Business Management Articles
/ Manufacturing Management


by Rene T. Domingo (email comments to

In spite of Japan's unquestionable economic strength, the Japanese people seem to throb with vitality as if they were still reconstructing a country just devastated by war, as if there were no tomorrow. What could explain this crisis mentality amidst the prosperity of the 1980s? Is this a Japanese secret formula or a lingering uncertainty after the trauma of World War Two?

In the business world, Japanese companies have incorporated crisis mentality into crisis management. The Toyota group has formalised crisis management into a total management philosophy which encompasses marketing, finance, human resource development and business policy - complete with maxims, pamphlets and mentors. The system was named “kanban” production system after a message board used on the shopfloor to control production flow, but it has also been referred to elsewhere as the "just-in-time" system or JIT.

The JIT system, though pioneered by Toyota, distinctly reflects the Japanese national character. Some Japanese companies outside the Toyota group have adopted the system and many more have long since operated with some of its salient features and principles. Although the system requires an almost military discipline, the Japanese worker is culturally equipped to adapt to it. Japanese and Western writers have, in fact, referred to the JIT system as the Japanese production system.

The fundamental concept of the JIT system is to indefinitely simulate a crisis so that managers and workers are always on their toes, ready to do their best, with or without any real crisis. Managers are trained to imagine the worst possible scenarios; plummeting sales, raw material supply cuts, walkouts and strikes, fires and accidents. The message is clear: "Do your best today to avoid disaster tomorrow."

Production workers, however, are slow to appreciate any of the macro-level "crisis" which threaten Japanese businesses today, such as cut-throat competition, import barriers, depreciation of the yen and imminent obsolescence of much present technology. The managers, therefore, induce an artificial crisis at the shopfloor level which can be felt by the rank-and-file. This crisis may or may not be related to any real threat.

The tension generated by the simulated crisis, however, is a positive tension and seldom results in any counterproductive fear or undue anxiety among workers. They become accustomed to using their survival instinct on a daily basis, and this makes every working day a challenge, a victory to achieve rather than merely a boring expanse of time. Toyota, the richest Japanese manufacturing company in terms of sales, profit and cash, may be one of the least vulnerable companies to the threats in the economic environment. Yet, Toyota continues to rely on crisis simulation in its management, and has substantially reduced working capital requirements and amassed tremendous cash reserves as a result.

Toyota's managers use a simple yet harsh method of inducing a crisis at the shopfloor level. They deliberately reduce all inventory, the lifeblood of any manufacturing concern, to a minimum. They cut down stock-piles of everything from raw materials to finished goods, including nuts and bolts, paper clips, pistons, crates and even finished Corollas.

In theory, inventory should be reduced down to the one-piece level. Each work station would process only one piece at a time and would thus only need one piece from the previous station. This would result in a synchronised one-piece flow of goods from the raw materials receiving station to the finished goods packing department. The JIT or small billboard is sent from one station to the preceding one to claim another piece.

In reality, however, Toyota does not reduce inventory so much as it designs systems from the very start to operate on very low levels of inventory. This does not mean that Toyota cannot afford to stock-pile inventory, but that it prefers to invest in the workers' ability, flexibility and a sense of responsibility.

Though most workers still do not work on one piece at a time, working with very low inventory levels exerts tremendous pressure on them and drastically changes their working methods, habits and attitudes. This works in the same way that being lost in a strange town with little cash makes you very resourceful with your money. The lesson is clear: a vital resource pared down to a certain minimum, whether deliberate, accidental or natural, induced one to use that resource very wisely. The important point is not so much what happens to the resource, but what happens to the attitudes, outlook and level of alertness of the user.

In the JIT system, the vital resource is inventory and the user, though not the owner, is the worker. The JIT system stimulates the desired crisis mentality in the worker because failure to produce a piece for any reason stops subsequent operations. Without any buffer stock, this stoppage will be instantaneous and will affect the entire production line.

In practice, however, the factory does not close down simply because a worker breaks a piston or a machine overheats. This is not so much because Toyota actually keeps some buffer stocks, but because all workers are trained to come to the rescue of a work station in trouble and to return the situation to normal as quickly as possible.

Each worker must press a signal button to alert others to any abnormal situation which might lead to work stoppage. This button ensures that everyone in the factory gets the message, activating giant light panels hanging from the ceiling as well as noisy buzzers. There are distinct lights and signals for different problems: red lights for a machine breakdown or a defective part from the previous station, yellow light for a time-out required to set up a machine or machine tool, and a white light for no part received from the previous station.

As each worker wants to avoid catching the attention of the whole workforce or annoying others by a production stop, he or she learns to develop a sense of responsibility for work usually only found in skilled craftsmen and high calibre managers. The beauty of the JIT system is in that it makes the worker realise, in practice as well as in theory, that he or she is a critical link in production.

The substantial savings and cost reduction due to low inventory requirements are just bonus side-effects of the JIT system. The original goal is high morale and worker productivity. The ultimate goal is still profits, but the Japanese companies hope to reach their profit targets by perfecting their workers.

The workers also ensure that defects are reduced to an absolute minimum, because the absence of buffer stocks prevents them from hiding any defects. In spite of the pressure to finish one piece just in time to feed the next station, the workers are not tempted to pass on a defective product just to follow the cadence because they know that this will cause more chaos down the line and solicit immediate reprimands from the receiving station. A zero defect rate is not merely a target set by the managers, but is a condition implied and even required by the logic of the JIT system.

The workers develop the ability to control the equipment as well as their own work. They do not go home until their machinery is repaired, so that they will not cause any inconvenience to co-workers the next day. Again the inherent logic of the JIT naturally makes the workers experts in preventive maintenance - a feat which no amount of seminars or pleas from the factory head can accomplish. One worker even painted on his machine: "I will guard this machine with my life."

The workers also learn to reduce set-up and changeover times which can cause machine downtime and line stoppage. By minimising changeover times, Toyota realised that multiple product brands and models could be processed on the same day without significant delays. This makes the company more flexible to cope with the changes in consumers tastes and preferences, and provides a hedge against product obsolescence and dead stocks.

JIT also simply reduces working capital requirements for inventory and hence also for interest payments. Toyota has eliminated the need for warehouse space. Suppliers regularly unload raw materials or parts in small lots while trucks pick up finished goods direct from the packing station for delivery to dealers.

One of the basic principles of the system is to make problems visible so that they may attract attention and prompt early and speedy solution. Lowering inventory levels "high-lights" inefficiencies in the factory: defective parts, sleepy workers, unreliable machines, poor working methods, excess equipment capacity and dead or obsolete stocks.

The JIT system applies a Japanese adage to the business world: "In times of peace and prosperity, think always of the threats and hardships of war." The Japanese have simply adapted their formula for survival into a formula for success. To them, doing one's best is a matter of honour, regardless or whether it is demanded by the situation. They are not irrational pessimists, always anxious about impending disaster. They are pragmatic, like a karate expert who trains under the worst conditions in order to guarantee victory. The JIT system is no more than one expression, in the business world, of this national attitude.


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