Journal of Operations Management 25 (2007) 403–419

www.elsevier.com/locate/jom

Japanese production management:

An evolution—With mixed success
Richard J. Schonberger *
Schonberger & Associates Inc., 177 107th Ave. NE, #2101, Bellevue, WA 98004, United States

Available online 19 May 2006

Abstract
Japanese production management (JPM) became a dominant influence in the field of operations management when, in the early
1980s, knowledge of its main elements became known beyond Japan. Those elements – quick set-up, small lots, cells, kanban, and
so on – are well known. Rather than explaining them again, this paper’s objective is to explore the sequence of events leading to JPM
as a competitive force globally, as well as its impact on theory and practices in operations management. JPM’s evolution includes
shifting terminologies, fusions and adulterations; limited extensions from manufacturing into services and innovative enhance-
ments, largely of Western origin. Longitudinal research data, based on inventory trends, provide insights on JPM’s diffusions and its
uneven results. Latter-day puzzling lapses and disappointments, among Japanese as well as Western companies, raise questions
about JPM’s sustainability, as well as some of its changing manifestations. While the core of Japanese production management, now
over three decades old, appears to have become solidly mainstream, its current and future states are problematic.
# 2006 Elsevier B.V. All rights reserved.

Keywords: Operations management history; Just in time; Total quality; Toyota system; Global inventory trends

Hundreds of articles in the business press throughout
the 1970s presented the problem: the Japanese export
Juggernaut was wreaking havoc on Western competi-
tion. Ezra Vogel summed up prevailing explanations in
his quantum-selling book, Japan as Number 1: Lessons
for America (1979). Vogel, a social scientist who had
lived in Japan for a time after receiving a Harvard PhD,
cited enlightened guidance of industry by government
ministries, a consensus culture, and other socio-political
factors. Vogel failed to mention the keiretsu system—
groupings of many mutually supportive businesses: the
bank-dominated ‘‘big six’’ horizontal keiretsus, and the
more manufacturing-oriented vertical ones (e.g., the
Toyota group made up of nearly 250 companies). Others
saw the keiretsus, a.k.a., ‘‘Japan Inc.’’, as a dominant
economic force (Business Week, 1973; Miyashita,
1994). The notion that production management might
also have something to do with the rise of Japan as a
first-rate industrial power was still under wraps.
Within a year or 2 of publication of Vogel’s book, the
wraps were off. Western manufacturers, academics, and
consultants had been joining study missions to Japan by
the planeload. Those from industry were looking for
evidence of unique Japanese production management
practices, and they found plenty (see, for example,
Burnham, 1983). Having grown up in the ‘‘silo system’’
of functional separation, however, few of the observers
were able to see Japanese production management
(JPM) as a mutually reinforcing set of ‘‘best practices.’’
Rather, what emerged initially was not one, but three
versions, each detailed in an outpouring of books and
articles in the first few years of the 1980s:

* Tel.: +1 425 467 1143; fax: +1 425 467 1143. 1. Unique practices in the area of employee involve-
E-mail address: sainc17@qwest.net. ment.

0272-6963/$ – see front matter # 2006 Elsevier B.V. All rights reserved.
doi:10.1016/j.jom.2006.04.003
404 R.J. Schonberger / Journal of Operations Management 25 (2007) 403–419
2. Extraordinary attention to quality using practices
collectively known in Japan as total quality control
(TQC) or company-wide quality control (CWQC).
3. The production system perfected by Toyota called
just-in-time (JIT), or, alternatively, the Toyota
production system, today also known as lean
manufacturing.
The first, employee involvement, might be seen as
centered in the human resources wing of the manage-
ment field. It deserves consideration in this operations
management-oriented paper, however, because
employee involvement furthers the second (quality)
and third (JIT/lean) aspects of JPM.
The remainder of this paper tracks the evolution of
JPM, globally as well as within Japan itself. One
assertion is that, while the Japanese contributions
remain sound, they gain potency in combination with
other management concepts of later, Western origin.
Another is that today’s synergistic mix of Japanese and
non-Japanese best practices seems to have generally
raised Western manufacturers to competitive parity. A
third assertion (or speculation) has to do with the
inability of most companies successfully to mount and
sustain the best-practice agenda, even though it consists
mostly of rather simple, low-cost, common sense
elements. The latter two assertions are supported, in
part, by data from a longitudinal ‘‘leanness’’ research
project.
The remainder of this evolutionary analysis consists
of five sections:
1. The first is a closer look at the three strains of
Japanese production management as expounded by
early 1980s authors. Call it the first generation of
JPM, at least as interpreted in the West.
2. The next section explores a second generation of
additional features that had originated in Japan and
were late arrivals in the West.
3. The third examines shifts in thought and practice
later in the 1980s and into the 1990s. A notable
change in thought includes the emergent opinion,
among Western adherents, that TQC and JIT/lean are
‘‘joined at the hip.’’ Shifts in practice largely stem
from Western innovations that dovetail with and
enhance the Japanese approaches. Also in this lively
period, general team building began to overshadow
JPM-oriented employee involvement; and quality
methods, pursuit of quick response, and employee
involvement found applications in services.
4. The fourth section probes Japan’s latter-day period of
economic malaise beginning in about 1990. Relevant
to this paper is the role of JPM during this difficult
period.
5. The final section, bringing us to the present, sees
Japanese core contributions as largely mature and
unchanging. This most-recent period has been one of
Western innovations in production management
concepts that closely relate to the JPM core, but
one of hits and, often, misses in their application.
1. First generation: early theory
The idea that there might be a type of management
distinctive enough to be labeled Japanese gained
prominence in 1981 with release of two widely sold
business books: Ouchi (1981), Theory Z: How
American Business Can Meet the Japanese Challenge;
and Pascale and Athos (1981), The Art of Japanese
Management: Applications for American Executives.
These authors and a few others had been airing similar
messages in academic journals for some years prior to
the books; for example, Johnson and Ouchi (1974);
Pascale (1978). The focus of the books and articles was
on the softer side of management: lifetime employ-
ment, lock-step promotion, broadened career paths,
suggestion systems, harmony, consensus, commitment
to the firm, and – what got the most attention – quality
circles.
1.1. QC movement
Theory Z included an appendix devoted to quality
circles (QCs). Originally named quality-control circles,
as usually translated from the Japanese, the term was
shortened in the West by omitting the word control.
