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Lean production in a changing competitive world: a Japanese

perspective Hiroshi Katayama

Department of Industrial & Management Systems Engineering, School of Science and Engineering, Waseda University,

Tokyo, Japan, and David Bennett

Technology and Innovation Research Centre, Aston Business School, Aston University, Birmingham, UK

Introduction Since its publication in 1990, the book The Machine that Changed the World, with its advocacy of “lean production”, has dominated much of the theory and practice of production systems design[1]. So well known and compelling have the principles and demonstrated benefits of lean production become that there are now very few countries and industries where its influence, along with its associated methodologies such as just-in-time (JIT), total quality management (TQM) and total productive maintenance (TPM), have not been felt[2]. However, the strength of this influence, along with that of other related philosophies such as world-class manufacturing, has meant that the rules of competition have themselves been changing. In many respects the resultant change in thinking about the way in which industrial production should be organized can be compared with the change brought about by the automobile, or the “machine” referred to by Womack and his colleagues in the title of their book[1].

The purpose of this article is to examine the role and significance of lean production within the context of the current industrial and economic environment in Japan. It explores the contemporary pressures on Japanese companies and considers how they are demanding a response to the new conditions which are emerging as a result of the continuously changing economic, competitive and industrial situation. For its empirical evidence, it draws on the recent experiences of four Japanese manufacturing plants. The first is the final assembly plant of a major automobile manufacturer, in the industry acknowledged for its pioneering role in developing lean production, the second is an electronics plant of a telecommunications equipment company, the third is a plant manufacturing refrigerators and the fourth makes domestic air conditioners.

International Journal of Operations & Production Management, Vol. 16 No. 2 1996, pp. 8-23. © MCB University Press, 0144-3577

The research on which this article is based was carried out with support from the Japan Society for the Promotion of Science under the Invitation Fellowship Programme for Research in Japan.

Lean production: a Japanese

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The case studies illustrate that Japanese companies can no longer rely on concepts developed during the 1980s. In order to remain competitive they must adapt to developments in the market and a changing industrial relations climate. Moreover, there is the paradox that Japanese companies’ overseas operations are reducing the opportunities for their own domestic plants to rely on exports as their means of achieving large production volumes.

Lean production in an era of change From their five-year worldwide study of the motor industry in the 1980s the authors of The Machine that Changed the World assert that the lean production system is the superior way of producing manufactured goods. In making their assertion they draw mainly on the evidence of Japanese automobile companies which, they argue, have developed the means for designing and building cars in less time with fewer people and lower inventories than Western manufacturers.

The essential elements of lean production are shown in Figure 1. A key feature is that fewer resource inputs are required by the manufacturing system (less material, fewer parts, shorter production operations, less unproductive time needed for set-ups, etc.). At the same time there is pressure for higher output perfor mance to be achieved (better quality, higher technical specifications, greater product variety, etc.). This should result in greater customer satisfaction which in turn provides the opportunity for the lean company to gain a market share larger than those of its competitors.

Within the automobile industry the consequence of creating a lean system of production has been demonstrated best by Toyota. Since starting to introduce lean principles around 1950 Toyota has transformed itself from being a minor producer of just a few thousand vehicles into one which produced 3.5 million vehicles in 1984, ranking it third in the world and only just behind Ford.

Despite the apparent superiority of lean production compared with conventional mass production systems, however, there are now questions being asked in Japan concerning its robustness as an approach to coping with future economic and market conditions. There are several factors to bear in mind concer ning the apparent dominance of lean production. The first is that Womack and his colleagues conducted their research at the time of Japan’s “bubble economy” of the late 1980s during conditions of a bull stock market and low interest rates. Domestic demand for consumer products was at an all-time high level and the output from Japan’s factories could also remain high. The

Resource inputs

Manufacturing system

Output (performance)

Customer satisfaction

Pressure for higher performance

Fewer resources

Higher market share

Figure 1. The essential elements

of lean production

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main competitive objective of companies, therefore, was to increase market share by reducing costs, and thereby prices, as well as offering a greater variety of products with more features. The second point is that Japan has a severe shaken vehicle inspection system which encourages owners to scrap their cars and buy new ones. There is little demand for second-hand vehicles and cars more than a few years old are a rare sight on Japanese roads. This has enabled automobile manufacturers to rely on a large domestic market which has been willing to accept the latest models readily, thereby increasing the rate of new product development. Domestic sales in Japan, at around eight million per year, account for about one-quarter of total world production and are two-and-a-half to three times larger than the market size in Germany, the UK or France, where sales are between two and three million per year. Also, the average model age of Japanese cars is less than two years compared with around four to five for a typical European or North American product.

