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ALFRED
P.
WORKING PAPER
SLOAN SCHOOL OF MANAGEMENT
""SMALL-LOT PRODUCTION: KEY TO HIGH PRODUCTIVITY
AND QUALITY IN JAPANESE AUTO MANUFACTURING^-
Michael A. Cusumano
November 1986
WP//
1841-86
MASSACHUSETTS
INSTITUTE OF TECHNOLOGY
50 MEMORIAL DRIVE
CAMBRIDGE, MASSACHUSETTS 02139
1987
''SMALL-LOT PRODUCTION: KEY TO HIGH PRODUCTIVITY
AND QUALITY IN JAPANESE AUTO MANUFACTURING
Michael A. Cusumano
November 1986
WP# 1841-86
Michael A. Cusumano
Assistant Professor
M.I.T., Sloan School of Management
Cambridge, MA USA 02139
Draft 11/20/86
SMALL- LOT PRODUCTION:
KEY TO HIGH PRODUCTIVITY
AND QUALITY IN JAPANESE AUTO MANUFACTURING
Managers
around
the
frustrated
world,
productivity, cost, and quality achieved by
have often
the levels of
at
Japanese automakers,
complained that what Japanese companies do is unique.
Visitors to Japan often leave convinced that without high-quality
workers
Japanese
their
and
willingness to
cooperate
Japan in,
say,
auto
know
this
is
now
automobile
plants
California
and
special
with
management,
not
necessarily
located
lies
much
performance of
the
case.
Japanese-run
Ohio (Honda),
demonstrated
have
But we
levels
of
quality comparable to what Japanese workers and
the performance
as
the
in Tennessee (Nissan),
managers have achieved in Japan.
key to
including their
manufacturing cannot be duplicated.
(Toyota-GM)
productivity and
culture,
if
not
[^
A major
]
of Japanese
more
in
reason is
that the
firms in auto manufacturing
their
approach
to production
management as any peculiar characteristics of Japanese workers in
Japan.
Compared to
have
been
at
the Japanese,
a
disadvantage
U.S.
and
due
to
European companies may
the
absence
of
clear
policies,
industrial
blue-collar employees,
But,
historically,
European automakers who
and
U.S.
in the work
well --
until auto
producers in
standards of productivity, general manufacturing
new
set
ethnic homogeneity
and less
founded the industry performed
Japan
programs, too
between management and labor, poorly educated
much confrontation
force.
quality-control
inadequate
product
efficiency, and
quality
low
at
The Japanese
cost.
accomplished this primarily by modifying, beginning in the 1930s,
American
European
and
equipment,
techniques,
assumptions about production management .[
^
and traditional
]
For non-Japanese managers in autos and other industries such
as electronics,
the challenge of the past decade has been to stop
But
falling behind.
set
requires
an
companies
got
important
to
to
learning to
analysis
where
determine
remarkably
disorganized,
of
match the standards Japan has
precisely
they
are.
how
they
inefficient
In
how
leading Japanese
particular, it seems
transformed
plants
U.S.
the
dirty,
Occupation
observers saw in the late 1940s and early 1950s, into perhaps the
most
superbly
the world.
['
conceived
]
Mt.T.u-:-'"
MAR 1 9
-a
1987
ReCHfVED
and run manufacturing organizations in
s
THE USUAL EXPLANATIONS
automakers
evolved
explanations
common
There are several
and
came
to
dominate
the world industry.
Since car mass production began in the U.S., it is
that
Japanese
firms
details and
the
best
American thinking
And then the Japanese, or so the story
of experience.
usually goes, did more:
often assumed
or imported American manufacturing
copied
equipment and techniques reflecting
and years
how Japan'
to
as
They
achieved better
paid greater
attention to factory
implementation --
aided by factors
like ethnic homogeneity, better educated employees,
and "harmony"
between managers and workers, combined with now-famous techniques
that supposedly grew out
conditions:
of
culture
Japanese
and geographical
near-fanatical attention to cleanliness and quality,
group cooperation
as
seen
in
quality
circles,
"just-in-time"
production using "kanban" cards to control manually and precisely
the process flow and parts deliveries.
Nor is this scenario the only
productivity and
low costs.
Japan's high
Another is the large investments in
plant and equipment, which appear
edge in capital.
explanation for
to
give
Japanese
workers an
Yet another is huge economies of scale achieved
in the domestic market during the 1970s, which
may have
made it
possible for Japanese automakers to match international standards
of productivity and costs and then
the U.S.
and Europe.
begin large-scale
exports to
::
WHAT HISTORICAL ANALYSIS REVEALS
Studying
historical
the
evolution
of
the
Japanese automakers, Nissan and Toyota, as well as
numbers,
leading
two
some relevant
that the explanations outlined above need some
suggests
clarifications and corrections.
One
Japanese automakers did not all copy and import American or
and production-management
European equipment
was
temptation
great
manufacturing
and
accounted for
1959.1'*]
and
so,
most
(Nissan,
did, during the 1930s and 1950s.
Mitsubishi, Hino)
assembly
do
to
techniques.
of
European
Isuzu,
In fact,
the
under license
models
of Japanese car production during 1953-
about 30%
But Toyota deliberately avoided
or techniques exactly.
There
Instead,
began an innovation process
copying foreign models
it developed in-house skills and
that led
eventually to
the highest
levels of productivity in the world. [^]
Two
The
Japanese
U.S. procedures
modifications
Led
by Toyota, in
Japan's automakers all made critical changes in
and
of
in automobiles is not, therefore,
"better implementation."
simply a matter of
varying degrees,
success
concepts.
foreign
innovations or
It
was
these
practices
and
assumptions
directly to higher worker output, better quality, and
that led
savings in
areas such as inventory turnover.
High productivity -- surpassing U.S. averages -- was not
Three:
scale derived
due simply to huge economies of
during
market
the
and then Nissan matched or
Toyota
1970s.
from the domestic
surpassed U.S. output levels per worker during the late 1950s and
early
and
1960s,
merely
at
(Exhibits
volume in 1965!
3% to 5% of General Motors'
and 2)
1
Nor can the Japanese performance in
Four:
simply
attributed
Nissan and Toyota
higher
to
matched
levels
capital investment.
of
doubled
then
and
auto manufacturing be
U.S. productivity
levels in the 1950s with less capital per employee.
are difficult
Some statistics
to interpret.
example, workers at Nissan and Toyota had
fixed assets
as their
creating the
impression
productive because
(see Exhibit 3).
property, and
sales
counterparts at
Japanese
that
of investment
Not so.
The
equipment) required
2
GM,
(Exhibit 3)
In 1983,
for
to 2.5
times as many
Ford,
and Chrysler--
workers
were
twice as
levels that were twice as high
amount of
fixed assets (plant,
to produce one vehicle by the
late 1970s and early 1980s was roughly equivalent in Japan and in
(Exhibit 4)
the U.S.
