-

-

i *

I**

- * j

- * * '4 w

.................................................................................................................................................. - j * * * i *

* I High quality

- -

I I I

Figure 2. World-class seat plants

High productivity

A 2t A A A A

................. *.---.---- A

A

A A A

A

A

A

A

World class

High quality I I I I

1 01

10 000 1000 100 10

Quality - ppm

Figure 3. World-class exhaust plants

three locations outside Japan - the USA, France and Spain. Five of the nine plants located in Japan were in the world-class category.

A detailed comparison of the world class versus the other plants is available elsewhere (Andersen Consulting, 1994) and so only the main messages

will be summarized here. In some respects the results supported the lean-production model, in others they challenged it. The common factor across the world-class plants appeared to be process discipline and control. This was not limited to internal processes, but typically extended along

s34 N. Oliver, R. Delbridge and J. Lowe

0 12

,2 10

2 a 6 -

.- I

0 3 8-

4 -

2 -

0

High productivity World class

B mi m m

m i

m i

-

............................................ ......._______..._ mi .................................................................. I ..._.......... . :. . .

rn High quality

I I I

Figure 4. World-class brake plants

the whole supply chain, and was manifested by better quality, much lower inventories and more stable schedules. Both internally and externally most of the nine Japanese plants exhibited many - but not always all - of the features of the lean- production model, such as team-based work organization, widespread problem solving activities and active supplier associations at both the first and second tier.

The areas which were most subject to local variation lay primarily in the organization and management of relationships, both internally and along the supply chain. All the Japanese world- class plants displayed elements of the Toyota production system. In contrast, there were no clear distinctions between the Western world-class plants and the Western non-world-class plants in terms of their use of teams in the factory, their levels of problem solving activity and their management of the supply base. Japanese-style supplier associations were rare outside Japan, amongst world-class and non-world-class plants alike.

Having examined the general conditions asso- ciated with high performance, the country-by- country comparisons will now be considered. Clearly, with an average of nine plants per country, one must not over-generalize about the performance of a whole sector or economy. That

said, in the three product areas there was a very high coverage in most countries - up to 100 per cent of capacity in some sectors. There is no reason to believe that in the case of any individual country the plants in these three product areas are any more, or indeed any less competitive than those of the industry more widely. Thus, the dynamics observed in these plants are suggestive of wider conditions. The purpose of the section which follows is to compare the UK plants to their Japanese and European competitors, both in terms of performance and in terms of the measures of ‘leanness’.

Context

Of the eight countries in the study, production volumes were lowest in the UK - less than half those in Germany, Spain, Japan and France. This is partly a consequence of the decline in the volume of vehicles built in the UK, a decline largely attributable to the troubles and subsequent con- traction experienced by British Leyland (as it was) during the 1970s and 1980s. Despite these low production volumes, the UK plants typically served three to four car companies and an average of five car assembly plants, placing the UK around the middle of the field in terms of the number of customers.


Japan

France

Italy

UK

Germany

0 20 40 60 80 100

Figure 5. Productivity by country (indexed)

The number of suppliers to the UK plants was more reflective of their low production volumes, with each plant being served by an average of 35 suppliers - slightly less than the average. Product variety was relatively low in the UK plants, which is indicative of the relatively basic vehicles constructed in the UK. In the case of seat plants, for example, the UK plants averaged 88 live part numbers compared to 149 in Japan, 310 in France and an incredible 33483 in Germany. Only Mexico’s seat plants showed lower product variety than those of the UK. Geographical dispersion of both customers and suppliers was below average in the UK, which was to be expected given the UK’s relatively small geographical area. However, a significant proportion of materials did come in from overseas, which served to increase the inventories of incoming parts, an effect which will be demonstrated later in the paper.

Performance

The country by country performance comparisons in terms of productivity and quality are shown in Figures 5 and 6. To simplify the pres- entation of the data, comparisons have been restricted to Japan, France, Italy, the UK and Ger- many. Spain led Europe in both productivity and

quality, but the Spanish plants have been excluded from these comparisons - there were only four Spanish plants in the study, raising doubts about the representativeness of their performance. The USA and Mexico have also been excluded as the main theme of the paper is the use of lean production methods in Europe.