The effect of the phenomenon just described is shown in Figure 2. The main competitive pressure on companies has been to expand market share, the principal means of achieving which has been through price competition. This in turn has reduced profits, thereby necessitating cost reductions and increased revenues. Cost reductions have been achieved through kaizen (continuous improvement) activities, which have further stimulated price competition, while increased revenues have necessitated larger sales volumes and required new products to be introduced and products to be diversified. This has required

Expand market share

Competitive pressure

Price competition

Lower profit

Reduce costs Increase revenues

Kaizen Enlarge salesvolume

Increase investment and indirect labour

New product introduction Product diversification

Increase in break-even point

Figure 2. The past trend in Japanese manufacturing

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increased investment and more indirect labour, so increasing the break-even point and reducing profit.

Japanese industry was able to maintain this continuous cycle during the “bubble” economy but more recently the chain of events in Figure 2 has been broken. In particular the increase in revenues through larger sales volumes can no longer be a presumed step in the cycle with the increase in interest rates and levelling of disposable incomes. Moreover, the increasing value of the yen, brought about by the strength of the industrial economy, has reduced the opportunity for Japanese companies to rely on exports as a means of compensating for lower domestic sales.

As well as these economic factors which have broken the manufacturing cycle there are, in addition, a number of influences which have called into question the viability of lean production principles within the context of Japan’s current situation.

External and internal environmental influences During the last few years a growing number of concerns have begun to emerge regarding the trend of Japanese manufacturing and the application of lean production methodologies and technologies. Some of these relate to the external environment of companies, while others relate to the inter nal production environment. Some of these have recently been documented[3].

One of the most apparent effects relating to the external environment, reported widely in the popular Japanese press, has been the increase in traffic brought about by the pressure for smaller, and thereby more frequent, deliveries of mater- ials to factories. Not only has this been the cause of urban congestion, but at times it has also created long queues of delivery vehicles on the country’s main high- ways, particularly the most important arterial route linking the main industrial centres, including Tokyo, Nagoya, Osaka, Kobe and Hiroshima. This situation has given rise to accusations that it has resulted in pollution and unnecessary energy consumption as well as being the cause of inconvenience to other road users.

Another effect relating to the external environment has been the public’s reaction to the plethora of new products and variants that have appeared at an ever-increasing rate. While this was once an attraction to consumers, the situation more recently is one in which they have become confused by the choice they are offered and they feel annoyed by the fact that new goods become obsolete almost as soon as they leave the store in which they were purchased. Many customers of automobiles, for example, are beginning to feel that despite the number of models on offer very few are attractive[4]. Some evidence of this can be found in the number of well-established foreign models which can be seen on Japanese roads despite their high price compared with domestically produced vehicles. For example the British made Austin (now Rover) Mini, almost unchanged since its launch 35 years ago, is a particularly popular model in Japan.

An external influence of the global economy, the high value of the yen, was mentioned earlier. Another influence has been the setting-up of Japanese-owned factories abroad. This in turn has created a source of competition for Japanese

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parent plants both in foreign and domestic markets. For example, a subsidiary factory in South-East Asia typically can manufacture products at 50 per cent of the cost in Japan while a European plant can manufacture at around 80 per cent of the cost. The effect of this is that Japanese companies are increasingly importing products and parts from their overseas subsidiaries, causing a decrease in demand on domestic plants.

The main internal environmental factor affecting the application of lean production relates to the workforce. There is the question of the ageing population, which means that there are fewer younger workers employed in Japanese factories. In the past Japan had an abundant younger workforce which was adaptable to new technologies and, by virtue of the seniority-based pay system, provided relatively cheap labour. Today, Japan has achieved the longest life expectancy in the world and the number of young workers entering the labour market is starting to decline. The total size of the Japanese workforce is also expected to decrease at the beginning of the next century so Japan’s problem in the future is likely to be a labour shortage rather than unemployment[3]. A particularly difficult problem that is already starting to become evident in many Japanese companies is the shortage of young workers and the relatively large number of older employees. As well as being less productive and versatile these older workers also increase wage costs and it is now common for the average annual wage per production worker in a Japanese car factory to be around Y60 million (£40,000).