QCs had received plentiful published attention in the
1970s. See, for example, a bibliographical monograph
compiled by Abbott and Eckstein (1981), which lists a
few dozen early references on QCs. According to one
source Lockheed and Honeywell became, in 1974, the
first (of many) companies in the United States to
implement circles (Introduction to the International
Association of Quality Circles). Promoted by the
growing membership of the International Association
of Quality Circles, founded in 1974 (Ingle, 1982), QCs
became the hottest Japanese management topic by the
early 1980s. Later, as QC fervor began to wane,
academics and consultants came up with a name
change, to small-group improvement activities, which
removed the limiting word, quality. That broadened
the concept’s scope, opening it to more than just
its dominant home, manufacturing. Many organiza-
tions, private and public, service and industrial, were
 R.J. Schonberger / Journal of Operations Management 25 (2007) 403–419
persuaded to implement SGIA’s among their hourly
work forces.
For all that, the QC/SGIA movement did not
penetrate deeply. Today few remnants of it, as formal,
systematic programs, can be found in Western
industry—though alive and churning out improve-
ments continuously in some Southeast Asian coun-
tries. In the latter regard, Singapore and Malaysia
stand out. Possible reasons are: (1) starting in the
1970s, the Singapore government spent heavily on
training and education to bring its industry up to
global – mostly meaning Japanese – standards; much
of the funding was routed through Singapore’s
National Productivity Board. (2) Much of that training
may have rubbed-off on Singapore’s nearest neighbor,
Malaysia, especially since many of the global
electronics companies in Singapore were also operat-
ing plants on Penang Island in Malaysia. (3) The
iconoclastic nature of both countries may translate
into ‘‘staying the course’’ rather than treating quality
circles and other management initiatives as here-
today, gone-tomorrow management fads, as seems to
be the tendency in the West.
1.2. Quality management
Meanwhile, another strain of JPM, the harder
sciences of quality management, had been fast gaining
adherents. A contributing factor was an NBC (1980)
documentary, ‘‘If Japan can. . . Why can’t we?’’ which
featured Dr. W. Edwards Deming. The main message of
this TV broadcast was that Deming’s quality concepts
were major contributors to Japan’s industrial ascen-
dancy. Big industry quickly lined up to engage
Deming’s services. Companies launched initiatives
based on his statistical quality-improvement concepts,
the plan-do-check-act ‘‘Deming circle,’’ and Deming’s
wide-reaching 14 points (Walton, 1986). Dr. Joseph
Juran had been equally active in Japan’s post-WWII
quality-improvement efforts. Many companies also
sought his services, which emphasize the management
of quality (Juran, 1988).
Also instrumental in getting the West’s quality
bandwagon rolling was a well-publicized Hewlett-
Packard study in 1980. H-P reported that failure rates
for three American chipmakers tested about 10 times
worse than for three Japanese manufacturers. Garvin
(1988) states that ‘‘these differences shocked the
industry,’’ noting further that ‘‘the lesson was not lost
on other U.S. managers, in industries as diverse as
machine tools, radial tires, and color televisions. . . For
them, quality took on a new importance.’’
405
While Deming and Juran played key roles in raising
Japan’s, and later the West’s quality consciousness,
much of Japanese quality management development is
owed to the work of various Japanese quality experts.
Chief among them is Dr. Kaoru Ishikawa, whose ‘‘seven
basic tools’’ for process and quality improvement have
been widely taught and used throughout the world. One
of the seven is Ishikawa’s namesake contribution, the
Ishikawa diagram, alternatively known as fishbone
diagram or cause-and-effect chart. The other six tools
are check sheet, Pareto chart, histogram, stratification,
scatter diagram, and Shewart control chart (Ishikawa,
1985, p. 198). Significantly, Ishikawa is also considered
to be the primary developer of the quality-control circle
methodology.
Except for the Ishikawa diagram, though, the
improvement tools are common, rather than of Japanese
origin. Nor do the seven tools seem even close to
explaining how Japanese quality went from ‘‘junk-
shoddy’’ before and immediately after world war II to
global best by the 1970s (‘‘Those of us old enough to
remember the 1930s know that at that time Japanese
products had a well-deserved reputation for poor
quality. . . These products sold only because they were
cheap,’’ Groocock, 1986).
My own first visit to Japan in 1982 was enlightening.
I had, by that time, nearly completed a book, Japanese
Manufacturing Techniques: Nine Hidden Lessons in
Simplicity (1982). My hope was to be able to see and
study Japanese quality first hand, and strengthen the
quality message in the book. In this quest I visited
companies ranging from Panasonic to Mitsuboshi
Belting Co. The quality managers I spent time with
were steeped in quality concepts that had been widely
promulgated by the Japanese Union of Scientists and
Engineers. Table 1 (adapted from Schonberger, 1982, p.
51) lists primary contributors to Japanese quality
excellence, as related to me by those quality teacher-
practitioners. The list is intended to be representative,
though not necessarily comprehensive.
Notably, Table 1 looks at quality assurance from
multiple angles. In the table 20 concepts are listed under
five QA categories. The first, organization, consists of a
single concept—one starkly contrary to Western QA:
production responsibility for quality, with staff depart-
ment’s responsibilities secondary.
Goals, the second category, are the habit of
improvement and perfection. These goals form a
symbiotic pair, as the goal of perfection requires the
habit of improvement.
The third category, basic principles, includes seven
concepts. As regards frequency, the basic principles
406 R.J. Schonberger / Journal of Operations Management 25 (2007) 403–419

Table 1 employing the full complement of aids, prominently

Total quality control: categories and concepts
Category
1. Organization
2. Goals
3. Basic principles
4. Facilitating concepts
5. Techniques and aids
including the statistical quality tools. The last concept is
Concept to formally organize people for improvement through
Production responsibility quality-control circles.