Only
because "throughput" per worker per
year was twice as high in Japan did workers at
show twice
and the
as many fixed assets each.
overall Japanese
Nissan and Toyota
But it was actually labor
production systems,
not capital, that
were twice as productive as their U.S. counterparts.!^]
THE NEED TO PRODUCE IN SMALL LOTS
KEY FACTOR:
to explain Japan's economic performance since
In attempting
debated
have
alike
government
scholars,
the mid-1950s,
contribution
the
cultural harmony, education,
unique
history.
and
emerges from studying the history of
and
talking
to
companies was
small-lot production
growing variety
at the
the need
That
.
But a simple "fact"
the Japanese
automakers to
is,
policy,
factors that seem
production engineers:
Japanese
concern that drove Japanese
than U.S.
industrial
of
or other
"luck,"
society
Japanese
to
and businessmen
officials,
auto industry
The overriding
become more efficient
after World
companies
War
had
II
to
to master
produce a
and trucks at extremely low volumes and
of cars
lowest possible
costs, to
increasingly sophisticated
accommodate
very small but
a
domestic market with
a
growing number
of competing firms. [^]
Attempts by
Industry
failed.
to
(MITI)
First,
abandon
Japan's
to
passenger
to
"rationalize"
of
the
International
auto
industry
after World War II, MITI tried to
MITI wanted to reduce
industry,
Ministry
raise
car
production.
the number
scale
largely
convince firms
Then, during the 1960s,
of producers
economies
Trade and
competing in the
for any one manufacturer.
]
Company executives at nearly
a
dozen firms saw great potential in
industry and repeatedly refused to bow to the wishes of
the auto
government bureaucrats.
[°
At Toyota in particular, this
modifications in
lots inspired
And
aircraft industry.
manufacturing
lots
buffer
and
machine
suppliers in
found
in U.S.
in the military
such as
these improvements,
minimum efficient
assumptions about
and
in small
more than anything
Japanese managers to overturn traditional American
enabled
worker
concepts
and
non-automotive factories
textbooks and
produce
to
equipment or techniques based on
practices
fundamental engineering
else,
"need"
scales,
the
the importance of
inventories,
specialization,
the
value of large
role
of
labor
and
the manufacturing process, as well as the limits to
worker productivity and, ultimately,
to
the
levels
of quality
achievable at a given cost.
production in
Japanese auto
1950 consisted
of 31,597 cars
and trucks -- little more than one days' output for the U.S. auto
industry.
(Exhibit
Nissan, Toyota,
enter the
Isuzu,
field by
Daihatsu, Suzuki,
Four local companies shared the market--
5)
and
half-a-dozen
more would
the early 1960s -- Mitsubishi, Honda, Mazda,
in 1966).
could use American mass-production equipment
and techniques for trucks
these
--and
and Prince (which merged with Nissan
Japanese automakers
produced
Hino
models
made during
in
relatively
World War
large
II,
since they
runs (compared to
with
passenger cars), and
machine
or
few
thousands
stamp
changes.
identical
of
manufacturers did for much higher volumes,
possible to
was
It
components, as U.S.
the excess
and store
It was expensive to pay for equipment in this
for future months.
way, but possible with high
prices
under
protected market
the
that existed
in Japan from 1936 to 1945 and then from 1953 until
the mid-1970s.
['
]
Nissan's history illustrates this
strategy.
the mid-
In
entered into an agreement with Graham-Paige (which
1930s, Nissan
sold out to Dodge before World War II) and bought specialized and
machine tools and stamping presses to produce
expensive American
the U.S.
company's standard-size
American
engineers
operations.
high
came
Nissan then
profit
margins,
Japan
to
for
sold nearly
continued to make the same
truck
and
years
two
all its
Japanese
the
to
A dozen high-salaried
truck.
output,
army
engine,
until
with
and set up
at rather
1945,
and
only minor
changes, until the late 1950s. ['°]
World
After
disappeared.
had to
War
To survive,
Nissan and
transition from
make the
production in 1950) to
other Japanese
however,
II,
to
require
far
more
market
other Japanese automakers
At
Nissan, Toyota, and
1950 and 1970, cars rose from
merely 5% of their output to about 65%.
came
military
trucks and buses (about 95% of
passenger cars.
producers, between
the
But
passenger vehicles
equipment and options, as well as a
8
variety of styles and more frequent model changes,
especially as
the Japanese improved their vehicles incrementally.
Toyota
standard-size
truck
designs.
The
fitted with
a
even
while
standards.
producing
produced
1950
in
and
By the
more
was
very
a
50
standard-size cars and
domestic market. [^^]
truck,
The number
the
1980s,
than
small-scale
preference
models,
still
producer by world
at
low
automaker was
with many (such as
volumes
for the
requirements, not cultural predispositions,
intractable dilemma:
for
on German
models increased
Japanese
largest
different
trucks)
of new
forced Nissan, Toyota, and other Japanese
seemingly
modeled
(Exhibit 5)
Changing market
a
major products -- one
it made were actually the small truck
car body.[^M
Toyota
two
small
one
cars
few
only
mass
producing
automakers to confront
the traditional auto factory's
huge
lots
of
standardized
components; and the Japanese market's demand for a rising variety
of products in small amounts and at falling prices.
The Japanese
government helped by limiting imports to about 1% of the Japanese
market following the postwar U.S. Occupation, although prices for
Japanese-made vehicles
dropped between
early 1970s as the number of
local firms
the early
1950s and the
competing for
the few
domestic customers tripled by the early 1960s. [^M
Prices (and,
presumably, unit costs) in Japan still did not
]
match international
levels for
late
Yet
1960s. [^^l
productivity
beginning
automakers,
1950s,
to
expand
costs
with
car
was
their
Exports
cars until the
incentive
to
increase
desire
of
Japanese
the
first
beyond
sales
market. [^^]
domestic
additional
an
reduce
and
comparable small
the
attempts
limits
in the late
of
the small
increased slowly in importance,
from less than 4% of total production to just over 20% as late as
As quality rose and small cars became more popular in the
1970.
U.S., Japanese exports passed 50% of output in 1977.
A PROBLEM WITH A SOLUTION
But in the
managers were
lean
years
not c[uite
following
World
War
II,
Japanese
sure how to accommodate changing market
needs and potential export requirements of low-cost, high-quality
vehicles.
U.S.
engineers
and
their equipment and influenced
companies had designed much of
many of
their experiences.
