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Wheelright, S. C. 1981. Japan - Where operations really are strategic. Harvard Business Review (July-August): 67-74.

Summary by Linda Perez
Master of Accountancy Program
University of South Florida, Fall 2000

Japanese Management Main Page | JIT Main Page

Main point of the article: The discipline and dedication of Japanese manufacturers prove the value of strategic operations policy.

In the 1970’s, Motorola’s TV assembly plant suffered from low productivity and low quality – more than 150 defects per 100 sets. Within three years after the purchase by Matsushita, the plant, which made Quasar television sets, increased its productivity by 30% and reduced its defects to fewer than 4 per 100 sets. Although defect rates averaged 0.5% or less in Japan, this one example proved that the expertise of the Japanese could be transferred to the U.S.

Some GE executives visited three Japanese companies: Tokyo Sanyo Electric, Toshiba Tsurumi Works, and Yorkogawa Electric Works with the opinion that the secret to the Japanese manufacturing success was attributed to their cultural ideals, government policies, and structural relationships within industries. At the end of their visit, the GE executives changed their opinions to mirror what the Japanese believed, which was that they learned both to think about manufacturing operations in an effective way and, in disciplined fashion, to put that thinking into practice. One GE executive commented, "We have known all along how to do these things, but we have lacked the discipline to follow through." "The fact of the matter," admitted another, "the Japanese don’t work harder. They just work more consistently, and they work together."

The result of the Japanese manufacturing success was due to truly impressive discipline and consistency.

Operations vs. strategy: Manufacturing decision categories for strategic considerations
Japanese companies
strategic operations policy view
U.S. companies
traditional view
Strategic

Capacity

Facilities

Vertical integration

Production processes

Work force

Quality

Production planning and control

Capacity

Facilities

Vertical integration

Production processes

Operational Implementation and execution of supporting operating tactics

Work force

Quality

Production planning and control

Implementation and execution of supporting operating tactics

The traditional view of the U.S. has drawbacks in treating the first four decision categories as strictly long-term strategies which promote a narrow understanding of manufacturing strategy and limitations in the analytic techniques (such as ROI and internal rate of return) often used in most capital budgeting systems. Also, treating the last four decision categories as purely operational has its negative side effects in which often an immediate objective is satisfied but "swing factors" are produced, i.e., meeting shipping targets by delivering a lower quality product, or order a sudden, drastic reduction in inventory levels or production workers, or in both, to meet end-of-period guidelines by senior management.

In Japan, the integrity of the production systems and strategic purpose comes first, but they also realize that decisions at the level of operations can, if handled in a wise and consistent manner, have a useful cumulative effect at the level of strategy.

Operations policy in Japan, an example by Tokyo Sanyo Electric:

Paying attention to detail.
Standardize parts and components in marketing and engineering.
Increase the frequency of vendor deliveries to one to four times a day instead of one to four times a month.
Develop a mixed-model assembly line for low-volume models.
Reduce setup and changeover times through equipment and procedure modifications.
Make lot sizes small and model runs frequent (daily or every other day).
Reduce warehouse space needs.
Promote discipline and commitment to the policy throughout all operations and over time.

Within five years, Tokyo Sanyo Electric had the following results:

Measurement 1975 1980
Warehouse space 80,000 sq ft 20,000 sq ft
Inventory level 10 days 1.5 days
Lot sizes 2-3 days 1 day
Production quantities 100 index units 300 index units
Production models 120 350

Quality circles were utilized in Japan to:

Promote savings from employees’ suggestions.
I.D. problems in meeting schedules, parts corrosion, and communication.
Set targets for increasing attendance, reduce accidents, increase cross-training, ensure communication.
Define steps to be taken regarding coordinating schedules of days off, track individual operations, and review safety measures and training daily.

Regarding perspectives on the relationship between cost and quality, each country’s management believed the following:

Considerations American manager Japanese manager
Cost & Quality Choices had to be made to reduce cost by reducing quality (180 degrees apart) = trade-offs. Unnecessary choices between cost and quality were not forced but approaches to quality improvement (as a means) were identified to reduce overall costs (as an end).
Flexibility & Dependability Choices were made between these (180 degrees apart). These were considered very important and were continuously improved upon.
Short-term vs. long-term Operational tactics were treated as objectives for specialized parts of the organization, to be achieved at any cost. Provided limited, immediate goals at the expense of the long-term objectives. This view constantly acknowledged a link, not a conflict, between S/T and L/T purposes.
Job definitions This view made job definitions narrow, explicit, and geared to one or two summary measures of performance. This view provided a broad definition of job-related responsibilities, including: production output, cost of output, care of equipment, product quality

The result of combining these considerations described the "strategic operations policy" of the Japanese management. In addition, other criteria were considered such as:

Remove the causes of problems, not just solve them.
Measure group performance levels.
Have the patience and consistency of direction that allows planning to take place.
Set goals in operating performance and stick to established directions for incremental operating improvements.

Can it work here? It already has.

Company Product Application of strategic operations policy Result
Signetics Semiconductors Signetics rejected all incoming material from suppliers if they did not meet specifications. Signetics achieved the desired order amount, improved its sales and market position.
Hewlett-Packard Computers Instead of balancing setup costs with inventory carrying costs, they reduced both. W/in 6 months, resulted in setup time reductions of close to 90%, lower inventories, and improved cycle time.

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