In terms of physical productivity (units per labour hour) indexed across the three product areas, the UK clearly trails, with an indexed productivity score of 41 compared to Japan’s 65 and France’s score of 57. The UK lies in the lower part of the table, mid-way between Italy and Germany. German products showed higher variety, and in some product areas, relatively high complexity, which may in part explain Germany’s relatively low productivity. In one factory, the research team were told that the car maker to whose cars their products were fitted never made two cars which were identical on the same day. Another factory was nicknamed ‘the personal line’ of the car maker it served, on the grounds that the customers could ask for almost anything and the plant would build it.

Figure 6 shows the defect rates along the supply chain, expressed in parts per million. The left-hand bar for each country shows the incoming defect rate, averaged across a set of named parts in all three product areas. The right-hand bar shows the

S36 h? Oliver, R. Delbridge and J. Lowe

7ALRR 8000 1

7000

6000

5000

4000

3000

2000

1000

0 Japan France Germany UK Italy

Incoming

Outgoing

Figure 6. Defect rates along the supply chain (ppm)

defect rate of finished products as reported by the customers of the plants (the car makers). On both of these measures the UK comes out as the second worst in Europe, with only Italy performing more poorly. Japanese levels of quality are approximately nine times better than those of the UK on the customer side, and six times better on the supplier side. This reinforces the idea that high- performing plants tend to be embedded in high- performing supply chains, and that the trick may be to get consistency of performance along the whole chain.

Change over time

As described in the methods section, the 1994 study was an extension of a UK/Japan comparison undertaken in 1992. Eleven plants, five in Japan and six in the UK, took part in both studies. These 11 plants allow the examination of performance change over a two-year period. Although Figure 5 makes it clear that the UK still lags Japan by a significant margin, has there been any pro- gress in closing the gap? This is shown in Figure 7.

For the Japanese plants units per hour show an increase of 38 per cent over the two-year period - this improvement was in the context of a sharp decline in both volumes and value of sales. Sales declined slightly more than volume, which may reflect cost-reduction activities, or a change in

product mix towards simpler, lower value products. The data suggest the former rather than the latter.

Of the five Japanese plants, four had reduced their head-count, two of them dramatically so. For example, in 1992 one of these plants had been highly vertically-integrated. During the 1994 inspection by the research team, the factory appeared identical to 1992, but the majority of operators now worked for subcontractors, who now operated much of the plant. In 1992 the research team frequently encountered ‘guest’ workers in the Japanese plants, particularly second and third generation Japanese-Brazilians (in fact, the signs above the assembly lines in several plants were in Portuguese as well as Japanese). In 1994 the Portuguese signs were still there, but the guest workers were not, a sign of the retrench- ment that was taking place. Major restructuring was also occurring amongst managerial positions, and many of the managers the team had met in 1992 had now been moved on to other positions.

Viewed together, the decline in factory head- count and the decline in volumes in Japan do not equal the productivity increase for two main reasons. First, some plants had made process im- provements, which had improved productivity. Secondly, the annual hours per person per year had declined by an average of 193 hours or about 10 per cent. There have been repeated calls for


Japan UK overall UK suppliers to Japanese transplants

O h change % change O h change 1992 to 1994 1992 to 1994 1992 to 1994

Units per hour +38.4 +31.5 +37.8

Production volumes -1 5.8 +35.1 +54.7 ~~~

Value of sales -1 8.0 +35.7 +41.1

Factory headcount -26.2 +19.6 +27.4

Stock turn ratio -1 5.3 +177.4 +187.4

Figure 7. Japanese and UK changes in performance 1,992 to 1994

reductions in working hours in Japan for the last two to three years, and the data indicate that this is occurring. The units per hour figure reflects this in a way that head-count does not.