Habit of improvement This broad array of approaches to quality, all
Perfection working together, contrasts sharply with what had been
Process control the standard, fractionated Western quality mindset:
Easy-to-see quality quality control owns quality, only management can stop
Insistence on compliance production, economics determine lot sizes and schedul-
Line-stop for nonconformities ing priorities, maintenance establishes regimens for
Correcting one’s own defectives
100% check
custodial housekeeping and for checking equipment,
Project-by-project improvement and so on. Reflection on this contrast raises the
question: To what extent was Japan’s holist approach a
Quality department as facilitator
Small lot sizes major contributor to Japanese industry’s attainment of
Housekeeping global pre-eminence in quality? While the question
Less-than-full-capacity scheduling cannot be answered herein, later discussion points to
Daily machine checking two types of holist-related failures. First, many Western
Exposure of problems companies simply have never learned and adopted
Fail-safe devices holist quality practices. Second, many others that did
N = 2 (first and last piece inspection) were not able to keep it up and have lost ground;
Analysis tools
QC circles
research data suggests that this failure applies to many
prominent Japanese as well as Western companies.

require both continual process control and intermittent
improvement projects. A facilitating concept is an
environment that makes quality visible—easy to see.
An insistence-on-compliance concept deviates from the
Western quality tradition of an acceptable level of
nonconformities. A pair of concepts accords operatives
line-stop authority to fix nonconformities before they
fester, and responsibility to correct their own defectives.
Finally, where feasible, build 100% checks into the
processes.
Five facilitating concepts make up the fourth
category. The first concept elevates the quality
department to facilitator, rather than doer. Small lot
sizes provide quantity control of nonconformities, plus
short trace-back loops. The housekeeping concept’s
quality role is to avoid clutter, which hides defects and
their causes. Less-than-full-capacity scheduling of the
work force ensures time for quality improvement, not
just production. The last of the facilitating concepts is
daily machine checking, thereby to reduce equipment
causes of nonconformities.
Under the fifth category, techniques and aids, are the
final five concepts. First is creating conditions favoring
exposure of problems—combating tendencies to cover
them up. Installing fail-safe devices ( poka-yoke in
Japanese) aims at catching problems and disallowing
their passage onward. An N = 2 concept means
inspection of not just the first, but also the last piece
in a lot. A quality analysis tools concept calls for
1.3. JIT/lean movement
Total quality control was generally not thought to be
or promoted as a quality system. That label, however,
has been attached – rightly or wrongly – to a parallel
movement: the just-in-time system or Toyota produc-
tion system (TPS). Developed mostly within Toyota and
with its suppliers in the 1950s and 1960s, the JIT/Toyota
system was largely unknown in the West until the late
1970s. The word got out in 1977 in two English-
language articles. One, written by Toyota managers,
was published in the International Journal of Produc-
tion Research (Sugimori et al., 1977). The other
appeared in American Machinist (Ashburn, 1977).
Not much changed until 1981 when JIT/TPS quickly
became a hot topic, aired in assorted books, articles,
conferences, lectures, and management consultants’
advocacy. Today, many industry people who are
involved appear to be unaware that what is now called
lean manufacturing was in full bloom, notably in the
United States, in the early 1980s. A common perception
seems to be that the movement began in the 1990s
following publication of The Machine That Changed
the World (Womack et al., 1990). The following are a
few notable markers of the rise beyond Japan of JIT/
TPS/lean in the 1980s:
 In an English-language book, a chapter, ‘‘Toyota
Production System,’’ co-authored by Taiichi Ohno,
 R.J. Schonberger / Journal of Operations Management 25 (2007) 403–419
generally credited as father or co-father of the TPS
(Ohno and Kumagai, 1981).
 English version of a full book on the Toyota system by
Shingo (1981), Ohno’s co-developer of the system.
 A set of four articles on the Toyota system in the
Industrial Engineer (Monden, 1981).
 ‘‘Stockless production,’’ a 29-min video taped at
Hewlett-Packard, Greeley Division, in 1983. In the
video, six H-P managers build a mock product out of
Styrofoam and masking tape, first in the large-batch
mode, then in small lots, and finally one-piece flow in
a tight cellular configuration. Performance under each
mode dramatically demonstrates the advantages of
JIT. The video has been widely sold, copied, and
played in hundreds of companies and universities.
Other similar videos (e.g., Britannica’s ‘‘Just-in-time,
just-in-case,’’ 1987) have extended the impact. Many
companies devised their own hands-on batch-versus-
JIT simulations (e.g., with Legos), becoming the
dominant JIT/lean training tool from the 1980s to the
present.
 The Repetitive Manufacturing Group (RMG), orga-
nized in 1979 under a grant from and sponsorship of the
American Production and Inventory Control Society
(APICS), held a seminal conference at Ford World
Headquarters auditorium in October 1980 (Repetitive
manufacturing group, 1981). Principle speaker Fujio
Cho, current president of Toyota Motor Corporation,
left the Detroit audience stirred up, with some deciding
it was time to act on the message. An RMG meeting at
Kawasaki’s motorcycle plant in Lincoln, Nebraska,
June 11–12, 1981, triggered some of that action. The 50
participants, 47 from industry plus three academics,
were exposed to Kawasaki’s well-developed JIT
system, a clone of Toyota’s system. An eye-opening
experience, several of the group went on to head their
companies’ JIT initiatives (e.g., at G.E., Ford, Black &
Decker, Briggs & Stratton, and Bendix), others onto the
lecture circuit and to lucrative careers in management
consulting. Some of the attendees began churning out
articles, and four of them published books on JIT/TPS
(Schonberger, 1982; Hall, 1983; Hay, 1988; Wantuck,
1989).
While the workshop at Kawasaki had extraordinary
spin-off effects, the RMG’s series of meetings at other
manufacturers’ sites contributed further to the quick
growth of the JIT movement. For example, ‘‘Buick
City’’ in Flint, Michigan, hosted the group in November
1982. At that time the giant assembly plant already had
‘‘about 150 parts (60% of all dollars) on JIT delivery to
final assembly.’’ Its 10-point JIT plan included small
407
work units, employee involvement, making problems
visible, improving quality, minimizing set-up time, and
synchronizing all production to final assembly (RMG,
1982). But the Kawasaki visit was more enlightening.
Unlike a massive automobile plant with its mazes of
non-value-adding conveyors, the compactness of a
motorcycle plant and the smaller size of its product
allow the features of JIT to stand out.