Not
surprisingly, many Japanese managers, especially at Nissan, first
believed that the best way to compete in automobile manufacturing
was to copy as closely as possible the systems perfected at Ford,
GM,
and other mass producers .[
The
U.S.
concepts that
levels
of
"paradigm"
assumed the
worker
and
^
^
involved
a
set
following were
equipment
10
of
techniques
most efficient:
specialization;
and
high
extensive
]
automation;
large manufacturing
set-up times;
keep
production runs on huge machines requiring long
long
active, making as many parts or assemblies as
period
a
set
delivering components according
manufacturing and
This involved
possible in
the "push" concept of production control.
and
time;
of
buffer stocks to
machines and specialized workers constantly
expensive
the
scales with
to a master schedule, which was also designed to keep most of the
machines running and components
might develop at
despite problems that
coming in
few stations or suppliers.
a
required
components made in huge lots
many
too
statistical sampling
companies adopted
To inspect all the
techniques to test
met an
parts and determine if an entire lot
inspectors,
a
so
few
"acceptable quality
level," even though this meant some defectives would pass through
the system at every stage.
as much
in house
[
In
acceptable
contrast,
their small
by
gradually
it
price,
of
but
competitive
automakers
Toyota's
after
quality, and
clear
World
Ohno
11
were
to
Japanese
necessary in
practices to meet the needs of
domestic
were common
Taiichi
became
modifications
some
and manufacturing
lots far smaller than
Led
and assembly as
'
equipment
Japanese
levels
to bring
^
production managers that
U.S.
also tried
components production
of the
possible, to insure
supply.
automakers
U.S.
War
II
in the
(bn.
Not
market.
only did
have to manufacture in
U.S.
1912),
or
even Europe.
Japanese managers
.
realized that the best way to do this required an increase in the
utilization of traditional components in their
"flexibility" and
manufacturing systems -- equipment, workers, and suppliers.
also sought
to lower,
as much as possible,
They
"fixed" costs for in-
house personnel, factory or warehousing space,
and equipment, as
variable costs, such as for in-process or finished-goods
well as
inventories
Individual
with varying
Japanese
automakers
degrees of
this strategy
success and in different years, yet all
pursued three basic policies:
One,
beginning in
the late 1940s
and in the mid-1950s at Nissan, was the "just-in-time"
at Toyota
concept for in-house production
components.
This itself
or
(techniques
assembly
recpaired several
faster setup times
practices:
presses
implemented
first
American
for
departures from U.S.
machine
written
deliveries of
and
tools
about
in
and stamping
the
U.S.
and
incorporated
in
presses),
each piece of equipment could be used for different
models
or
so
components
equipment
without
long
such
as
waiting
Danley
stamping
tighter
times;
synchronization between subassembly production, parts deliveries,
and final assembly, to increase equipment
in-process inventories;
or
models
on
single
utilization and reduce
mixed scheduling of different components
machines
or
assembly
lines,
to
avoid
specialized but under-utilized equipment and workers; and broader
job specifications,
so managers
could maintain
the just-in-time
pace by shifting workers to different jobs as needed at any given
12
]
moment.
[
'
®
These
workers
]
modifications
ended
operating
up
simultaneously, and
resulted
doing
inspection, especially
higher
in
their
of
in times
what they were doing
stocks if
they made
with small-lot production
no longer
mistakes in
defectives, furthermore, resulted
A second
The discipline
as workers paid more attention to
and could
boost to productivity .[
maintenance and
of slow demand.
imposed by the just-in-time pace along
also tended to improve quality,
own
large buffer
rely on
processing or assembly.
higher
in
^
'
]
policy was
complexity
Beginning in the
standardizing
Fewer
-- another
yields
to gain some benefits from the concept
of scale economies, even at low volumes compared to the
reducing
product
in
late
1940s,
components
(until the later 1950s),
designs
Nissan
across
and
manufacturing.
Toyota
and
different
U.S., by
did
this by
car and truck lines
reducing the frequency of model changes,
and limiting the number of options available to customers .[ ^
The
vertical
third
policy
integration
assembly, while
involved
between
building up
decreasing
components
establishing
a
°
levels of in-house
production
and final
networks of lower-wage subsidiaries
and loosely affiliated subcontractors .[ ^
process of
as
machines
different
several
some
productivity
M
Toyota
started the
network of suppliers in the late 1930s
13
and founded all its major subsidiaries during the
a
the 1970s for Nissan,
and as early as
integration" (the percentage of
at affiliates
house or
total
General
automaker.
levels
costs
higher than
Motors.
(Exhibit
higher
the
of
accounted
"group
for in-
personnel
the most integrated
made it
This
7)
possible to achieve many of the benefits of
without
for Toyota, the
in which Nissan or Toyota held a minimum
20% equity share) that were far
U.S.
the 1940s
demonstrated
automakers
Japanese
Nissan
supplier network, although, by the end of
took longer to set up
largest
1940s.
vertical integration
or
other
costs
each
small
car
that
formal
integration would have required.
For example,
for
in 1983,
they produced,
about 50% of the costs at Nissan and Toyota were accounted for by
subsidiaries and other affiliated subcontractors (see Exhibit 7).
These companies,
those received by
(Exhibit
workers.
Toyota
8)
workers
Wages
productivity gains were not.
Nissan
and
(Exhibit 9)
2.8-fold
and
were
81%
lower
received
at
By working with
by Nissan
suppliers,
but
these companies to
production systems as well as the quality of their
improve their
components
wages equal to merely 77% of
furthermore, paid
or
assembly
Toyota
value-added
services,
subsidiaries
productivity at
tripled between 1960 and 1983.
This was a rate of increase faster than the 2.4- and
improvements
registered
respectively, in this same period. [^^]
14
at
Nissan
and
Toyota,
THE TOYOTA "REVOLUTION"
Toyota, unlike Nissan,
started
out
1930s without
the
in
buying American design and manufacturing technology.
Toyoda (1894-1952),
of the company, Kiichiro
vehicle
copying
by
Ford
a
chassis,
Chrysler DeSoto body -- combining
designed his first
Chevrolet engine, and
a
features
"best"
the
The founder
a
of each
U.S. manufacturer.
The first truck broke down on the way to the
showroom, portending
a
series
took more
vehicles that
than
technical
of
a
problems
in Toyota
decade to overcome.!^'
by importing what was essentially
Dodge
a
went quickly
truck,
production" in the mid-1930s and turned out
into "mass
U.S. models
comparable to
-- while
establishing
Nissan,
]
a
a
vehicle
predilection
manufacturing equipment and practices that managers
for American
carried through to at least the 1970s. [^*]
In contrast,
they would
Kiichiro
need to
other
and
improve vehicles frequently, since they were
experimenting with designing cars
particular,
design
Kiichiro'
skills
equipment, and
(he
managers realized
Toyota
s
and trucks
objectives
could
were
afford
not
independently.
cultivate in-house
to
to
In
buy
the blueprints,
American assistance Nissan purchased), as well as
inexpensive
to set up
an
Since the
early vehicles
production
system
for
low volumes.
were unreliable, the Japanese military
would not buy all Toyota's output.
15
Nissan,
on the
other hand,
had more orders than it could fill.
To solve
its unique
problems, Toyota, again departing from
Nissan, bought universal machine tools and small stamping presses
that were affordable and easily adaptable to model changes.
was the beginning of the "flexibility"
system
that,
World
after
in the
This
Toyota production
War II, helped the company introduce
numerous new models, for the domestic and export markets, quickly
Again, unlike Nissan,
and cheaply.
1950s Toyota
during the
European
or
chose not
producer
auto
U.S.
