Wednesday, April 11, 2012

JIT, TQC and Japanese Corporations

JIT, TQC and Japanese CorporationsJust-In-Time (JIT) and Total Quality Control (TQC)

The nature of Japan's corporate culture allowed it to excel in industry. Management worked hard to develop successful corporate processes and two of the best
examples of such processes are just-in-time (JIT) and total quality control (TQC). Managers at the Toyota Group came up with JIT, which they referred to as right-on-time. Kiichiro Toyota, former President of Toyota Motors Inc., wanted the company to catch up to America's car-making industry. Mr. Toyota was known to be the father of the Japanese automotive industry. The management at Toyota developed the Toyota Production System, which used JIT. This system essentially places the parts on the line right on time in the right quantity. There is a high level of automation in this process in which the system works itself out. One of the benefits of JIT is it eliminates overproduction and prevents defective goods. Furthermore, it keeps costs down and raises productivity. There is nothing more costly for a firm than to build up unused inventory in their warehouses. Lastly, it ensures that each worker masters a range of production techniques and keeps them actively engaged in the factory processes. Today the JIT system is used by many corporations throughout the world and is a manifestation of the success it had in Japan decades ago.

Japanese products during the pre-WWII era were known to be cheap and of a low quality. Today, they are admired around the world for their high quality. One of the reasons for this distinction is TQC. As mentioned before, the Japanese corporate culture is paternalistic and encourages lifelong employment. Once JIT was implemented, production systems became more efficient. It also led to high growth in labor productivity. The Japanese also invented TQC. This was a type of suggestion system in which top management solicited suggestions from workers. Today it is used by ninety percent of companies on the Tokyo Stock Exchange. The idea of TQC was to improve the effectiveness of management objectives in the most efficient means.

Fuji Xerox Corporation will be used as a case study in the usage of TQC. Fuji Xerox implemented TQC in 1976 and participated in rigorous exercises four years later to win the prestigious Deming Prize. Fuji Xerox was established in 1962 as a joint venture between Fuji Photo Film and Rank Xerox (U.K.), a subsidiary of Xerox Corporation. It started as a marketing company. Fuji Photo Film, the Japanese parent, consisted mainly of a workforce composed of people who joined the company directly out of high school or college and expected lifetime employment. Fuji Xerox, on the other hand, recruited a diverse group of workers with various work backgrounds and was more individualistic than the company-oriented Japanese parent. Management placed both entities under one roof, which led to internal strife among divisions and even layoffs, which was seen as a last resort in Japan.

TQC was implemented in 1976. The management encouraged contribution on all levels. On average, 90,000 ideas were gathered from employees per year, mostly discussing problem areas and ideas for improvement in business functions. This system instilled creativity, teamwork and initiative among the employees. A major result of TQC was the development of a successful new product in 1978, the 3500 Model, which also stimulated other product lines and turned the business around. Four years later, Fuji Xerox won the Deming Prize along with three other companies after submitting a formal application to the Japanese Union of Scientists and Engineers.

TQC is successful under a specific set of circumstances, which must all hold: good leadership, proper training, sufficient resources, clarity of program goals and cultural unity. There are three main principles of TQC: customer focus, in which the customer's needs are met or exceeded; continuous improvement; and teamwork. TQC is also seen as one of the reasons that Japanese corporations have performed well in the 1970s and 1980s. Another reason for this success is due to excellence in manufacturing management. Facilities were kept clean, employees were responsible, and the JIT system was utilized. The JIT system was especially known to increase the skill levels of workers, improve quality and reputation and lower costs.