Other meetings of the RMG took place at plant sites
of Briggs & Stratton, April 18–19, 1979; Champion
Spark Plug, September 6–7, 1979; Bendix, May 21–22,
1980; Steelcase, November 4–5, 1981; Schlage Lock,
April 14–15, 1982; NOK, April 20–22, 1983; Hewlett-
Packard, October 5–7, 1983; Black & Decker, March
29–30, 1984; Deere & Company, September 6–7, 1984
and IBM, September 24–25, 1984. Each of these sites
showed-off it’s own early JIT achievements and plans.
In 1983 the RMG launched The Just-in-time
Technical Development Newsletter, which turned out
five issues between August 1983 and September 1984.
The newsletters reviewed findings of study missions to
Japan and discussed the various elements of the JIT
system. Principally, however, they featured the JIT
plans and implementations of a growing list of
prominent U.S. manufacturers. The motor-vehicle
companies on the list were Stanadyne Diesel, Deere,
Detroit Diesel Allison, and AP Parts. The involved
electronics companies were RCA, ITT Telecom,
Tektronix, Hewlett-Packard, and Motorola. The rest
were a diversity of manufacturers: 3M, Colt Industries,
United Technologies, Alladin Industries, Omark Indus-
tries, G.E., FMC, Richardson-Vicks, Smith Interna-
tional, Franklin Electric, Black & Decker, and
Ingersoll-Rand.
The components of the JIT system became well
known and, in some of the companies, thoroughly
implemented (see, for example, the Hewlett-Packard,
Kawasaki, and Tennant Company case studies in
Schonberger, 1987). Those components included work
cells with cross-trained operatives in frequent job
rotation; quick set-up and changeover; frequent, small-
lot production and transport; pull/kanban/one-piece
flow and fewer and smaller containers. The companies
were employing quality at the source; stop-and-fix;
supplier partnership; employee involvement; total
preventive maintenance and target costing. And they
responded to the three Ms, the five whys, the seven
deadly wastes, and the five Ss. Primary measures of
success included minimization of throughput times, set-
up times, flow distances, fork trucking, defects, rework,
equipment down times, inventories, administrative
transactions, obstacles to visibility (e.g., storage-rack
408 R.J. Schonberger / Journal of Operations Management 25 (2007) 403–419
heights), and clutter. The batch-and-queue system,
opposite to JIT and theretofore dominant in Western
industry, concerned itself with none of those measures,
nor employed any of JIT components.
In January 1985, the Repetitive Manufacturing
Group elected to split-off from APICS, primarily
because the APICS mission revolved around production
and inventory control, whereas JIT was multidisciplin-
ary and multifaceted (Sage, 1985). The members re-
launched themselves as the Association for Manufac-
turing Excellence, which thrives today with chapters in
four countries.
But APICS had not been losing interest in JIT. In July
1983, borrowing the title of Hall’s (1983) book, Zero
Inventory, APICS mounted a zero inventory crusade
(Ames, 1983), and JIT issues remained prominent in
APICS meetings and publications throughout the 1980s
(zero inventory – the book and the crusade – was all
about JIT/TPS; bringing inventories to zero was simply
cast as an idealized but obviously unreachable result.)
Many or most of the leading management consulting
companies made JIT among their most heavily
promoted services to manufacturing clients. The
consulting arm of Price-Waterhouse contracted with
Kawasaki to promote the ‘‘Kawasaki production
system,’’ capitalizing on Kawasaki’s Nebraska plant
having become the premier Western site for JIT
benchmarking. Kawasaki had even been charging
admission for the legions of visitors from industry,
consultancies, and academia (these days, visitors on
learning missions tend to gravitate toward Toyota’s
Georgetown, KY, plant, or Toyota plants in other
countries. The size and complexity of a Toyota plant,
however, can hardly offer the clarity and transferability
that visitors to Kawasaki should have experienced in the
1980s).
While JIT implementations and consulting had
largely been limited to manufacturing operations, it
gained executive-level stature with publication of
George Stalk, Jr.’s (1988), award-winning Harvard
Business Review article, ‘‘Time—the next source of
competitive advantage.’’ Stalk was then a senior
consultant (later senior executive, and then board
member) with the Boston Consulting Group, among the
foremost consultancies specializing in business strat-
egy. The article presented the strategic advantages of
quick, flexible response, a la Toyota, pointing in
particular to how it had endowed Japanese industry with
a distinct competitive advantage. By that time, most of
the writings and implementations of JIT had de-
emphasized inventory reduction as the primary target.
The emphasis had shifted, instead, to quick response,
which is more relevant to customers and therefore, as
Stalk observed, to competitiveness and strategy.
The perception that time-based strategic manage-
ment was just for manufacturing withered in light of
Stalk’s persuasive message. That plus TQM’s eyes-of-
the-customer slant may have been the catalysts for
banks, retail stores, medical clinics, and so on to
implement kanban-like policies that shortened custo-
mer waiting times (Knod and Schonberger, 2001,
chapter 11). Kanban, in any setting, limits the length of
and time in queues.
Not content with treating JIT as tactical or even
strategic, some of its ardent advocates began calling JITa
‘‘philosophy’’ (for example, Harvey, 1986, citing JIT as
philosophy within Hewlett-Packard; Collis and Bazeley,
1986, citing the same at the Ingersoll Engineers
consultancy in the U.K.). Once planted, the philosophy
rubric was not readily dislodged, still showing up in
works by Schniederjans (1993) (‘‘a winning strategy,
philosophy, methodology, or approach,’’); Cammarano
(1997) and the APICS Dictionary (2005).
2. Second generation: mergers and extensions
Though the philosophy label seems a stretch, it may
have emerged out of recognition that the three
variations on Japanese production management as
presented above are of a piece. The mature, more
encompassing view, a second generation, if you will,
soon took root.
One move in that direction had its beginnings in
1983. The American Productivity Center in Houston
organized an on-line modem-to-modem network of
professionals interested in comparing notes and ideas
about JIT and TQC. The network, co-chaired by Lee
Rhodes of Hewlett-Packard and Richard Schonberger
of the University of Nebraska, included managers from
FMC, Omark Industries, Storage Technology, Honey-
well, Harris, Clark, Xerox, Beatrice Foods, R.J.
Reynolds, Pitney-Bowes, Texas Instruments, 3M,
GM, and Scovill, as well as the University of Michigan.
Perhaps half were heads of their companies’ quality
function, and the rest were a mix of strong JIT
advocates and company leaders of more eclectic
improvement approaches. An early topic of discussion
was the relationship between JITand TQC. Was either a
subset of the other? The group quickly settled the
matter: they were mutually supportive co-equals.