Isuzu, Hino,
to become
to
learn
and Mitsubishi,
affiliated with a
modern
design and
automation technology developed in the 1940s and early 1950s.
Benefiting from the versatile
the 1930s
purchased in
the direction of Ohno, who rose to executive
and from
vice-president in
equipment first
the
Toyota
company,
gradually
introduced a
series of innovations in manufacturing that rival the achievement
of Henry Ford with the Model T.
a
initiated
result
in
inventory
the
1943 from
producer, with no experience in automobiles, no
loom-machinery
predilections
Ohno joined Toyota in
in
favor
planning
of
for
extraordinarily
turnover,
and
U.S.
a
high
help
methods.
one manager
virtual "revolution" that would
levels
Toyota
of
become
efficient and profitable companies in history.
16
This
productivity
one
and
of the most
The development
production system
techniques
key
the
of
occurred between
used
in Toyota's
1948 and 1965: [^^]
(See also
Exhibit 10)
1948:
Ohno instituted a "pull"
system in
the machining shop
for engines, with each worker moving back to the
previous station
the
necessary
time
pull system in
this
practice
only
in
immediate processing.
a
work in process, just at
to retrieve
the
in
needed for
He first read about the idea of
Japanese
a
amount
the
newspaper which described
U.S.
aircraft industry during
World War
II
with the
traditional "push" systems used at Nissan and
other automakers in the U.S., Japan,
the
flow
components
of
production moved in
a
This contrasted
supermarkets.
and in U.S.
and
and Europe, where
information
signalling
forward direction, according to
a
schedule, whether or not stations were ready to receive
the components.
The push system was not well suited to
small-lot production
inventories
whenever
machinery
breakdowns
and
production
fell
downward.
and tended to build up in-process
Toyota
stations
or
fell
behind,
due
to
other factors, or when sales
schedules
management
were
wanted
not
revised
to control in-
process and finished-goods inventories because of large
financial
losses
associated
with the collapse of the
military market and postwar inflation.
17
.
1949:
The pull system in the machining shop allowed Toyota to
end the intermediate stockpiling of engines.
Ohno also
made workers
several machines each, rather
autoworkers
Nissan
at
companies), because
enough work
machining shop operate
in the
as
than specialize
well
demand was
and European
as U.S.
low and
(as did
there was not
to keep all machines operating constantly.
This procedural change improved worker productivity.
Ohno then asked production workers to conduct their own
inspections.
improved
This
quality on the line and
on non-productive
raised worker output by cutting down
inspection staff.
1950:
Toyota extended
the
policy,
demanded by
the pull
prompted
by
concept to marketing through
financial
difficulties and
company bankers, of limiting production to
orders received by Toyota Motor Sales from dealers.
transmission machining
Toyota synchronized engine
and
with
reduce
final
assembly,
to
further
in-process
inventories
Indicator lights introduced on the engine lines alerted
18
.
supervisors to problems.
1953:
introduced
Ohno
"kanban" system, using the
early
an
exchange of paper tags to signal
or
parts
production,
into
processing operations
machining shop.
the
The
Japanese called this the "supermarket method," since it
mimicked
practice
the
in
U.S.
customers went to stores to buy
they
wanted
rather
it,
supermarkets
what they
than
wanted when
store goods, while the
supermarket replaced items on shelves as
To simplify
where
it sold them.
manufacturing, procurement, and conveyance
Toyota also instituted
standardization
a
program for
car and truck components.
1955:
Toyota synchronized
its body
and final assembly shops
to eliminate more in-process inventories.
Controls introduced
on
parts
mix
the
deliveries
further cut
inventories
Toyota
started
to
loading of components in
small lots for machine tools and
final assembly
to mix
model runs on
lines to raise equipment utilization as
well as lower inventories.
19
.
Line-stop buttons
workers
introduced
authority
assembly
on
lines gave
halt production if they noticed
to
defects or if other problems arose.
1957:
lights
Indicator
alerted
installed
supervisors
outside
on
the
all
production lines
machining
shop
to
problems
1959:
A control system for in-house to
to outside
in-house and in-house
conveyance again cut in-process inventories
and waiting time.
1961:
kanban
Toyota introduced the
system
to
some outside
parts suppliers.
1962:
Toyota then
extended the kanban system to all in-house
shops, placing the entire company on
a small-lot,
pull
system.
Foolproof devices added to machine tools helped prevent
defects and over-production.
As an example of rapid setup,
press changeover
times for
previous years to 15
Toyota lowered stampingdies from
minutes, through
2
or
3
hours in
techniques such
as automating as much of the process as possible, doing
20
preparations for
teams
training
and
running,
changeover
the
machines were
to specialize in setup.
increased equipment
Rapid setups
while
utilization and made
small-lot production more economical, as well as helped
reduce in-process inventories by cutting lead times.
1963
Ohno now asked
:
machines
1947,
and
workers
operate
to
each,
compared
to
in
previous
years.
1
3
an
average
of 5
to 4 since 1949,
This
2
in
raised labor
productivity.
Toyota extended
1965:
the kanban system to all outside parts
in-process
reducing
deliveries,
inventories
to
a
minimum.
IMPACT ON PRODUCTIVITY AND INVENTORY TURNOVER
The
results
of
Toyota's
techniques
impressive.
were
Vehicles per worker per year (unadjusted for vertical integration
or capacity
utilization) tripled at Toyota between 1955 and 1957
and then rose another 60% by
Toyota had
(Exhibit
11)
By this time,
levels at GM, Ford, and Chrysler
passed productivity
(see Exhibit 1).
and focused
1964.
Nissan did not adopt the kanban or pull system,
on improving
European companies did.
its levels
But,
of automation,
at roughly the same time
21
as U.S.
and
or a year
.
or two behind Toyota, Nissan also worked at reducing setup times,
in-house
improving
synchronization,
Gross productivity
deliveries.
five-fold between 1955 and
caught
never
and has
parts
levels at Nissan then increased
improvement
an
1964,
comparable to
still behind Toyota in productivity
Nissan was
Toyota, although
controlling
and
despite
up,
doubling
U.S. productivity
levels
Perhaps the most remarkable effects of Toyota's pull system,
clearest contrasts
and the
seen
controls
all
stocks
in-process
In the mid-1950s,
relatively
had
firms, can be
and U.S.
(average total inventories divided
This is an effective measure of how
into sales).
goods.
turnover
inventory
in
with Nissan
as
as stockpiles of finished
well
Toyota, Nissan,
turnover
low
well a company
GM,
and Chrysler
Ford,
levels.
the U.S.
In fact,
companies made no progress in this area between the 1950s and the
1980s
early
--until
they
experimenting
began
"just-in-time" concept around 1982.
Nissan's factories and
Toyota's.
a
limited
(Exhibit 12).
suppliers
are
more
dispersed than
From the 1930s, Nissan has also been more committed to
automation and specialized
1960s
with
introduced
a
equipment
computerized
than
Toyota,
push- system
for
and
in the
production
control resembling "Materials Requirement Planning" (MRP) systems
common
in
according to
the
a
U.S.