The ageing population is not the only reason why fewer younger workers are going into Japanese factories. The work itself is also proving to be a disincentive, being seen as exhausting and involving long working hours. The automotive industry is especially notorious in this respect and a report by the Confederation of Japan Automobile Workers’ Unions[4] recognized an “exhausted workplace” as being among the factors which it considered were causing harm to the industry’s competitiveness. Of particular significance in this report is the suggestion that the Japanese automobile industry may not be competitive in the true sense of the word when taking into consideration the fact that employees work 2,200 hours per year. These are much longer working hours than are common in European or US plants and the question is posed: how competitive would a Japanese plant be if the work hours were shortened to a more typical 1,800?

Case studies of current practice in Japanese manufacturing plants To assess the current situation in Japanese manufacturing industry concerning the application of lean production and its associated methodologies and technologies the authors carried out a number of case-study investigations within manufacturing plants. Additional information was also gathered from a visit to the central production engineering research laboratory of one of Japan’s largest manufacturing companies. The investigations were carried out during September and October 1995. Four plants were studied through a visit comprising a plant tour together with a separate question-and-answer session. Prior to each visit a list of questions was supplied to enable the personnel in

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each plant to prepare their responses. The questions covered the following four aspects:

(1) The extent to which production systems have be en modified to accommodate any changes in the companies’ circumstances in terms of: technology; software; and human resources and work organization.

(2) The current state of development concerning lean production and related methodologies such as TQM (total quality management), TPM (total productive maintenance/management), etc.

(3) The companies’ current competitive strategies and how they have been influenced by external and internal factors and conditions.

(4) The companies’ future plans with regard to production. The industries represented by the case companies are automobile production, electronics assembly and electrical appliance manufacture. They include component and end-product manufacture and the use of a range of production technologies from state-of-the-art materials processing to manual assembly. They also cover domestic and industrial markets, and meet different demand patter ns from relatively stable to highly seasonal. Thus the cases can be considered as fairly representative of the spectrum of Japanese manufacturing industry. Each case is briefly described and the particular features of each plant’s operation are highlighted. The plants have been given fictitious names.

Case 1: auto plant A This is a final assembly plant of a major automotive manufacturer. The company as a whole has several plants in Japan and also manufactures overseas. Over the last year its domestic production has fallen by around 6 per cent owing to recession and the supply to some of its foreign markets by the overseas plants.

Auto plant A is almost 30 years old and produces a medium-sized saloon together with related models (e.g. estate cars, coupés, etc.), with 50 per cent of the plant’s output being exported.

The plant has three assembly lines, each with a capacity of 200,000 cars per annum (total capacity 600,000). Current output is around 500,000 owing to reduced demand and the fact that, increasingly, the market is being supplied by overseas plants. The three lines currently employ 5,000 workers (i.e. each assembles 100 to 120 cars per year). The line cycle time is 1.01 minutes.

Two shifts are operated and shifts change every week. There are currently no temporary workers owing to the reduced production level and, in fact, the company normally employs fewer temporary workers than the other major Japanese manufacturers.

Auto plant A represents a good example of lean production. There is no goods inward warehouse. Bodies are made in the plant. Engines are supplied from a plant 15 minutes away and delivered in small batches by light truck. When a new model is introduced production is mixed with the old one and multi-skilled workers are used on assembly. The complete changeover is

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achieved in one week. Software on the automated plant can accommodate the mixed production.

Three particular features of auto plant A’s operation should be noted: (1) Owing to the reduced demand, shifts are stopped 25 minutes early.

Operators then carry out housekeeping tasks for the remainder of the time.

(2) There is a trend towards job rotation among both assembly line workers and office staff. Assembly workers not only move within the same area but also between completely different areas. Job rotation is popular among assembly line workers. There are two main reasons for job rotation, which are to develop multiskilled workers and to improve job interest.

(3) As part of the plant’s kaizen activities operators are increasingly being provided with support to enable manual assembly tasks to be carried out more easily and efficiently.