Results of this and six other on-line computer
conferences were summarized for a 1983 White House
Conference on Productivity (Computer Conferences,
1983).
 R.J. Schonberger / Journal of Operations Management 25 (2007) 403–419
By then the co-equals viewpoint was becoming
established, as indicated by common use of the joint
term, JIT/TQC. Mainstream JIT had quality as an
essential element: a highly synchronized, tightly linked
JIT system could not tolerate spasms of defects, scrap,
and rework. For its part, JIT enhances quality
improvement, exposing defects and nonconformities
while their causes are still fresh, and disallowing large,
potentially defective lots (Schonberger, 1984).
The synergism was not limited to JIT and TQC, but
easily accommodated quality circles as well. QC’s work
naturally in support of the quality-improvement
mandate of TQC. JIT/lean, in turn, calls for various
kinds of employee involvement, notably cross-trained
cell teams operating in the stop-and-fix mode. The
systematic modus operandi of quality circles potentially
makes such teams all the more effective in carrying JIT/
lean forward.
While most of the JIT system had developed within
the Toyota family of companies, the quality component
originated elsewhere, as has been noted. Nor was
Toyota the origin of quality circles (an Ishikawa
innovation), total preventive maintenance (said to have
developed at Nippondenso in 1969: Shirose, 1996, p. 5),
or 5S (origin unknown)—though Toyota and its
suppliers readily took them in (see, also, Nakajima,
1988, on TPM; Galsworth, 1997, on 5S.)
Still another addition to JPM’s concepts is the term
kaizen, meaning continuous improvement, and the
kaizen event, which is an approach to continuous
improvement. Kaizen events – kaizens, for short – seem
to have arisen in the early 1990s and have become
popularly thought of as a component of the Toyota
production system. Imai (1986) may have introduced
the word kaizen to the West (a search of many earlier
English-language books and articles, including those on
the Toyota system, failed to turn up any use of the
word). Imai’s book treated the word kaizen as including
TQC, QC circles, suggestions, and other improvement
methods, and was not focused on kaizen events.
A limitation of kaizens is that, belying the meaning
of the term, they are discontinuous. Kaizen events are
projects that pull together diverse people, whereas
quality circles are more continuous and embedded. The
combination of QC’s for continuity and kaizens for jolts
would seem to be ideal. In recent years companies’
improvement efforts seem to have tilted toward kaizen
events generally dominated by salaried experts, and
away from empowered associates acting in a QC-like
mode.
Two other management innovations, both quality-
centered, round out Japan’s contributions to manage-
409
ment. One is Taguchi’s quality loss function, featuring
robust design and efficient experimental design
methodology—dating back to his work with Fuji Film
Co., in about 1963 (Taguchi, 1981). The second is
quality function deployment (QFD), developed by
Professors Shigeru Mizuno and Yoji Akao in the late
1960s. QFD is a matrix approach that combines
prioritized customer requirements with product design
criteria and competitive considerations (Mizuno and
Akao, 1994). QFD is sometimes referred to as VOC –
voice of the customer – or, for the shape of the QFD
matrix, ‘‘house of quality.’’ Though the Taguchi
methods and QFD have existed since the 1960s, they
were generally unknown to the West until the late
1980s.
That is about it for Japanese production manage-
ment. That country’s era of significant contributions to
manufacturing management (and general management
as well) appears to have long-since ended. Its quick-
response core, the Toyota production system, seems to
have been completely developed and implemented
within the Toyota family of companies by the early
1970s, and has been largely static since.
That long-ago innovative era in Japan, however, has
been a vital catalyst for two developments that have far-
reaching global significance on manufacturing practice,
and a third with significance for theory in general
management and operations management.
First of all, as has been alluded to, the JIT/TQC/QC
regime is holistic: it presses – hard – against the silo
system. It breaks up the shops on the manufacturing
floor and reorganizes them as focused ‘‘plants-in-a-
plant’’ and work cells that are cross-functional and act
somewhat like small companies. The staff departments
conform by losing much of their functionalism, and
their employees. For example, process engineers and
buyer-planners may move their desks to the production
floor, each assigned to a small number of cells.
Departments filled with inspectors, material handlers,
schedulers, expediters, custodians, stockroom atten-
dants, job classification staff, and so on downsize
sharply as much of their roles are absorbed by involved
production teams, or eliminated as results of root-cause
corrections. Of the silo system we may say, good
riddance.
The second development is subtle. Intensive com-
petition with the Japanese – and, later, with all the
companies that learned, adopted, and adapted the
Japanese innovations – served as a comeuppance to
complacent Western companies. It opened their eyes
and minds to the necessity for continual learning and
training, which these days may be the surest, highest
410 R.J. Schonberger / Journal of Operations Management 25 (2007) 403–419
return on investment there is. From our many
transformed companies – aspiring to be learning
organizations (Senge, 1990) – came new rounds of
innovation, which effectively moved the main locus of
production management innovation across the Pacific
Ocean to North America and beyond.
The third development, this one more in the realm of
theory, has to do with notions about limits to
effectiveness: a trade-off viewpoint that says companies
generally cannot excel in more than, perhaps, one major
competitive attribute. Porter’s Competitive Strategy
(1980, p. 85) offers cost leadership, differentiation, and
focus as strategic options, maintaining that it is ‘‘rarely
possible’’ successfully to pursue more than one of the
three at the same time. In a small irony, his book came
out around the same time as some in operations
management began to grasp the essentials of the Toyota
system, which seemed to provide global superiority in
cost, quality, and flexibility – plus quick response – all at
the same time.
That high quality lowers, not raises cost was obvious
to Deming and Juran; is a book title, Quality is Free, by
Crosby (1979) and was given further support in an
article, The Incline of Quality, by Leonard and Sasser
(1982). Two decades later, trade-off viewpoints seem
much suppressed. As Boyer and Lewis (2002) suggest,
trade-offs may be irrelevant in this hypercompetitive
global economy that presses for improvement in
multiple dimensions. Academic interest has shifted
largely to the nature and subtleties of multiple or
cumulative capabilities (e.g., Flynn and Flynn, 2004).