Nissan
computer-generated
22
thus
manufactures
schedule that
automobiles
is not
tied as
directly
market
to
demand
and
adjusted
not
is
"instantaneously" to changes in shop conditions
Toyota's kanban
as in
The result
system.
to guard
buffer inventories
keep larger
or at suppliers,
is that Nissan must
against disruptions in
the supply system or inaccurate computer information.
To
reduce warehousing
Yokohama, in
modifying
machine
urban area of
tools
rapid
more
get
to
setup
times and
turnover beyond
level of inventory
a
These
Yet it is still considerably behind Toyota, and only
since 1979, when
Nissan
than 20
suppliers are
adopted
minutes or
progress in
achieved by the mid-1960s.
kanban
for
outside suppliers
its factories (nearer
so from
on-line terminals),
connected by
make substantial
inventory turnover
American automakers
can be
seen in
turnover in 1955 was no higher
mid-1950s through
did the company
beyond what it
(Exhibit 13)
One indication that Toyota was not always so
from the
]
the 1950s and early 1950s, Nissan began
practices brought Nissan to
located more
^ '
frequent parts deliveries than in the U.S.
requiring more
firms.
[
at small volumes and to
the expensive
requirements in
Tokyo and
U.S.
diversity
product
accommodate
almost
the fact that its inventory
than the
the early
different from
average for
1980s.
U.S.
firms
Only with better
synchronization among processes and with parts deliveries, mixing
runs
in
parts
production
and
assembly,
and experiments with
kanban and the pull system, did turnover double
23
between 1955 and
for a few years while Toyota built another plant
It fell
1956.
but then rose significantly again
Toyota adopted
the kanban
between
and
1962
1963 (when
system for all in-house shops) and in
1965-1966 (when Toyota brought suppliers onto the kanban system).
Nor was
rapid turnover
rapid increases
due to
when production volume fell
in sales.
1974 following
8% in
Even
the first oil
shock, Toyota maintained a turnover level of more than 20 times--
twice as high as U.S. firms and Nissan.
After perfecting these techniques
by the
mid-1960s, Toyota
engineers and consultants taught their production system to major
subsidiaries and affiliates such as
efforts helped
Companies affiliated
[^
.
'
been able
Toyota's.
to
But
]
consolation in
Daihatsu.
and
These
produce significant rises in turnover (as well as
productivity) at nearly all
mid-1970s
Hino
subsidiaries
with Nissan
realizing that
Honda, Fuji Heavy
can
not all
just-in-time
implement
This
followed, as
competitors
foreign
be
seen
Industries
the
in
Toyota group.
did Mazda in the
should
find
some
Japanese automakers have
systems
as
effective as
not only at Nissan, but also at
(Subaru),
and
Isuzu,
turnover rates comparable to GM, Ford, and Chrysler.
which have
(Exhibit 14)
IMPLICATIONS FOR MANAGERS
The "quality" (education and discipline) of workers found in
24
been important,
Japan has no doubt
War
after World
But Japanese managers
too.
also reflected on the labor difficulties U.S.
II
then planned
companies had in the 1930s and
how to
insure more
cooperation from workers and to reduce personnel costs.
this by undercutting industrial
dominated
unions
by
union
workers
World
after
employment
would
leaders
positions, raising
cooperation; and
firing
cooperate;
War
then
and
II
groups
select
to
up company
setting
and
white-collar workers; frequently promoting
union officials to management
that
unions
They did
large numbers of
offering
"lifetime"
employees in return for their
of
using low-wage
the likelihood
subcontractors highly dependent
on the original equipment manufacturers to produce 70% or more of
the components (by value) of each Japanese car.[^®]
Management- labor
relations
industrial
and
unions
have
evolved differently in the U.S., and it is unlikely that American
managers will be able to control
Japanese
excuse
for
important
less
to
efficient
understanding
industry is what went
American
stable
managers
or
on
came
"mature"
the same
extent as
labor differences must not become an
But
companies.
workers to
in
to
manufacturing
practices.
Equally
happened in the Japanese auto
what
the
U.S:
By
the
early 1950s,
automobile manufacturing as a
view
technology,
with
certain
limits
to
productivity, minimum efficient scales of production, unit costs,
quality,
(or
be
and the ability
coerced),
as
of workers
well
as
25
to
and suppliers
to cooperate
contribute to improving the
overall production
characterized by
system.
thinking,
"American paradigm"
large production runs, push-type of scheduling,
high levels of automation
and worker
inspectors using
numbers of
original
The
specialization, with large
statistical sampling, dominated the
and the goals, of U.S. as well as European managers.
There was nothing particularly "wrong" with this approach to
It proved
manufacturing.
volume production of
Toyota
and
other
then
assumptions
American
limited number of models.
Japanese
master
and
produced greater efficiency in
output
utilization
and
a
rates
and even higher
turnover,
But then market
financial constraints in Japan after World War
conditions and
led
a
remarkably effective for high-
to be
automakers
small-lot
.
This
higher worker
machinery, faster inventory
for
quality,
to challenge
production
variety of areas:
II
since
"just-in-time" systems
did not tolerate defectives or equipment breakdowns, and Japanese
workers
producing
attention
to
in
what
smaller
lots
doing
were
they
workers making thousands of
found
they
paid
greater
-- as opposed to American
components of
one type,
with large
piles of buffer stocks to draw on if they made mistakes.
In sum,
the history of Japan's auto industry is a story both
of American lapses and
involved
a
Japanese innovations.
spectrum of changes in American production technology,
with Toyota as the most
automakers,
These innovations
typified
radical
by
Nissan,
26
most
other Japanese
incorporating
less extensive
and
with
modifications of U.S. practices and equipment.
Critical to the Japanese
success
(Exhibit 15)
manufacturing was
auto
in
that managers such as Toyota's Ohno did not accept U.S. practices
viable
as the only
believe
that
U.S.
way
produce
to
had
firms
automobiles,
capital and worker productivity, quality, inventory
there was
automakers
nothing mysterious
responded
conditions, creatively using techniques,
U.S.,
for
ultimately
competing
new
applications
establishing
managers
dramatic
higher
away convinced
improvement,
industries that seem old,
may
never
about what Japanese
to
automobile
else
specific market
developed first
standards
nothing
learn
should at least come
in
turnover, or
and suppliers. And
labor,
or miraculous
They
accomplished.
did not
the limits possible for
reached
the effective integration of equipment,
and
of
from
in the
production,
and
efficiency.
If
this story, they
that improvement, sometimes
be
impossible
--
even
in
and quintessentially Western.
stable,
REFERENCES
Evidence for this statement comes from numerous reports during
1985-1986 in The New York Times
The Wall Street Journal and
Consumer Reports regarding the quality and cost of Honda Accords,
Nissan Sentras,
and Chevrolet Novas
(nearly identical to the
Toyota Corolla and made by the GM-Toyota joint venture) produced
in the U.S.