Case 2: PCB plant B This factory makes printed circuit boards (PCBs) for electronic tele- communications switchboards. It is part of the electronics division of one of Japan’s largest corporations. The main production areas occupy two floors of the plant. Bare boards are made on one floor and PCB assembly takes place on another. Most of the PCBs go into the switchboards made by PCB Plant B’s parent company. The plant employs 2,200 people, with 500 on production.

The factory sells 60 per cent of its production to NTT (Nippon Telegraph and Telephone) – the volumes are high and very predictable so a highly automated line flow system can be used for production of these boards.

The remaining 40 per cent of sales are to a range of other customers. These products include electronic instr ument systems and different types of switchboard. Owing to the high variation and small batch sizes these boards are made on a different system – basically a multi-model line.

A maximum of 50,000 boards is made per month. Around 25,000 are made for NTT in less than 100 varieties. The balance of 15,000 to 25,000 boards go into end products made for other customers and are produced in 2,000 to 3,000 varieties. The average batch size of these is about eight.

Bare boards are produced using a special method developed and patented by the company. The lines for processing boards are designed in-house. Four axis NC drilling machines made by the company are used for fine drilling the holes in the boards, which may be up to 18 layers in thickness.

Boards are assembled on one of two lines – a mass production line and a flexible assembly system (FAS) for small batch-size boards. The FAS is less than four years old. All boards on the NTT line are assembled automatically on the mass production line since the investment in the necessary machinery is justified by the quantities involved. All other boards are assembled on the FAS because their batch sizes are much smaller. The FAS is controlled by a hierarchical computer integrated manufacturing (CIM) system. Long-term production

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planning is carried out on a computer at the upper level – a lower-level work station divides the schedule into small parts for each stage of production and is transferred through a local area network (LAN) to each facility.

The FAS uses automated guided vehicles (AGVs) to transport boards between all stages of assembly. They are carried in a box with internal racking to prevent damage. The boxes are identified by a programmable badge (A satellite ID system) which determines the routeing of the AGV. Each PCB is identified by a barcode label and similar boards which require the same routeing can be processed together.

The first stage of assembly is for devices which are surface mounted. This takes place in a clean room after which the boards are 100 per cent machine inspected and manually checked again if any problems are detected.

The boards are then routed to the auto-insertion machines for assembly of reg- ular components. The final assembly stage is carried out manually where com- ponents cannot economically be inserted automatically. Around 10 to 15 per cent of components are inserted manually. Fifteen workers are employed on this work.

Four particular features of PCB Plant B’s operation are: (1) There is a need for a technological solution to the problem of producing

small batches economically, although manual operations cannot be avoided.

(2) Owing to the wide finished product variety of special boards there is a need to focus improvement activities on upstream products and processes such as bare board design and manufacture and logistics planning.

(3) The flexibility of the FAS is mainly due to its software orientation. (4) Group technology (batching together similar boards) is a means of

increasing the resource efficiency of flexible systems.

Case 3: refrigerator plant C This plant belongs to an electrical appliance division of a major industrial corporation which was established in 1954. The plant manufactures domestic refrigerators. Altogether the division has 2,000 employees.

Annual production of refrigerators is 600,000, of which around 10 per cent are exported. There are eight refrigerator manufacturers in Japan and the market is highly competitive.

Refrigerator compressors are made on a special facility. The five main parts of the compressor are made on automatic production lines. Each line requires only one operator. Machines are designed in-house and made by specialized machine builders. The assembly of the compressors requires some manual operations although the amount of automation was improved from 63.4 to 82.9 per cent during a 12-month period over 1994 and 1995.

Seven models of refrigerator are made. Total production is 2,400 per day. There are two lines for making the shell and insulation which then feed two assembly lines. One line produces three large models and the other produces four smaller ones.

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Production of the outer shell requires forming pre-coated steel sheet and is carried out using “mass production” whereby a batch of shells is produced for about 20 minutes, at which time each stage of the line is progressively re-set. Each set-up takes a total of 9 minutes and involves a loss of four pieces at each station on the large model line and six pieces on the small model line. This loss is justified compared with the investment that would be required to enable the models to be mixed. To allow them to be mixed during assembly it is necessary for the shells to be put into a temporary buffer store after they have been produced.