That shift is in tune with findings reviewed later in this
paper on difficulties companies are having in mounting
and sustaining a lean effort. Lean management may take
in so many complimentary concepts and techniques that
keeping them going in the right direction is like herding
cats. The next section presents more of the ‘‘lean herd’’
and the compounding difficulties.
3. Western modifications and enhancements
The Japanese-production-management innovation
engine having stalled, the Western one revved up. It
generated methodologies that have made JPM methods
more palatable, implementable, and effective. The
following summarizes, roughly in sequential order, the
main, JPM-enhancing Western contributions, namely,
cost of quality, design for manufacture and assembly,
pay for skills/job rotation, direct- and activity-based
costing, total quality management and teaming, public
honors, reengineering, continuous replenishment and
vendor-managed inventory, lean manufacturing, six
sigma, and collaborative supply-chain management;
finally, the term world-class manufacturing serves to
sum up most of the Japanese and complementary
Western concepts.
3.1. Cost of quality
Following NBC’s 1980 broadcast, ‘‘If Japan can. . .
Why can’t we?’’ companies turned not only to Deming
and Juran, but also to author-consultants Crosby (1979)
and Feigenbaum (1961). Both advised companies to
compute their ‘‘cost of quality’’—really their internal
and external costs of bad quality. Expressing the total as
a percent of sales would produce the necessary shock
value to make quality a high company priority. Among
those taking schooling at Crosby’s Quality College in
Florida were senior executives from Milliken, Xerox,
and Motorola, each company later receiving America’s
new Baldrige prize for quality. Though it was not a
component of Japan’s TQC, cost of quality was
instrumental in getting financially centered U.S.
executives’ attention, thereby to launch their own,
successful total-quality efforts.
Feigenbaum’s 1961 book and Ishikawa’s in 1985
share the title, Total Quality Control, but the impacts of
their work were quite different. Ishikawa’s giant
contributions to Japan’s quality ascendancy preceded
his book by many years. Feigenbaum’s book, on the
other hand, was like the works of Deming and Juran—
appreciated right away by quality professionals but
without much genuine influence until after the full story
of Japan’s TQC became known.
3.2. Design for manufacture and assembly (DFMA)
The most important of all the enhancements to JPM
may be design for manufacture and assembly. Devel-
oped and codified by Professors Boothroyd and
Dewhurst at the University of Rhode Island, DFMA
provides systematic methods for standardizing designs
of component parts and simplifying and reducing the
costs of manufacture and assembly of products and
components. Their early research reports and papers
were released in the late 1970s and early 1980s. Within
a few years, the engineering magazines were dotted
with DFMA articles (e.g., Boothroyd and Dewhurst,
1988), and manufacturers flocked to DFMA workshops.
It is easy to see that implementation of JIT/TQC
becomes simpler as numbers and variety of parts are
reduced: fewer technologies, fewer skills, fewer
equipment types on which to reduce changeovers,
fewer processes to synchronize over shorter handling
 R.J. Schonberger / Journal of Operations Management 25 (2007) 403–419
distances, fewer quality variables to master, fewer stock
locations, and much more. Having originated in the
U.S., DFMA bestowed competitive advantages on U.S.
and North American manufacturers.
3.3. Pay for skills/job rotation
The versatility and involvement that JIT/TQC
requires of shop-floor associates was in direct conflict
with rigidities of Western job descriptions, solidified as
work rules in unionized plants or just entrenched
otherwise. To get their work forces cross-trained, some
Western companies instituted pay-for-skills/pay-for-
knowledge (Perry, 1988). Once new skills are acquired,
and perhaps tested and certified, frequent job rotation
steps in to ensure that the skills are retained. When
Milwaukee Electric Tool Corp., replaced batch man-
ufacturing with multiple JIT cells, they eliminated job
grades, provided well-rounded training in both skills
and improvement methods, and instituted job rotation at
least every 10 days (Tonkin, 1997). But is every 10 days
often enough? Cell teams at O.C. Tanner in Salt Lake
City rotate every 2 h (Schonberger, 2003a).
3.4. Direct- and activity-based costing
The cost-accounting profession became active in the
1980s in championing innovations in cost management
(McNair, 1988). Conventional product costing was
known to be inaccurate, mainly because of low-validity
methods of allocating overhead. JIT/TQC opened the
door to advances in the treatment of overhead costs. For
one thing, as mentioned above, it reduced some of the
overheads: inspectors, material handlers, and so on. For
another, JIT-focused work cells absorb and contain
much of the overheads, partly by making quality, set-up,
preventive maintenance, data collection, and problem-
solving part of the cell associates’ jobs and partly by
reassigning some staff (process engineer, buyer-
planner, trainer) to the cells where their pay merges
with that of direct labor (Schonberger, 1991).
Management accountants who were strongly repre-
sented in CAM-I (the Consortium for Advanced
Manufacturing-International) were especially turned
on to a new accounting tool called activity-based
costing (ABC). Much of the early development of ABC
is owed to such JIT-enthused accounting faculty at
Harvard Business School as Robin Cooper and Robert
Kaplan (Cooper and Kaplan, 1988; Cooper, 1988). ABC
takes care of shrunken overheads remaining after JIT/
TQC does its work; the method is a bit like direct
costing in that it directly associates the cost of each
411
separate overhead activity with the product being made.
These advances in product/component costing are
important, because, just to cite two examples: revealing
the true high costs of the batch system can be what
sways management to toss it out in favor of lean and
true high costs of proliferation of parts and suppliers can
be what ushers in DFMA and supplier reduction.
3.5. Total quality management and teaming
Books by Ishikawa and Feigenbaum provided a term,
total quality management (TQM), that the West came to
prefer over Japan’s term, total quality control. In the
early years of TQM’s popularity, the mid-1980s, it may
have been considered as the same thing as TQC: high
emphasis on quality in the eyes of the customer, an
upgrade from typical earlier fixations on operational
quality. Before long, though, the employee involvement
and team concepts resident in TQM began to receive
most of the emphasis. That matched well with agendas
of the greater organizational-behavior community, and
by the 1990s articles on TQM were primarily about
empowerment, teaming, self-directed work teams
(SDWT), and leadership, with process and quality
improvement sometimes treated as little more than an
example (Hackman and Wageman, 1995); those TQM
topics, along with customer focus, played about as well
in the service sector as in manufacturing. For those
whose concern was still or mainly on quality, the
shortened term total quality came into use (Total
Quality Leadership Committee, 1992).
