MIT Sloan Management Review

Management of Technology and Innovation, Operations Management and Research

 

Manufacturing Innovation: Lessons from the Japanese Auto Industry

By Michael A. Cusumano

October 15, 1988

THE FACT THAT JAPANESE MANUFACTURERS made tremendous inroads on the global automobile market during the 1970s will surprise nobody. What may surprise many is that Toyota’s productivity rates exceeded U.S. manufacturers’ as long ago as the 1960s. Business historian Michael A. Cusumano details the spectacular developments in Japanese productivity, quality, and process flexibility that have occurred over the past thirty years. His findings complement those of John F. Krafcik, whose companion piece, “Triumph of the Lean Production System,” appears elsewhere in this issue. Ed.

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SEVERAL STUDIES published in the 1980s indicated that Japanese firms, led by Toyota, have achieved the highest levels of manufacturing efficiency in the world automobile industry. Physical productivity, which reflects the “throughput” speed for completing products and the amount of labor required, has been significantly higher than in most U.S. plants (although differences vary by company and U.S. firms have made improvements in recent years).1 Japanese auto producers have also demonstrated rates of inventory turnover (sales divided by work-in-process and finished goods, or the cost of goods sold divided by work-in-process) several times those of U.S. firms.2 (Inventory turnover is a useful measure of efficiency, since it reflects how well firms manufacture to meet market needs rather than production schedules. It also reflects how effectively they reduce the number of parts and semifinished goods; these add to operating costs and often cover up inefficient practices or process errors.)

High productivity and other aspects of process efficiency, such as rapid inventory turnover, help solve a problem as old as mass production itself: that the conventional factory tends to produce huge lots of standardized components, while consumer markets demand a variety of products at low prices. Looking for the reasons Japanese companies have managed this problem so well, many authors cite the contributions of Japanese workers and Japanese culture. However, the... To read the complete article, login or sign-up using the form below.

 
 

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