For the UK plants, as with the Japanese plants, a substantial overall increase in productivity is apparent, although it is clear from the table there are differences between those plants which supply the Japanese car assemblers (Honda, Nissan and Toyota) and those that do not. This is particularly noticeable in the case of production volumes which increased by over 50 per cent for the suppliers to the transplants, but which actually showed a slight decline for the other plants. This pattern is repeated for the value of sales. The suppliers to the transplants increased volumes well ahead of sales, suggesting a combination of successful cost- reduction activity and changes in product mix. The other plants moved in the opposite direction, with sales increases moving ahead of volume increases.

In contrast to the Japanese picture, head-count increased for four of the six UKplants, a test- ament to increasing volumes. Stock turn ratios increased substantially across the group as a whole, although there were wide variations in this - from a 5 per cent increase in a long-established

plant whose volumes were stable, to over 300 per cent in the case of a plant whose volumes had doubled.

There is no single explanation behind the changes in stock turn ratios. For the transplant suppliers, increased volumes are clearly a big part of the picture, although one plant had made significant advances in process controls through the introduction of a kanban system. One plant claimed to have ‘reduced’ its previously very high levels of incoming materials stock by insist- ing that the materials be delivered on consign- ment, and hence remain the property of the supplier until they were used. The stock was physic- ally still there, of course, and ultimately resulted in increased cost. Such actions move the problem elsewhere in the supply chain, rather than solving it, and are indicative of the limitations of measuring efficiency solely at the level of the single enterprise.

Within the context of the overall increase in stock turn ratios (and hence stock reduction relative to sales), there were examples of increased (strategic) stockholding on the part of some plants. One model UK plant, which had been particularly lean in 1992, had increased its through- put time by 24 hours when the research team

S38 h? Oliver, R. Detbridge and J. Lowe

Incoming materials

Finished goods

Japan France Italy UK Germany

I

Figure 8. Inventories along the supply chain (in hours)

revisited the plant in 1994. The reason given for this was that the plant had recently suffered a major machine failure and had come within a few minutes of stopping the assembly line of its major customer. The failure had revealed that the pre- requisite technical support was not available - or at least not available quickly enough - to guar- antee the integrity of supply. The plant manager commented that after this incident:

‘We all sat round and said “We didn’t enjoy that very much, let’s not do it that way again”.’

Consequently, the plant had installed a buffer of 24-hours inventory downstream from the rogue machine.

Another of the UK plants which had been a strong exponent of the lean production in 1992 was reconsidering some of its policies in 1994. Consistent with the lean model, in 1992 the plant had vested substantial responsibility for a whole range of activities, including minor equipment purchases, in the hands of the production teams. However, following a couple of bad purchasing decisions, this practice was now being reviewed with a view to establishing stronger central support functions. In a context where the members of production teams lacked the requisite skills and knowledge to make good decisions, the plant saw

no alternative but to establish specialist support functions. ‘We’re so lean it’s hurting’, commented the plant manager.

The supply chain

Figure 6 showed the performance levels with respect to quality as measured by incoming and outgoing defects. Figures 8 and 9 show the levels of incoming materials and finished goods and the punctuality of incoming and outgoing deliveries respectively.

Inventories are a key measure of leanness, and are affected by the simplicity of production flows, and the uncertainty of both demand and supply. Inventories may be used to protect one stage of the process from problems elsewhere. This may be seen from Figure 8 - inventories in the UK are about two and a half times those in Japan, but are slightly lower than those found in France and Italy. Given the relatively small geographical area of the UK, one might have expected inventories of finished goods to be rather lower. On the incoming materials side, inventories are second only to those found in Germany, at 89.7 hours. This may be due in part to the fact that many UK firms source material from overseas, which clearly serves to inflate the raw materials inventory figure. Only Germany shows higher inventories


Japan France Germany Italy UK

Incoming

0 Outgoing

Figure 9. Percentage of late deliveries

of incoming parts, and in the German case this seems to be aggravated by very high product variety.