3.6. Public honors
A variety of awards and prizes have been established
to encourage and publicly recognize JPM-related
achievements, as well as offer standards that promote
key concepts. Japan’s Deming prize for quality,
awarded annually since 1950, recognizes company
achievements in total quality control. Once TQC had
migrated to the West, the United States followed suit by
establishing the Malcolm Baldrige national quality
award, presented annually since 1988; many of
America’s states, plus many other nations and their
provinces and states have followed with their own
quality awards. The ISO-9000 series for international
registration to quality standards also presses companies
to commit to quality. While the initial ISO-9000 criteria
were criticized as being too much a documentation
exercise and not enough a gauge of quality improve-
ment, that changed with the release of ISO-9000:2000.
That year-2000 version requires evidence of process
412 R.J. Schonberger / Journal of Operations Management 25 (2007) 403–419
improvement. On the other hand, the criteria for the
Baldrige prize and other nation’s quality awards have
taken rather an opposite tack: away from process
improvement and related operations management issues
and toward general management, leadership, and
business and financial results (Schonberger, 2001;
Dean and Tomovic, 2004).
Awards have been established as well to recognize
achievements in JIT/TPS/lean. One is the Shingo prize,
named after Shigeo Shingo, who helped father the
Toyota system. First awarded in 1989 for manufacturers
in the U.S., the annual Shingo prize now includes
Canada and Mexico and some states are awarding local
Shingo prizes. Industry Week magazine’s Best Plants
award, given annually since 1990, rates plants some-
what similarly to the Shingo prize, as does the
Management Today’s Best Factories award in the
United Kingdom, inaugurated in the late 1980s.
3.7. Reengineering
Hammer’s milestone article on reengineering (1990)
advocated business process redesign. The aim was to
simplify and eliminate wastes, which sounds a lot like a
pursuit native to the Toyota production system.
Hammer, an MIT professor of information technology,
said that process redesign should precede information
system automation; else it is automation of wastes. In
Toyota-speak, just change one word so that the phrase
reads, ‘‘process redesign should precede production
system automation.’’
Reengineering might have become a valued comple-
ment to JIT/TPS. It turned out that many companies and
their consultants preferred to treat business process
redesign as a way to cut employment. To the distress of
Hammer and his colleagues, ‘‘once out of the bottle, the
reengineering genie quickly turned ugly’’ (Davenport,
1995).
3.8. Continuous replenishment and vendor-
managed inventory
The pull system – a customer’s use as signal to
produce – is a TPS basic, but one that Japanese and later
Western manufacturers were tending to apply restric-
tively: largely within manufacturing. Thanks especially
to textile manufacturer Milliken and retailer Wal-Mart,
the pull system has moved forward into retailing. To its
already well-established quality initiatives, Milliken, in
the mid-1980s, added a JIT commitment and a strategy
for linking its production to pull signals downstream at
retail sale points. To give this strategy impetus, Milliken
sponsored a meeting with major apparel makers and large
retailers in Chicago in 1986. Retailers had long been
using barcode scanning, but mainly to cut labor costs.
The strategy advanced at the meeting was for them to
electronically send their daily barcode data directly to the
entities in the supply chain, all the way to textile maker
Milliken. Armed with that nearly real-time data, the
manufacturers would manage the retailers’ inventories in
a continuous replenishment mode; this arrangement
came to be called vendor-managed inventory (or, in
groceries, efficient consumer response). Soon, banners in
Milliken’s customer showrooms were proclaiming,
‘‘Milliken: the home of quick response.’’
Though a manufacturer kicked-off the quick-
response campaign, a retailer, Wal-Mart, proved to be
the chief instigator for its fruition. Wal-Mart has led the
world in implementation of barcode-triggered contin-
uous replenishment with vendor-managed inventory
(Thornton, 1995); direct shipments, bypassing inter-
mediaries (Blumenthal, 1991); cross-docking (Kulwiec,
2004); and more.
3.9. Lean manufacturing
The Machine that Changed the World (Womack
et al., 1990) reported on a study, funded through a $5
million grant, of 90 of the world’s automotive assembly
plants, and offered lean manufacturing as a synonym for
the superior practices pioneered by Toyota. The report
was just in time, because with initiatives such as
reengineering and TQM diverting companies’ attention,
JIT enthusiasm had slacked-off. Though the concepts
and techniques advanced under the lean label were the
same as those of JIT a decade earlier, the hard data from
the study – of the world’s dominant industry – was
compelling. Lean caught the attention of many
companies and whole industries (e.g., aerospace/
defense) that had not participated in the movement’s
first generation. In addition, a sizeable number of
manufacturers that had lost early JIT gains have been
rejuvenating the effort under the lean banner.
Later in the 1990s, value-stream mapping, a useful
tool for implementing lean manufacturing, emerged
(Rother and Shook, 1998). A variation of process flow-
charting, the idea is to map the routings necessary to
produce a family of products. The maps may extend
beyond a single entity, to include links to suppliers and
customers. Just as Taylor- and Gilbreth-era flow-
charting features before charts, and after charts with
wasted steps removed, value-stream mapping includes
present-state and future-state maps, noting non-value-
adding elements to be excised.
 R.J. Schonberger / Journal of Operations Management 25 (2007) 403–419
3.10. Six sigma
Quality professionals are aware that the six-sigma
methodology employs existing, well-known tools: the
quality sciences, based on the works of Deming, Juran,
Ishikawa, Taguchi, and others. Nevertheless six sigma, a
Motorola innovation, has been a positive force.
Presentation – the work of excellent chefs – can make
food taste good. And presentation – black belts and
green belts honoring six-sigma experts – can make
statistical process improvement, and the systematic six-
sigma methodology taste good, and do good work.
3.11. Collaborative supply-chain management
Supplier partnership is another basic of the Toyota
system. In recent years Western industry has pursued
that idea under the broadened name, supply-chain
management (SCM)—with strong support from the
information-technology industry. More essential than
the computer systems, though, are front-end and
continuing collaborations that must break down the
many human, functional, and company-to-company
barriers. Two companies turn up time and again in
published reports about such collaborations: Wal-Mart
and Dell.
