CHAPTER 2: THEORETICAL FRAMEWORK AND LITERATURE
2.3 Literature review
2.3.4. From Mass Production to Lean Production and Total Quality Management
29 The introduction of firms to global strategies in the automotive industry can be traced to the 1980s, where early analysts such as Michael Porter cited as saying a “firm’s competitiveness in any one of the world’s major regional markets is independent, and symbiotic with its position elsewhere”
(Porter 1986). The need to raise company competitiveness dawned with the emerging environment that characterised the automotive industry which came with immense global competition for manufacturers and their peers. This pressure forced companies to review their adaptive strategies (Belis-Bergouignan et al. 2000). The understanding of the uniqueness and individuality of operating firms makes it imperative to understand that there is no one master strategy that will suit every firm (Belis-Bergouignan et al. 2000). The organisational structures that companies adopt are informed by the function of their acquired competencies, and the transformation model that the organisation uses to retain its competencies enabling companies to be able to develop endogenous organisational capabilities autonomously (Chandler 1992). The key for an automotive firm’s survival rests in the ability to maintain its competitive advantage. This would be determined by the ability of a company to create its own trajectory, complete with company specific solutions which can only be utilised for the original company.
30 The Japanese automotive markets are entrenched in the works of Eiji Toyoda and Taiichi Ohno who operated from the Toyota plant in Nagoya. These two scholars developed the lean manufacturing framework after carefully studying the techniques that American car manufacturers utilised. They concluded that the operations of mass production would not be able to succeed in Japan due to the different social and economic compositions (West 2000). The technique that these Japanese pioneers developed was called Lean Production, which is described as “an interrelated and mutually supportive set of manufacturing practices. It is characterised by short lead times and reduced set-up times, inventory reduction through just-in-time (JIT) systems, together with a high concern for quality and continuous improvement (kaizen)” (Oliver & Wilkinson 1988: 6). This system requires that an organisation has a motivated and skilled workforce that is able to develop solutions that the organisation requires (Womack et al. 1990). This operational system incorporates different elements of organisational design with the worker being at the centre of their system designs.
The key elements of Lean Production are described as being rooted in flexibility of staff and production (Storey 1994). The structure of employees was redefined as “workers are grouped into teams or cells and given the opportunity to work together to achieve the best methods of performance. Members of the cell are responsible for housekeeping and for contributing suggestions for improvements to the system” (Womack et al. 1990: 14). The inclusion of employees in providing ideas to improve their current systems meant that they were valued, and they came up with realistic interventions as they experienced the business cycle changes, both exogenous and endogenous. The business cycle has two characteristics. The first is the Real Business Cycle theory (RBC) which is based on the assumption that in business, economic fluctuations are an outcome from exogenous shocks, and in the absence of these the economic system is stable (Hallegatte et al. 2008).
The second and opposing theory is the Endogenous Business Cycle theory (EBC). This theory is in contradiction to the RBC as it asserts that economic fluctuations are the cause of inherent processes that internally destabilise the economic system (Hallegatte et al. 2008). This system of production holds that, buyer-supplier relationships are the key determinant of the success of lean production and JIT (West 2000). Therefore, the buyer-supplier relationship that is encompassed within the structures of lean production and JIT is an institutional arrangement that is aimed at
31 continuous improvement, the flexible output of high quality, low cost products (West 2000). The adoption of this system meant that the relationships between the buyers and suppliers of Japanese cars had an integrated, open relationship that could enable both buyer and supplier to have a voice in the production of their vehicles, which was a component of the JIT framework.
To comply with the buyer-supplier system, Toyota personified the system, and divided their suppliers into functional tiers, the first-tier supplier was included as an integral part of the product development team (Womack et al. 1990). The relation of the supplier and buyer was mainly based on associations that were made in the design and assembly stage, training and development needs identification and intervention delivery. The development of this relationship is of mutual benefit with the buyer being satisfied with the quality, the performance and the commitment for continuous improvement, and the supplier develops a level of security within the relationship (West 2000). The buyer will however maintain a dominant role within this relationship and can control the supplier through performance, delivery and pricing monitoring (West 2000).
South African organisations have been identified as having had a different diagnosis as they are confronted with rapid socio-political and environmental changes as opposed to other organisations that just need changes in technology or redesigning of structures. It is said that S.A organisations
“require a direct and major cultural overhaul. It requires people to let go of ‘how it was’ and navigate through a dark period of uncertainty and fears” (Moerdyk & Aardt 2003: 19). Many South African organisations applied approaches such as the Total Quality Management (TQM) approach.
TQM made its appearance after many countries had faced the negative economic implications from the emergence of Japan as one of the leading frontrunners in automotive production, with the competitive advantage that they had acquired. North America and Western Europe were the worst hit, they lost the advantages that they had for so long until the late 1970s and the early 1980s (Martinez-Lorente et al. 1998).
In response to these economic pressures, automotive manufacturing firms began questioning their methods and started to examine the new approaches that the Asian leaders had implemented which had enabled them to rise as the dominant force in automotive production. The exact origins of TQM are muddled but the efficiency of the approach has yielded unquestionable positive results.
This approach stems from the teachings of Dr W. Edwards Deming, an American Engineer, who made contributions to various fields. The United States Navy in 1984 adopted and branded the
32 work done by Dr W. Edwards Deming to be Total Quality Management. TQM rests on organisation-wide implementations that are aimed at continuously improving the quality of the organisation’s products and the customer services that they provide. This approach positively improved many organisations in the 1980s and the early 1990s. The significance and influence of TQM is still relevant, with current SA organisations still utilising this approach. Its success in changing the factory and its operations has been the reason why even after 32 years of its emergence, the workings of Dr W. Edwards Deming are still relevant in the current space.