On the measures of lateness of delivery of incoming and outgoing supplies (Figure 9) the UK trails, with 11 times as many late shipments and about three times as many late deliveries as Japan. As with inventories, Italy is the UK’s closest bedfellow on these measures.

Human resources

Four measures of human resource policy will be presented here. These are the use of production teams in the factory, the amount of responsibility for quality given to operators, the number of suggestions per person per year and the use of so-called visual controls.

The use of production teams in the factory is an important component of the lean production model. Several different versions of teams exist, and identifying whether a plant is or is not using teams is not a straightforward undertaking. Figure 10 shows the percentage of plants in each country who use production teams (as defined below) in the factory.

‘Teams’ refer here to small groups of operators under the control of a team leader, although this is not the only model of a team. However, it is the

model found in Japan, and hence is closest to the concept of a team found in most writing on lean production. As Figure 10 shows, outside Japan the UK has proved to be one of the most enthusiastic consumers of the team concept, with over 70 per cent of UK plants either using or moving towards the use of teams. Interest in the rest of Europe is clearly rather lower. It should be remembered that there was no clear link between the use of teams and superior performance in the comparisons between the world-class and non-world- class plants.

A second element of the lean production model involves the pushing of responsibility on to front- line operators. This, along with the opportunities for problem solving that form part of the regime, is one of the reasons why the promoters of lean production have claimed that it involves ‘ever more challenging work’ (Womack, Jones and Roos, 1990). The questionnaire required managers to estimate the amount of responsibility for a range of quality issues - for example inspection, rework and quality improvement - given to operators as distinct from other groups in the factory (team leaders, skilled trades, quality spe- cialists and so on). Surprisingly, and contrary to the conventional wisdom, the Japanese plants emerged as giving their operators the least responsibility for quality of any country in the


/J In transition

Using teams

Japan UK Germany France Italy

Figure 10. Percentage of plants using teams in the factory

study, although they did give much more responsibility to their team leaders. These figures are shown in Figure 11.

Of the European countries, the UK plants gave the most responsibility to their production workers. In this, as with a number of the other softer measures, there appeared to be an Anglo- American effect, as the US plants also reported substantial operator responsibility for quality. The findings on Japan reinforce what was apparent during many of the Japanese plant visits - that Japanese operators work very diligently and conscientiously, but within a system which has already effectively been foolproofed in many key respects. In contrast, several UK plants appeared to have enthusiastically embraced some of the softer aspects of the lean production model - such as team working, devolution of responsibility and so on -without apparently addressing some of the more fundamental questions about process control. This is an issue to which we shall return in the discussion.

Figure 12 broadly confirms the stereotype of Japan with respect to problem solving. Suggestion schemes represent a method by which the skills and knowledge of those most closely involved

with the production process can be gathered and applied to improvement activities. The majority of plants ran such schemes, although the activity rates from scheme to scheme differed mark- edly, particularly by country. Across all of the Japanese plants, suggestions averaged nearly 30 suggestions per (factory) employee per year. In the world-class Japanese plants, the number of suggestions per employee was 47. In contrast, suggestions per employee in the European plants were low, with the UK leading at an average of two suggestions per employee per year. The high rate of suggestions in the Japanese factories is not driven by high rewards for each suggestion, which at an average of about 225 per suggestion was much lower than that offered in any of the Western plants. In Japan, these rewards are backed up in some plants by formal targets - for example 40 suggestions per employee per year. Western schemes tend to have a higher volun- tary element and typically emphasize major im- provements for which substantial rewards are offered.