The situation on the insulation line is different. Due to the high cost of the moulds in which the insulation is formed it is not economic to produce in batches because this would require a large number of moulds and their utilization would be low. For this reason the models are mixed.

Mixed production continues on the main assembly lines where the refrigerators are assembled manually. To improve assembly efficiency and reduce errors the operators are supplied with kits of parts which are delivered by overhead conveyors which run alongside the lines.

The final stage of production is inspection and packing, which takes place on a single line which r uns at twice the speed of the two assembly lines. For delivery the finished refrigerators are then batched together by type to save space during transportation. There is virtually no finished goods stock – trucks continuously arrive to be loaded with refrigerators as they are packed and marshalled in the delivery bay.

Three particular features of refrigerator plant C’s operation are: (1) Efficiency is slightly reduced with mix production but this is com-

pensated for by reducing set-up time. TPM activities are extensively used to improve assembly efficiency and parts kitting is one of improvements made.

(2) Mixing products is considered to be suitable for the number of models currently being produced and is being extended to eight models in the future. However, there is some doubt about whether production can be extended to nine models without a loss in efficiency.

(3) The assembly lines are balanced by varying the spacing betwe en refrigerators. Those requiring more time for assembly will be spaced to allow the operator to complete the required task before moving on to the next one.

Case 4: air-conditioner plant D This plant makes domestic air conditioners. It was built in the mid-1970s and belongs to the home electrical division of a major Japanese corporation.

The plant produces around 40 models of split-type room air conditioner. Most of the output is for domestic consumption. There are also sister plants in China, Malaysia and Taiwan. The Malaysian plant makes air conditioners which are exported to Japan.

About 50 per cent of parts by value are made in-house. The rest are supplied by outside contractors including other group companies (e.g. printed circuit boards).

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The production of air conditioners averages around 60,000 per month (output in 1995 was 700,000). Monthly output can vary between 50,000 and 70,000 – demand is highly seasonal with the peak occurring during the summer months.

Production of parts and final assembly is by mass production (on single and multi-model lines). Parts production (metal stampings, etc.) is carried out in large quantities – typical batch sizes are around 10,000. Batch sizes for final assembly depend on model type – they vary between 50 and 2,000.

The production of heat exchangers is automated (i.e. stamping of fins and assembly together with copper tube). The machine for this operation was built in-house around 15 years ago. It can make five types of heat exchanger. Run time is two to three days and set-up time is two hours.

There are some AGVs used for material handling although most material delivery to the assembly lines is by overhead conveyor. Stocks of small parts are kept alongside the assembly lines.

Assembly is carried out on continuously moving conveyors. There are no fixtures and the conveyor speed is varied depending on output. One main assembly line produces the more popular models in batches of about 2,000 (i.e. there are set-ups every couple of days). Two other lines produce batch sizes of about 500 and are changed up to ten times per day.

The main assembly line normally operates at a cycle time of 20 seconds but during periods of peak demand the cycle time is shortened to about 12 seconds. During these periods extra assembly workers are transferred from elsewhere in the plant (e.g. from the refrigerator or assembly robot departments). The regular workers on this line do not rotate jobs, however.

Four particular features of air-conditioner plant D’s operation are:

(1) Seasonality negates the use of mixed production as a means of produc- tion smoothing. Although the production rate is varied throughout the year the plant still has ten large warehouses for stocking finished goods to allow for seasonal demand.

(2) Assembly is almost 100 per cent manual to allow the plant to be adaptable. Automation could be achieved, and costs reduced, if there were more standardization of parts and products but the company’s policy is to offer a wide and distinct product range.

(3) Parts production is usually around 60-70 per cent automated, depending on the model. For example, some of the tube-welding operations have recently be en automated but there are still some manual welding operations. A few lines are dedicated to the manufacture of one part only and are 100 per cent automated.

(4) The rising value of the yen has meant that air-conditioner plant D’s home market is under threat from imports. Since the production cost at its overseas sister plants is around half that of plant D there may be a need to import parts in order to remain competitive – which would be a threat to jobs. To safeguard jobs production costs will need to be reduced.