1.
,
27
,
fuller treatment of the arguments in this article see
2. For a
Cusumano,
Michael
A.
The
Japanese
Automobile Industry:
and
Management
Technology
at Nissan and Toyota
(Harvard
University Press, 1985).
Vivid descriptions of the chaos and low productivity that
existed in the postwar Japanese auto industry can be found in the
company histories of Nissan and Toyota,
the two largest auto
then and now:
producers in Japan,
Nissan Jidosha Kabushiki
Kaisha, Nissan Jidosha sanju-nen shi (A thirty-year history of
Nissan Motor), Tokyo, 1964, and Toyota Jidosha Kabushiki Kaisha,
(A
thirty-year history of Toyota
Toyota Jidosha sanju-nen shi
Toyota City,
1967.
Also of historical importance in
Motor),
documenting that the Japanese did not always establish clean and
well-organized factories are several field reports written by
American engineers from Western Electric, working as part of the
Occupation forces, who visted Fujitsu, Matsushita, Oki
U.S.
and other Japanese communications equipment
Electric,
Sony,
Charles Protzman and Homer Sarasohn, "Survey
producers in 1949:
of Six Japanese Manufacturing Companies, "
Civil Communications
Industry Division,
24 February 1949--13 June 1949,
Section,
Box 3190B,
Washington National
Modern Military Records Group,
Suitland,
Md.
Records Center,
For a discussion of these
engineers and their observations as well as contributions to
improving Japanese management see Kenneth Hopper,
"Creating
The American's as Teachers,"
Japan's New Industrial Management:
Summer 1982; and Ghary Gappelberg,
Human Resource Management
The Influence of American
"'CCS' and Modern Japanese Management:
Management Concepts on the Japanese Communications Industry,
1946-1950," Harvard College B.A.
Thesis, Department of History,
March 1986.
3.
,
4. Based on
data in Amagai Shogo, Nihon jidosha kogyo no shiteki
tenkai (The historical development of the Japanese automobile
Tokyo,
Aki Shobo,
industry),
and the Japan
136,
1982,
p.
Automobile Manufacturers Association, Nihon no jidosha kogyo (The
Please note that Japanese
Japanese automobile industry), annual.
names in the text of this paper are in the English order, with
surnames following given names.
In the notes, however, Japanese
authors are listed in the traditional Japanese order, with
surnames first.
evidence that the Toyota decision not to link up
5. Examples of
with foreign producers was indeed deliberate can be found in the
following:
Toyoda Kiichiro, "Toyota Jidosha ga konnichi ni itaru
made" (Toyota Motor up to the present, September 1936), reprinted
Tokyo, Jikensha, 1955,
in Ozaki Masahisa, Toyoda Kiichiro shi
Nagoya, Toyota
pp. 172-173; Shotaro Kamiya, My Life with Toyota
Toyota Jidosha sanju-nen shi pp. 346Motor Sales, pp. 61-70;
,
,
,
348.
28
,
6. My thanks to Kim Clark
helping
interpret
me
standpoint.
of the Harvard Business School for
these
numbers from an economist's
to produce
7. A good discussion of this need
in small
lots and
the response at Toyota can be found in Ohno Taiichi, Toyota
seisan hoshiki (The Toyota production system), Tokyo, Daiyamondo,
On 18 March 1983, I also interviewed Mr. Ohno, the founder
1978.
He retired from Toyota as a senior
of Toyota's kanban system.
vice-president in 1978.
On Japanese government po licy toward the auto industry, see
Hiroya Ueno and Hiromichi Muto,
"The Automobile
Industry of
Japan, " in Kazuo Sato,
ed.
Industry and Business in Japan New
York, Croom-Helm, 1980, pp. 1 48-155; Masaru Udagawa, "Historical
Development of the Japanes
Industry,
1917-1971:
Business and Government," Kei ei shirin 19.4:31-46 (January 1983);
Magaziner,
"Japanes e Industrial Policy:
Ira C.
Source of
Strength for the Automobile Industry, " in Robert E.
Cole, ed.,
The Japanese Automobile Indu stry:
Model and Challenge for the
Future? Ann Arbor, Michigan Papers in Japanese Studies,
No. 3,
8.
,
1981, pp.
79-83.
9. Regulations on
imports can be found in Jidosha Kogyo Shinko
Kai
(Automobile Promotion Association),
Jidosha hakubutsukan
chosa hokokusho (Automobile museum survey report), Tokyo, Vol. I,
May 1978;
and Nissan Jidosha Kabushiki Kaisha Chosa-bu (Nissan
Motor Business Research Department),
Jidosha kogyo handobukku
(Automobile industry handbook), Tokyo, 1983, p. 373.
10. Sources for these
comments on Nissan include the company
history as well as Jidosha Kogyo Shinko Kai (Automobile Promotion
Association),
ed.
Nihon jido sha
shi
kojutsu
kiroku shu
(Recordings of oral interview
on the hi story of the Japanese
automobile industry), Tokyo, Vol
II, 1975;
Nihon Jidosha Kogyo
Kai
(Japan Automobile Manufac turers Asso ciation),
ed.
Nihon
jidosha kogyo shiko
histo ry of the Japanese automobile
(A
industry). Vol. II, 1967, and Vo 1. Ill, 1969 and interviews with
former Nissan managers Kawazoe Soichi
June 1982), Sasaki
(2
Sadamichi
May 1982),
Kat ayama Yutak a (31 May 1982), and
(18
Okumura Shoji (10 June 1982).
,
.
,
11.
See Toyota Jidosha san1u-nen shi
,
pp.
160-163,
193,
249-252.
12. For a listing of
all current models see Toyota's Japaneseversion of the 10-K annual report (yuka shoken hokokusho).
13. The historical
movement of prices for particular models can
be followed in Jidosha hakubutsukan chosa hokokusho.
29
14. For international price comparisons,
see the book by former
Nissan President
Iwakoshi Tadahiro,
Jidosha koqyo ron (A
discussion of the automobile industry), Tokyo, University of
Tokyo Press, 1968.
74-82;
Kamiya,
15. See
Toyota Jidosha sanju-nen shi
pp.
especially pp.
456-457;
and John B.
Rae,
Nissan-Datsun:
A
History of Nissan Motor Corporation in U.S.A., 1960-1980 New
York: McGraw Hill, 1982, especially pp. 15-18.
,
,
16. This
comment is based on interviews with former Nissan
managers Okumura, Sasaki, Kawazoe, Katayama, Maeda Riichi (21 May
1982), and Matsuzaki Shiro (14 July 1982).
David J.
17. See Kirk Monteverde and
Teece, "Supplier Switching
Costs and Vertical Integration in the Automobile Industry," Bell
Journal of Economics 13.1:206-213 (Spring 1982).