‘Visual control’ (Figure 13) covers features such as Andon lights above production lines, which are activated by operators in order to indicate a

Lean Production Practices S41

Japan

Italy

I I I

I I 1

0 20 40 60

Low High

% responsibility 1 forquality

Figure 11. Operator responsibility for quality

28.9

25

20

15

10

5

0 Japan UK France Italy Germany

Figure 12. Suggestions per person

problem with the production process, and by constructed to indicate the extent to which public visual and public displays of volume and qual- displays of information were in use. ity performance. Public displays of information - Japanese plants proved to be the most for example, about absenteeism, improvement extensive users of visual control. Most other activities and so on - are also sometimes in- countries make only moderate use of this tech- cluded under this practice. Based on data from nique, although the UK stands out as somewhat the questionnaire, a visual control index was ahead of the rest of Europe, with Germany


Germany

Italy

I I I I I I 0 1 2 3 4 5 6 7

Low High

Figure 13. Use of visual control

lagging. In Germany a dislike of public displays of information, particularly about the activities of work groups or individuals, was evident. One German manager described to the research team how he had visited the plant of a Japanese car assembler in the UK, and had seen the names of individuals with their absence records publicly displayed beside the line. He commented that:

‘German workers would not tolerate such displays, nor would German managers wish to impose them.’

Discussion and conclusions

To a large extent, the data on world-class performance and those on individual countries paint a consistent picture. Lean production principles partially, but by no means completely, explain high performance. The common denominators of high performance appear to be good process discipline and control, with the softer aspects - team-working and operator responsibility - show- ing no clear link to performance. It may be that these soft issues are necessary but not sufficient conditions for high performance; or that some of these practices are effective at fine tuning a

system which is already basically in control, but are not of themselves capable of bringing order to chaos.

Turning to the differences in country performance, the picture for the UK has both positive and negative aspects. On the positive side, the small number of UK plants who took part in both the 1992 and 1994 studies showed a substantial improvement over the two-year period. How- ever, this improvement was in the context of an overall increase in volume, due in particular to the expansion of the Japanese transplant factories of Honda, Nissan and Toyota. During the same period, Japanese plants which took part in both studies improved their performance by a rather greater amount, but that was in the context of an overall decline in volumes. It was also interesting to observe that some of the particularly lean UK plants were reappraising some of their ways of managing their manufacturing operations, and creating more robust, buff- ered systems.

Despite the performance improvement between 1992 and 1994, compared to plants in other countries, the UK plants did not perform well, and were well down the league in terms of both productivity and quality. On the indices of management practices the UK performs relatively poorly


on process discipline and control - incoming and outgoing defect rates, inventories along the supply chain, punctuality of deliveries and so on - but shows a relatively high use of the softer aspects of the lean production model. Unfortunately, the practices which the UK is embracing most enthusiastically are not those which are reliably linked to superior performance. What appears to be happening is that UK plants are seizing on the colourful, people-oriented aspects of lean- production practices, and are perhaps ignoring, or at least giving insufficient attention, to the harder, process control-oriented aspects. This finding is consistent with those of other commentators in the field, for example Voss and Robinson (1987), who have observed that it tends to be the easy-to- implement rather than the most useful aspects of the Japanese manufacturing package which are being implemented in the UK.

A final point concerns the link between industry structure and the performance of individual plants. Here the UK may be hampered by a variety of circumstances. These include low production volumes, which, coupled with the presence of many different car makers, create a fragmented industry with multiple standards and different messages from different customers. Here the cases of France and Japan stand in stark contrast to that of the UK. Both France and Japan perform very well overall, although French quality was still a long way behind Japanese standards and only average for the sample as a whole. How- ever, both France and Japan displayed industry structures and practices that were in some ways similar. In Japan buyers and suppliers are typically locked together in long-term relationships from which it is difficult to exit (Sako, 1992). This situation creates a pressure for cooperation and improvement in a manner that is not possible in a more fragmented structure. Of course, the precise details in France and Japan are different. In Japan the common link between firms is the keiretsu system; in France it appears to be a spirit of nationalism, coupled with the domination of the industry by only two car makers, which makes tacit coordination possible. However, both Japan and France differ from the UK, where free market relations and competition have been actively promoted in the name of industrial development. If the UK’s industrial strategy is appropriate, it has yet to be proved by the performance data at the level of the individual firm. It is clear that

national context and government policy provide an interesting and important backdrop to the efforts of individual firms as they strive to improve their performance.