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The need for a new approach The analysis of the case studies shows that each plant has developed its own unique approach to the design of its production systems and use of technologies and methodologies. The cases have highlighted a number of problems, for some of which solutions have been found while others remain to be resolved. The most common problem area relates to the demand for products and the need to adapt the production system to meet a more uncertain situation. In the case of auto plant A this situation has arisen as a result of falling domestic sales and supply from overseas plants, in PCB plant B it is due to the proportion of specialized products sold in small quantities, while in air-conditioner plant D it is due to the seasonality of sales and, again, the supply of its products from overseas plants. Only in refrigerator plant C is demand more predictable, although here there are problems to be resolved as its mix of products increases.

The overall message which comes from the cases is that lean production in its currently defined form is proving to be deficient as a solution to many of the kinds of problem faced by the case companies. What is needed is a more versatile design of production system which allows for changing circum- stances; we can call this “adaptable production”. The rationale behind adaptable production is illustrated in Figures 3 and 4.

Figure 3 shows the relative costs of lean and adaptable production. The variable costs of lean production are low as a consequence of the reduction in resource inputs and the drive for higher process perfor mance from the manufacturing system. However, set against this low level of variable costs must be the high cost of fixed assets, indirect labour and indirect overheads (FCL ). This is caused, among other things, by the need to develop new products constantly and to acquire the facilities to produce them in the most resource- efficient manner. By contrast the variable costs of adaptable production are higher since it may involve more manual work, greater inventories and use of

Sales revenue Total cost of adaptable production

Total cost of lean production

Fixed cost of lean production

Fixed cost of adaptable production

Cost/sales revenue

Break-even point for adaptable production BEPA

Break-even point for lean production BEPL

FCL

FCA

Demand

Figure 3. The relative costs of lean and adaptable production

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less efficient (although more flexible) equipment. Set against this, however, is the lower level of fixed investment (FCA) since equipment will not need to be replaced as frequently and its acquisition cost is likely to be lower since it would be more general purpose in nature.

Looking at the sales revenue line in Figure 3 it can be seen that lean production potentially generates the greater profit at higher levels of demand. However, from the intersection point of the sales revenue line and the total cost lines of the two production system types it can be seen that the break-even point for adaptable production is at a lower level of demand than for lean production. This means that when demand is lower adaptable production becomes the more profitable of the two systems. This point is further emphasized in Figure 4, which shows the cost sensitivity of the two system types. Here a possible distribution pattern of demand is shown (fD), together with the associated cost distributions for lean production (fCL) and adaptable production (fCA).

For a range of demand from A to B the cost distribution for lean production is relatively insensitive with a range from A1 to B1 while that for adaptable production is more sensitive with a range from A2 to B2. Thus when demand is lower adaptable production is more versatile and has the capability of carrying lower costs and being more profitable. This occurs at any demand below C. In fact in this example the demand can reduce to B and adaptable production would still remain profitable (being above the breakeven point BEPA) while lean production would incur losses (since demand B is below BEPL ).

Of course if higher and more predictable levels of demand can be guaranteed then lean production will still be more profitable but its cost advantage may not be as great as Figure 4 would at first seem to indicate. This is because kaizen activities can be applied to both systems, and economy of scale benefits would also be achieved in adaptable as well as lean production. Hence the cost lines will probably be non-linear as shown in Figure 5.

B C A

Cost

FCLFCA

fCL B 1

B 2

A 1

A 2

FCA

BEPA

BEPL

Adaptable production

Lean production

Demand fD

Figure 4. The cost sensitivity of

lean and adaptable production

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The characteristics of adaptable production The position of adaptable production on Figure 3 might suggest that it is equivalent to the batch or job production systems as identified earlier by Bennett[5] or the project, jobbing and batch types of process identified by others such as Hill and Slack et al.[6,7]. However, it is not simply one of the alter native systems or processes in the traditional sense; rather it is a production concept based on gathering together the technologies and methodologies which are compatible with the objective of adaptability rather than resource and process efficiency. Adaptable production is not the same as “agile manufacturing”[8], which is still based on the idea of frequently changing products and making investments in equipment to facilitate the production system’s agility. However, there may still be some common features between these two concepts. From a synthesis of the key points drawn from the case studies described earlier some of the features of adaptable production would be as follows:

Production costs are more sensitive to changes in demand As mentioned earlier this is an essential feature which enables adaptable production to remain profitable over a wider range of demand situations than lean production.

