Why the Standard Analysis of Japanese Manufacturing is Incomplete

Table of Contents: Select a Link to be Taken to That Section

Executive Summary

What was missed when people went to try to figure out what the Japanese had done with quality?
What role did unionization play in the Japanese success story, and why was it de-emphasized?

Introduction

An entire cottage industry was built around taking manufacturing concepts perfected by the Japanese and applying them to the US. It is effortless to find these books on Amazon by searching for “Lean,” or “Kaizen,” or “Toyota.” The central concept behind these books and the philosophy is that the difference between the quality levels of Japanese manufacturing products and US manufactured goods can be reduced to the methods used by Japanese companies versus US companies. George Plossl presented this viewpoint in Production and Inventory Control 2nd Edition:

“Production growth slowed to a stop in the late 1970’s. Also during this period many U.S. manufacturers lost their dominant position in their domestic markets as well as internationally. The list of products for which foreign suppliers, principally the Japanese, set the pace was staggering — from automobiles through wristwatches, with almost every letter of the alphabet in between represented at least once. Many irrelevant reasons were advanced for this situation, including lower wages, cultural differences, cartels, cooperative unions, paternalistic governments and trade restrictions but professionals in production and inventory control knew better. We had certainly developed our ability to plan better and we could replan at blinding speeds. But we failed to execute the plans as well as competitors did.” – George Plossl

(I should say, I am a huge fan of George Plossl and consider his books in inventory management and production planning some of the best, but he is mistaken with the assertion above. Yet, we were aware of the mistaken consulting advice offered and based on the Japanese manufacturing concepts, as is described in this post.

This quote could have been more accurate if it stated that those whose knowledge was limited to production scheduling thought everything boiled down to planning. This quote and many others leave out the fact that there were many differences between the US and Japan, and just a few that come to mind are listed below.

Differences in the Type and Sophistication of Software Implemented by Japanese Versus US Companies
The Culture of the Two Countries
The Preference Given to Sales, Marketing and Finance Versus Engineering and Manufacturing
That the Japanese Implemented Quality Management Primarily as Independent Companies
The Unionization Levels in Japan Versus the US

Broader Analysis

Interestingly none of these topics is analyzed when discussing Japanese manufacturing excellence. The abilities of the Japanese in manufacturing are undoubtedly correct. In fact, in automobiles, the Japanese defeat all the German manufacturers in quality very easily (actually presently, the German auto manufacturers are roughly equivalent in quality to the US manufacturers.) The Japanese attain higher quality than the German, and they do so at lower cost levels.

#1.) US Manufacturing Software Implementation Versus Japanese

The US has the best and largest software industry globally (although increasingly amounts of technical work are performed in India). Secondly, the US leads the world in software implementation, implementing more software, more expensive software, and more sophisticated software than any other country. On a per-person basis, the enterprise software spend is larger than in any other country. An interesting question is how the Japanese can surpass the US in manufacturing, with a much lower spend on systems than the US on a per-company basis.

#2.) Japanese Culture Versus US Culture

Japan is not the US and vice versa. The Japanese have greater attention to detail built into their culture than does the US. This is historically proven because the Japanese were known for luxury goods during the colonial periods, including very finely woven tapestries, silk, and clothing. Many Japanese stories are centered around protagonists who spend enormous effort on getting to a state of perfection. When Deming first taught in Japan, what is left out is that the US industry had largely rejected Deming up until that point and only accepted him after his verified successes overseas. When he was consulting and taught in Japan, his ideas were accepted very readily. But, the question of why they were received so readily is left out of the story. The answer, The most plausible explanation is that the Japanese had a pre-existing quality culture and that Deming’s statistical quality techniques were adopted so widely and quickly because they fit with Japan’s authentic cultural traditions.

#3.) The Preference Given to Sales, Marketing and Finance Versus Engineering and Manufacturing

It is no secret that sales, marketing, and finance are much more esteemed and compensated than engineering and manufacturing in the US. During the financial bubble, many pundits thought that the US could get completely out of the business of making things and sell financial “products” to other countries. We see how that worked out. The US neither esteems manufacturing or engineering nor pays competitive rates or accords status to these fields. Japan does, and that should be considered in the evaluation of the performance of our manufacturing operations.