Already the field is split between those who favour explanations at the level of the firm (Womack, Jones and Roos, 1990) and those who favour structural explanations (Williams et al., 1994a). Our findings provide some support for the institutional argument, and in common with Done (1989) we are pessimistic about the pros- pects for building world-class manufacturing facilities in what may be basically a non-world- class economy. We predict that this issue will be an important item on the public policy agenda in the years ahead.

References

Ackroyd, S., G. Burrell, M. Hughes and A. Whitaker (1988). ‘The Japanization of British Industry?’, Industrial Relations Journal, 19, pp. 11-23.

Andersen Consulting (1993). The Lean Enterprise Benchmark- ing Project Report. Andersen Consulting, London.

Andersen Consulting (1994). The World Wide Manu- facturing Competitiveness Survey: The Second Lean Enter- prise Benchmarking Project Report. Andersen Consulting, London.

BBCfOU (1986). Strategies for Change: The Task Force, PT61 I: The Structure and Design of Manufacturing Systems. Open University/BBC Productions.

Boston Consulting Group (1993). The Evolving Competitive Challenge for the European Automotive Components Industry. Boston Consulting Group, London.

Done, K. (1989). ‘The Hard Road Lies Ahead’, Financial Times, 17 March.

Dore, R. (1973). British Factory-Japanese Factory. Allen and Unwin, London.

Dore, R. (1986). Flexible Rigidities. Athlone, London. Ingersoll Engineers (1990). The Quiet Revolution. Ingersoll

Engineers, Rugby. Kenney, M. and R. Florida (1993). Beyond Mass Production:

The Japanese System and its Transfer to the US. Oxford University Press, Oxford.

Kirby, M. W. (1991). ‘Economic Records Since 1945’. In: T. Gourvish and A. O’Day (eds), Britain Since 1945. Mac- millan, London.

Krafcik, J. F. and J. P. MacDuffie (1989). Explaining High Performance Manufacturing: the International Automotive Assembly Plant Study. Paper presented to the IMVP International Policy Forum, Pierre Marques, Acapulco, 7-10 May.

Lewis, W. W., H. Gersbach, T. Jansen and K. Sakate (1993). ‘The Secret to Competitiveness - Competition’, The McKinsey Quarterly, 4, pp. 2944.

N. Oliver, R. Delbridge and J. Lowe

Nishiguchi, T. (1989). Is JIT really JIT? Paper presented to the IMVP International Policy Forum, Pierre Marques, Acapulco, 7-10 May.

Oliver, N. and B. Wilkinson (1992). The Japanization of British Industry: Developments in the 1990s. Basil Blackwell, Oxford.

Sako, M. (1992). Prices, Quality and Trust: Inter-firm Relations in Britain and Japan. Cambridge University Press, Cambridge.

Schonberger, R. (1982). Japanese Manufacturing Techniques. Free Press, New York.

Voss, C. and S. Robinson (1987). ‘The Application of Just-in- Time Techniques’, International Journal of Operations and Production Management, 7(4), pp. 46-52.

Williams, K., C. Haslam, J. Williams, T. Cutler, A. Adcroft and S. Johal (1992). ‘Against Lean Production’, Economy and Society, 21(3), pp. 321-354.

Williams, K., C. Haslam, S. Johal and J. Williams (1994a). Cars: Analysis, History, Cases. Berghahn Books, Providence.

Williams, K., C. Haslam, J. Williams and S. Johal(1994b). ‘De- constructing car assembler productivity’, International Jour- nal of Production Economics, forthcoming.

Wolfe, M. (1985). The Japanese Conspiracy. New English Library, Sevenoaks.

Womack, J. P., D. T. Jones and D. Roos (1990). The Machine that Changed the World: The Triumph of Lean Production. Rawson Macmillan, New York.

Lean Production Practices: International Comparisons in the Auto Components Industry1

Documents

Transcript of Lean Production Practices: International Comparisons in the Auto Components Industry1