Systems enable production rate to be adjusted to accommodate changes in demand Adaptable production will have lower fixed costs and higher variable costs than lean production. Adjusting the amount of direct labour and materials is the usual means of varying production cost but adaptable production will also have equipment with the ability to be “volume flexible”.

Demand

Lean production

Adaptable production

Cost difference at high level of demand

Cost difference at low level of demand

Cost

Figure 5. The effect of non-linear costs

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System software can support changes in production rate and product mix Software systems for lean production are often designed to support constant production rates and a stable product mix. Software for adaptable production will need to exhibit flexibility capabilities commensurate with the range of quantities, products and variances which are likely to occur in the future.

Lower fixed costs on new product development activities and the acquisition of new production facilities Less frequent changes to products will require fewer new product development projects and fewer equipment replacements.

Use of human operators as a flexible resource Flexible machines are expensive and lead to high fixed costs, thereby reducing the adaptability of the whole system. Use of manual operations can make production systems both flexible and adaptable

Prevalence of mechanisms to support manual work An argument against manual work is that it may result in lower productivity and quality than using automated equipment. However, intelligent use of mechanisms to support manual work can often raise productivity to a level close to that of automated systems while appropriately designed tools, fixtures and poka yoke (or foolproof) techniques can enable high quality levels to be achieved.

Production systems support job enlargement and job rotation The Machine that Changed the World is particularly critical of methods of work organization which the authors call “neocraftmanship” where long cycle times provided greater job enlargement. They argue that such forms of work organization can never reach the productivity levels of lean production. However, this fails to recognize the possibility of using alternative forms of work organiza- tion as a means of changing the rules of competition[9]. The idea of a new produc- tion concept has been proposed which links the “modern sociotechnology” form of work organization with lean production to create “lean sociotechnology”[10].

Use of technological solutions to increase the variety of upstream products and flexibility of upstream processes To date, most of the emphasis on achieving flexibility in production systems design has been on downstream processing and assembly operations[11]. Adaptable production requires that equal emphasis is placed on developing the flexibility of “front end” products and “enabling” processes such as planning and programming of production.

Grouping of parts and products into families to reduce work-in-process variety and shorten set-up times Group technology is a powerful tool for allowing small numbers of parts to be manufactured economically. However, in recent years its basic philosophy has

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tended to be forgotten as the focus of attention has moved to production technologies such as flexible manufacturing systems (FMS). Adaptable pro- duction will recognize the underlying principles of group technology in its design.

Modularization of product designs to enable efficient production of greater product mixes High product variety can be achieved without necessarily embarking on completely new designs. Standardized modules of established and reliable design can be incorporated into new products, thereby allowing greater mixing of products within an uncertain demand environment.

Planned mixing of different product complexities to smooth production load Mix production can allow a variety of products to be manufactured without large inventories. However, to minimize system losses during manufacture the sequence of products needs to be carefully planned. In adaptable production the changes in mix require the sequence to be re-planned quickly to avoid inefficient operation. To ensure the best result a new sequence can be tested using simulation before being implemented in practice.

Extensive use of kaizen activities and methodologies such as TQM and TPM The benefits of lean production are often achieved not by the underlying system but by the associated improvement techniques and methodologies. However, improvement techniques are not exclusive to lean production. They are equally applicable to adaptable production and should be rigorously applied to ensure that it remains competitive.

Conclusions Lean production has undoubtedly proved to be a competitive and effective method of manufacture within the context of the Japanese “bubble” economy. However, the more recent recession, coupled with the threat from imports, has cast doubt on whether lean production will be the most appropriate system, given the changes that have occurred in more recent years.

A particular weakness of lean production is its inability to accommodate the variations or reductions in demand for finished products which have occurred in many Japanese companies. Only small changes in demand will often take production to below the break-even point. Therefore the new economic and competitive situation which is emerging calls for systems of production which can manufacture goods profitably across a range of levels of demand.

Adaptable production offers such an alternative by embracing features which enable it to operate with lower fixed costs and thereby benefit from a higher variable cost element. The additional features of adaptable production help to improve its ability to produce a mix of products and number of varieties efficiently while still remaining competitive as well as strategically viable.

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References 1. Womack, J.P., Jones, D.T. and Roos, D., The Machine that Changed the World, Rawson

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