#4.) Did Japanese Companies Implement Quality Management Independently?

This assumption is incorrect. It was not that individual companies individually focused on statistical quality control and adopted the work of Walter A. Shewhart and W. Edward Deming, but it was part of a policy promoted by the Japanese government. Does anyone know this? Companies initially brought in W. Edward Deming and others like him because the Japanese have an industrial policy. (the US has an industrial policy, but it is unlike the Japanese, who focus on manufacturing as a critical industry. Most of the US industrial policy is directed towards the public funding of R&D through the Pentagon system, and of course, in bailing out the financial sector). Most Americans think the US is some free market. Yet, the fact is that quality management was pushed first by Japan’s Ministry of International Trade and Industry.

#5.) Unionization in Japan Versus the US

Japan has a higher percentage of its population as part of a union than the US. Unions tend to be quite prevalent in manufacturing companies. Could the higher union participation in Japan be part of the reason for the quality difference? I am not even allowed to write this statement on a blog. Unions are “bad” in the US, and there is no contrary view allowed within US companies. Therefore the investigation of this question is just impossible in such a doctrinally controlled country like the US. The questioning as the optimality of any part of our system is not tolerated (individual tactical changes may be recommended). The rule is straightforward, companies have a right to form co-operatives in the form of corporations, but employees have no right to form co-operatives.

#6.) Do the Japanese Automotive Companies Have an Advantage in Forecasting?

I came across the following quotation in the book “The Fortune Sellers,” which describes how Japanese manufacturers tend to forecast. This book primarily focuses on how forecasts are oversold in many areas (economics, finance, weather, etc..) versus their actual demonstrated ability to predict the future.

Japanese auto manufacturers’ strategy is to ignore economic forecasts. Stephen Sharf, a columnist specializing in the auto industry, noted that orders to parts suppliers from Japanese auto manufacturers tended to vary by only 2 percent from original forecasts, which he believes has contributed to their success in producing high-quality cars and high profit margins. In contrast, orders from U.S. auto manufacturers are “all over the map,” because they listen to vacillating economic forecasts, and the “result of listening to these seers… is a chaotic condition that continues throughout the year.”

I did find this quote below from Toyota Supply Chain Management:

For Toyota suppliers, the forecast is fairly consistent from week to week….the strategy at Toyota is to smooth the production schedule.

Smoothing production, or keeping the production stable from week to week, is an often described benefit of Japanese manufacturing. Interestingly I also found this quote in the Great Soviet Encyclopedia:

Smooth flow of Socialist production, an important principle for organizing the production process, which presupposes that all the production units of an enterprise or association will systematically fulfill the quotas of the state plan.

However, you can’t make any money consulting in Soviet manufacturing strategies, so of course, smoothing the production schedule must be attributed in popular writing to the Japanese. The fact that the Soviets applied to smooth decades before the Japanese is of no consequence to the many authors of Japanese manufacturing books.

Edward Deming

W. Edward Deming, with a PhD. in Statistics, is presented as a person who brought narrow manufacturing techniques to companies. That is not true. When Ford hired Deming to replicate his success with Japanese manufacturers, Deming immediately questioned Ford’s culture.

“To Ford’s surprise, Deming talked not about quality but about management. He told Ford that management actions were responsible for 85% of all the problems in developing better cars.” – Wikipedia

Management incompetence or changes to management’s structure are not part of the narrative of Japanese success, so it should be no surprise that this is not an area of focus when people and consultants discuss Deming. Deming said some other things about management that probably did not make him very popular:

“Management must be judged not only by the quarterly dividend, but by innovative plans to say in business, protect investment, ensure future dividends and provide more jobs through improved products and services.” – Wikipedia

Well, companies are not going to want to talk up this aspect of Deming’s views. Deming opposed many philosophies and attributes of quality management that would be surprising to people, including the Malcolm Baldridge Award and ISO 9000 certification. Deming also opposed performance reviews:

“He argued that they lead to short-term solutions and under-performance. Inevitably, appraisal has to be based on measurable outcomes and often these provide a misleading view of what is important in the process. He did not believe that the quality of an employee’s contribution could be reduced to measurable results. He also believed that, rather than improving performance, appraisal often has the opposite effect, with staff concentrating on what was important for gaining a good performance rating rather than developing a pride in their work. He believed that performance appraisal had the effect of putting staff in competition with each other rather than welding them into teams.” – Total Quality Management in Education

I happen to agree with all of Deming’s statements above. As an independent consultant, I have been finally able to escape the waste of time and control mechanism called the performance evaluation. Not having performance reviews is one of the main bedrock assumptions of Deming’s approach to quality management. But consulting firms that work in class do not focus on this adjustment. The vast majority of companies still have extensive performance reviews. This is relatively easy to understand; companies prefer control over the improved performance or improved product quality.