18. Details on Toyota can be found in numerous sources, including
Ohno, especially pp. 11-23, 36-53, 62-72, 138-141, 175-193, 217(from Toyota's Production Control Dept.),
229; Y. Sugimori et al
"Toyota Production System and Kanban System of Materialization of
Just-in-Time and Respect-for-Human System," International Journal
15.6:553-564 (1977);
of Production Research
Toyota Jidosha
265-271,
334-336,
sanju-nen shi
421-430;
Toyota Jidosha
pp.
Kabushiki Kaisha,
Toyota no ayumi (The path of Toyota Motor),
Toyota City, 1978, pp. 342, 345-346; Shingo Shigeo, Toyota seisan
hoshiki no lE-teki kosatsu (An industrial-engineering analysis of
the Toyota production system),
Tokyo,
Nikkan Kogyo Shimbunsha,
Zero Inventories Homewood, Illinois, Dow1980; Robert W. Hall,
Jones Irwin, 1983; and several publications by Yasuhiro Monden:
"What
Makes
the
Toyota Productiion System Really Tick?"
Industrial Engineering January 1981;
"Adaptable Kanban System
.
,
,
,
,
Helps
Toyota
Maintain Just-in-Time Production, " Industrial
Engineering
May 1981;
"How
Toyota
Shortened
Supply Lot
Production Time,
Waiting Time,
and Conveyance Time," Industrial
Engineering
September 1981;
and
Toyota Production System
Atlanta,
Institute
of
Industrial
Engineers,
1983.
For
developments at Nissan I relied on interviews with two managers
responsible for production control, Kanao Kaiichi (11 April 1983)
and Matsuzaki (14 July 1982 and 19 January 1983); Nissan Jidosha
sanju-nen
shi
244-246,
330-339;
73,
Nissan Jidosha
pp.
Kabushiki Kaisha, Nissan Jidosha shashi
(Nissan Motor company
history), Tokyo, 1975, pp. 44-47, 375-376.
,
,
,
,
the impact of just-in-time on quality see Richard J.
19. On
Schonberger, Japanese Manufacturing Technicrues
New York, The
Free Press, 1982, pp. 15-82.
,
Product development at Nissan and Toyota can be followed
through the company histories, including data series on car and
truck specifications.
For Nissan, see also Ikari Yoshiro, Dai-
20.
30
Sekkei-bu;
Bluebird no otoko-tachi
The No 1
Ichi Sharyo
Men of the Bluebird), Tokyo, Bungei
Chassis Design Section:
On limitations on options and complexity in
Shunshu,
1981.
see Harbour and Associates,
"Comparison of
assembly,
Inc.,
Japanese Car Assembly Plant Located in Japan and U.S. Car
Assembly Plant Located in the U.S.," Berkley, Michigan, ca. 1980,
and James Cook,
"Where's the Niche?" Forbes 24
pp. 12-13;
September 1984, pp. 54-55.
(
.
,
21. On the development of subsidiaries and supplier networks, see
Toyota Jidosha san1u-nen shi pp. 180-181, 196-202, 207-210, 226Nissan Jidosha san-ju nen shi pp. 205-206, 239,
229, 272-273;
320-321, 339-342; Nissan Jidosha shashi pp. 31-33, 55-56, 60-61,
281-284.
76-79,
178-179,
222,
229,
262,
On the vertical deintegration strategy, I relied on an article by former Nissan
manager Okumura Shoji, "Jidosha kogyo no hatten dankai to kozo"
stages and structure of
(The developmental
the automobile
in Arisawa Hiromi,
ed.,
Gendai Nihon sangyo koza
industry),
(Series on contemporary Japanese
industry),
Tokyo,
Iwanami
V, 1960, pp. 327-330; and interviews with Matsuzaki
Shoten, Vol.
and a former Nissan manager responsible for procurement and
recent chairman of Nihon Radiator, Ota Hisakichi (20 May 1982).
,
,
,
See Cusumano,
Table 50, p. 202-203.
I deflated the valueJapanese consumer
added data
using the
price index for
automobiles and related expensives.
Unadjusted value-added data
on Nissan and Toyota, as well as their main subsidiaries,
can be
found in Nihon Seisansei Honbu (Japan Productivity Center), Fuka
kachi bunseki (Value-added analysis), Tokyo, annual since 1960.
22.
The discussion of Toyota is based primarily on Toyota Jidosha
sanju-nen shi
Ozaki and Toyoda Kiichiro in Ozaki; Okumura;
Kamiya;
Morikawa
Hidemasa,
"Toyoda
Kiichiro," in Morikawa
Hidemasa et al., Nihon no kigyoka (Japanese entrepreneurs),
Tokyo, Yuhikaku Shinsho,
Vol.
Ill,
Kamiya interview in
1978;
Morikawa Hidemasa, ed., Sengo sangyo shi e no shogen (Accounts of
the history of postwar industry), Tokyo,
Asahi Shimbunsha, Vol.
II, 1977; Ohno; and interviews with Ohno and Okumura.
23.
;
24. The
following discussion of Nissan is based primarily on
Nihon jidosha kogyo shi kojutsu kiroku shu
Aikawa Yoshisuke,
Watakushi
no
rirekisho
(My career),
Tokyo,
Nihon Keizai
Shimbunsha, Vol. XXIV, 1965;
Ozawa Chikamitsu, Aikawa Yoshisuke
den (Biography
of Aikawa
Yoshisuke),
Yamaguchi
Yamaguchi
Shimbunsha, 1974; Nihon jidosha kogyo shiko
Vol.
II; Nissan
Jidosha sanju-nen shi
Ikari;
and interviews with Aikawa Yaichi
(7 September 1982), Katayama (31 May 1982), Sasaki, Maeda (21 May
Asahara Hideo (19 May 1982), Okumura, Matsuzaki, and
1982),
Kawamata Katsuji (8 June 1982).
;
,
.
;
31
:
This chronology is based
228-229;
my interview with
25.
shi
primarily on Ohno, especially pp.
Ohno; and Toyota Jidosha sanju-nen
.
on interviews with Matsuzaki and
26. These comments are based
Kanao, as well as Nissan Jidosha sanju-nen shi especially pp.
72-73, 244-246, 330-339, 375-388; and Nissan Jidosha shashi pp.
44-47, 375-376.
,
,
discussion of Mazda (formerly named Toyo Kogyo), see
27. For a
Harvard Business School (Kim Clark), "Toyo Kogyo Co.
LTD (A),"
Boston,
HBS Case Services No.
9-682-092,
and Richard
1982;
Pascale and Thomas Rohlen,
"The Mazda Turnaround, "
Journal of
Japanese Studies 9.2:219-264 (Summer 1983).
28. A discussion
of labor relations is beyond the scope of this
paper, although I refer the reader to Cusumano,
Chapter 3, as
well as sources such as Aoki Satoshi, Nissan kyoeiken no kiki
roshi niju kenryoku shihai no kozo
(The
crisis of the Nissan
group:
The structure supporting the dual authority of management
and labor), Tokyo, Chobunsha, 1980; and Yamamoto Kiyoshi, Jidosha
sangyo no
roshi kankei
(Management-labor relations in the
automobile industry), Tokyo, University of Tokyo Press, 1981.
32
Exhibit
1:
Vehicle Productivity Adjusted for Vertical
Integration, Capacity Utilization, and Labor-Hour
Differences, 1965-1983
GM,
IHt'
Relative Scale (U.S.
1965
"
"
1979
Scurcz: Derived
Notes: 'This
'^h^
assumed
0.9
1.5
1.9
2.-1
1.7
2.6
2.0
2.7
1.9
2.2
"
19S3
frcrr.
ccI'stt..-:
Toyota
1.0)
"
1975,
*
=
1.0
1970
kcsed c~
Nissan
Ford, Chr/sler'
annual reports.
ir.diczzes avezzge figi::es fcr
GM.
Fczd.
and Chzysler.
'ivcildv.zde dczz.
1983 figures fcr
GM
and
Ford, buz not for Ghrysler.
the verzical integration levels of 1979.
•
Exhibit
FY
1965
2:
PRODUCTION SCALES ADJUSTED FOR VERTICAL INTEGRATION,
1965-1983
,
Exhibit
3:
Fixed Assets
(at
Cost) per Estimated Labor
Hour, 1965-1983
GM;
FY
Ford, Chrysler
=
Relative Scale (U.S.
1965
^
"
1975
"
19S0
"
1983
"
Souice: Derived from
Toyota
1.0)
1.0
1970
Nissan
0.7
0.8
0.9
1.3
1.4
1.7
1.4
1.7
2.0
2.5
annual reports.
Notes: Exchange rates are based on purchasing-power parity data for capital
formation (SI. 00 = 299 yen in 1975)
Rates for other years and constant values found by using the Japanese and
U.S. price deilatcrs for domestic non-residential fixed investm.ent. For
purchasing-power parity rates see Irving Kravis et al., V7orld
Product and Income
International Comparisons of Real Gross
Product Baltimore, Johns Hopkins University Press/World Bank,
1982, pp. 178-179.
:
,
Exhibit
4:
Fixed Assets per Vehicle Produced, 1965-
1983
Adjusted
FY
for Integration
GM,
Ford, Chrysler
Relative Scale (U.S.
^
1965
and Capacity Utilization
=
100
Nissan
n
Toyota^
ICO)
76
1970
1975
1979
1983
Sources:
Annual
reports (English versions for Nissan
and Toyota).
Notes: "Figures for Toyota prior to 1983 are adjusted upward by 9% to
account for the fixed assets of Toyota Motor Sales; this was the level of
Toyota Motor Sales' fixed assets in the 2 years prior to the merger.
^Includes an estimate of 50% for accumulated depreciation not listed in
Nissan's 1975 report. This estimate is based on data from other years.
Exhibit
5:
JAPANESE AND U.S. AUTO PRODUCTION BY
VEHICLE TYPE, SELECTED YEARS
Exhibit
6:
Nissan and Toyota Production by Vehicle Type, 1941-83
%
NISSAN:
1941
Production
Small
Trucks
%
Standard
Tracks
%
Small
Cars
%
Standard
Cars
Exhibit
7
Company and Group
:
1965-1983
(%)
GM
Toyota
Nissan
FY
Integration, U.S.-)apan,
Ford
Chrysler
In-House Group In-House Group In-House In-House In-House
1965
32
54
41
74
50
36
36
1970
29
52
35
66
49
39
36
1975
22
50
30
73
45
36
36*
1979
26
70
29
74
43
36
32
1980
26
73
29
76
1981
26
71
28
75
1982
26
75
26
70
1983
26
78
26
73
—
—
—
—
—
—
—
—
Sources:
Derived from
annual
34
31
34
28
reports.
Notes: 'Estimate, assuming that the level of payments to sumdicrs las a
percentage of sales)
1975 equaled the average for 1974 164.1%) and 1976
164.3%), since Chrysler did not publish this figure in 1975.
m
In lioii'ir vertical integration is
defined as internal manufacturing and other
operating costs divided by sales minus operating profits
til
Croup
vertical
defined as internal operating costs plus operating costs paid
affiliates (2U"/n-e(iuity niinunum) divided by sales minus operating prof-
inlrKnilion
is
its.
Since the liifuinese anil US firms do not publish comparable data, I employed the Idllowing methodology and assiimptiiins to construct the table
above. For Nissan and Toyota (including Toyota Motor Sales). 1 multiplied
the percentage of manufacturing costs for small cars not subcontracted
(ser Table 45) by total manufacturing costs listed in the yCika shoken
liokokusho (lapanese lO-K reports), added other operating expenses incinrcil m house (executive and other non manufacturing employee compensation, retirement and severance payments, and depreciation), and
divided by sales minus operating profits. Tor group integration, I added
(iprrnling costs paid to affiliates, listed in the notes to the balance sheets
111 the lapanese reports, to mliouse costs. For the U.S. firms, I subtracted
payments to suppliers from sales minus operating profits and divided by
sales minus operating profits.
and Ford stopped publishing data on
pavments to suppliers after 1979. so I could not calculate their levels of
GM
integration for 19Ht)-19H3.
The fapanese
figures arc estimates, therefore, assuming that the percentages
Nissan and Voyota published regarding subcontracting are accurate, and
that total subcontracting was roughly equal to that for small cars.
Exhibit
8
:
Average Monthly Wages per Employee
(Excluding Bonuses)—Nissan and Toyota Groups, 1983
(yen,
-
number
of employees)
Exhibit
9:
Net Value-Added Productivity (VAP)
1960-1983 (number
at
Nissan and Toyota Subsidiaries,
of firms and employees; 1000 yen in constant 1983 values)
c
On
OO
00
^
o
CL,
O
o
o
o
>
o
Q
4->
H
w
-
u
Exhibit
11:
UNADJUSTED VEHICLES PER WORKER AT TOYOTA, NISSAN,
GM & FORD, 1955-1964 & SELECTED YEARS
Exhibit
12:
Inventory Turnover Comparison, 1955-1983
Toyota
Nissan
Period
GM
Ford
Chrysler
1955-1959
7
11
7
9
9
1960-1964
14
15
7
8
9
1965-1969
14
26
7
7
8
1970-1974
14
23
6
7
6
1975-1979
14
26
8
9
6
1980
17
23
8
7
5
1981
15
21
9
8
6
1982
16
29
9
9
7
1983
19
36
12
11
11
'
Souices:
Annual
reports.
Exhibit
FY
13:
Inventory Turnover Comparison, 1955-1983
Exhibit
14:
Inventor/ Turnover in the Nissan and Toyota Groups, 1963-1983
Exhibit 15: SPECTRUM OF JAPANESE RESPONSES
MOST RADICAL!
TOYOTA
FASTEST SETUP
COMPROMISE
CONVENTIONAL
^953
088^
/'r.
MM
I
3
mil mil
LlBRAHltS
illiilllllllllllllllinilll
TDflO QOM
2bl
2'=IQ
XV-