Go to top

Conclusion

The presumption that Japanese manufacturing’s distinct advantage is due to specific methods used in manufacturing misses out on many other critical components. Secondly, the Japanese follow some manufacturing approaches, ranging from keeping very little inventory to employing kaizen (improvement) teams to statistical process control. No one can say which one of these methods is the key to Japanese manufacturing quality. These methods have been adopted willy-nilly by US companies for decades. Several tried, such as JIT, have performed very poorly, so badly that they needed to be renamed “Lean” to allow that the constant flow of consulting dollars not be reduced by the lack of effectiveness of the methods preached. Secondly, these methods’ promoters attempt to ignore all cultural, economic, public policy, and company incentives differences between Japanese firms and US firms. This, of course, controls their “solutions.” Many alternative solutions are equally possible. For instance, US companies could elevate engineering and manufacturing to the same level or even superior to finance, sales, and marketing. This would undoubtedly have a positive effect on quality. No one seems interested in it. Japanese executives also make a lot less money and US executives.

The average Japanese executive makes 1/10th what a US executive takes home in compensation.
Japanese manufacturing companies also provide much more stable employment for manufacturing workers.

As noted, there are many features of how production is practiced in Japan. A big part of the system is that the shop floor workers take the initiative to make continual adjustments. Therefore the motivation level of the shop floor workers is a critical component of the overall process.

Could shop floor motivation have something to do with the persistent quality differences between the US and Japan? No one seems interested in finding out. If it was determined to be accurate, would we be willing to adjust downward the pay levels of US executives to Japanese levels or provide more steady employment? The question requires no answer.

How Commerce Undermines History

Many of these books written about Japanese manufacturing prowess have more to do with consultants trying to get paid than any adherence to a thorough and comprehensive analysis on the topic. I am disappointed in the lack of scholarship that has been applied by people who have written books and those I have heard the lecture in this area. Secondly, even the teachings of W. Edward Deming have been cherry-picked to present an approach that degrades what W. Edward Deming had to say. And significantly reduces the success ratio of this method (have you ever tried to make a recipe while leaving 1/2 the ingredients out?). It certainly has worked. We have several generations of people who think that the traditionally offered explanations, which can be sold in bite-size consulting projects, are the main area to focus on. The broader policy difference between Japan and the US and their implications are unseen and unobserved. A particular narrative has been developed, and it is impervious to explanations that may better explain Japanese manufacturing excellence but aren’t considered pertinent because they break with the narrative.

Secondly, even the teachings of W. Edward Deming have been cherry-picked to present an approach that degrades what W. Edward Deming had to say. And significantly reduces the success ratio of this method (have you ever tried to make a recipe while leaving 1/2 the ingredients out?). It certainly has worked. We have several generations of people who think that the traditionally offered explanations, which can be sold in bite-size consulting projects, are the main area to focus on. The broader policy difference between Japan and the US and their implications are unseen and unobserved.

There is, of course, a particular narrative that has been developed, and it is impervious to explanations that may better explain Japanese manufacturing excellence but aren’t considered pertinent because they break with the narrative.

References

https://en.wikipedia.org/wiki/Quality_management

“The Fortune Sellers,” William A. Sheriden, John Wiley & Sons, 1998

“Toyota Supply Chain Management,” Roy Vasher, McGraw-Hill, 2009

“The Great Soviet Encyclopedia,” Aleksandr Mikhaĭlovich Prokhorov, MacMillan, 1982

https://en.wikipedia.org/wiki/Great_Soviet_Encyclopedia

“Total Quality Management in Education 3rd Edition,” Edward Sallis, Stylus Publishing, 2002