Wal-Mart’s collaborations are best developed with
such major supplier-manufacturers as Colgate-Palmol-
ive and Procter and Gamble (Saporito, 1991). As a
Harvard Business School case study puts it, ‘‘Although
Wal-Mart had developed a reputation for bargaining
hard, it had also progressively tried to build partnerships
with a widening circle of suppliers’’ (Ghemawat et al.,
2003). The proof is in the numbers: According to
another case study more than a decade ago, Wal-Mart
‘‘has an 80% time advantage over a typical competitor
in the industry.’’ Its rapid replenishment cycle (twice
weekly versus the typical every 2 weeks) results in
‘‘asset turnover of about four times the industry
average’’ (Society of Management Accountants, 1994).
Dell Inc.’s collaborations are equally notable.
Knowing the state of suppliers’ inventories and capacity
all the time allows Dell to guide customers away from
shortages and, with attractive prices, toward product
features for which there are capacity and inventory
excesses in the supply chains. In Hall’s (2000) words,
Dell achieves ‘‘two-knob control’’—over suppliers and
customers, mostly to their benefit as well as Dell’s own
advantage. Dell’s total on-hand inventory, just 4.1 days’
worth in 2005 – for a company that makes PCs to
customer order and delivers in under a week – testifies
to the effectiveness of its system.
413
3.12. World-class manufacturing
World-class manufacturing is a term befitting the
large collection of best practices discussed above
(Schonberger, 1986, 1996). A more precise, but
cumbersome term would be world-class manufacturing
company management, since it includes innovative
initiatives that touch most of the manufacturing
company functions: product design, sales and market-
ing, the customer and supply chains, logistics,
purchasing, costing, information technology, plant
and equipment design, other manufacturing support
functions, and manufacturing itself. The elements of the
world-class agenda that are native to the West have been
slow to gain acceptance in Japan. Repercussions of that
are the topic of the next section.
4. Japan’s and Japanese manufacturers’ lost
decade
The 1990s decade was one of economic decline and
malaise for Japan (Stieglitz, 2003). When an economy
turns sour, manufacturing’s helpful reaction would be to
pull in and reach out: work force lay-offs, plant
closures, production and inventory reductions, and
aggressive use of global best practices. In Japan
industry did not help. Specifically, Japan was
1. late to restructure,
2. late to outsource off-shore,
3. late to learn and implement design for manufacture
and assembly,
4. late to employ modular deliveries from suppliers, and
5. Japan had been bulking up on inventories, its lean/JIT
heritage seemingly losing ground.
4.1. Restructuring
Finally, late in the decade, Japanese companies
reacted. In 1999 Sony announced that it would slash
17,000 jobs; Mitsubishi Electric would trim 10% of its
146,000 global employees; Nissan would close three
assembly plants and two engine facilities, and reduce
employment by 21,000. These three companies ‘‘barely
represent the tip of the iceberg of major Japanese
companies that have announced restructuring plans’’
(Ostram, 2000). So much for the lifetime-employment
aspect of Japanese management.
Resistance to mergers, acquisitions, and other
alliances with foreign companies also was melting.
Ford took a major stake in Mazda, Daimler-Chrysler the
same in Mitsubishi automotive, and Renault in Nissan
414 R.J. Schonberger / Journal of Operations Management 25 (2007) 403–419
(Robertson, 2004). With Renault’s help, a lot of it in the
DFMA arena, Nissan emerged in 2004 as the world’s
highest operating-margin automaker—after losing
money nearly every year of the 1990s (Bremner
et al., 2004).
Part of the restructuring had to do with the keiretsus.
Big six and other banks have long been saddled with
non-performing loans to many companies that in other
countries would long since have gone bankrupt. When
major manufacturers began to restructure, the keiretsus
that had propped up the money-losers no longer were
‘‘big happy famil[ies]’’ but became ‘‘a bit dysfunc-
tional’’ (Williams, 2000). No doubt, few any longer
view Japan Inc. as a positive force in that country’s
economy.
4.2. Off-shoring
As the New York Times puts it (Belson, 2004), ‘‘The
qualms are gone. Now even Japan’s pride and joy, its
top-end electronics manufacturers are coming to
China.’’ More accurately, Japan, like other industria-
lized countries, is selectively moving production to
developing countries – especially of products involving
a lot of touch labor – and successfully exporting to the
developing countries its higher-end products, such as
machine tools (Economist, 2004).
4.3. Design for manufacturing and assembly
Various sources indicate that Japanese manufac-
turers were, at first, slow to learn and adopt DFMA. That
is not surprising since the concept’s origin was not
Japan, but the U.S. An early, notable application of
DFMA (one of many among U.S. manufacturers) is the
IBM Proprinter. Featuring uni-directional push-and-
snap assembly and minimal number and variety of parts,
the Proprinter received PC Magazine’s 1985 product
award. Eighteen years later Sony and Toshiba saw the
light. Sony ‘‘will seek to reduce the number of parts to
100,000 from 840,000,’’ and Toshiba ‘‘would cut the
number of its parts by 20%’’ (Ishibashi, 2003).
In automotive, Nissan tallied 28 different chassis, 87
steering wheels, 110 radiators, 200 ashtrays, and 1200
floor carpets. Calsonic, a Nissan supplier, was required
to make more than 2000 kinds of mufflers, most in only
a few units a year, prompting Calsonic’s president to
say, ‘‘We have to maintain the presses, dies, and
inventory on all those. . . mufflers for the lifetime of the
cars. . . 9 or 10 years. It’s terrible!’’ (Chandler and
Williams, 1993). In 1997, a fire destroyed a brake-valve
supplier’s plant, shutting down 20 Toyota plants. In their
assessment of causes, ‘‘Toyota production officials were
dismayed to learn that they needed 200 P-valve
variations. . . with many complex tapered orifices that
require highly customized jigs and drills’’ (Reitman,
1997). At both Nissan and Toyota, DFMA was missing.
James Harbor, one of the world’s foremost authorities
on the motor-car industry (the Harbor Report has long
been highly influential in the industry) does not agree
that Toyota is among the laggards in standardizing parts.
He avers, on the contrary, that Toyota is an industry
leader in this arena (Harbor, 2005).
By about the mid-1990s, some spokespersons of
Japanese auto companies were talking about standardi-
zation and reduction of parts (e.g., Teresko, 1995). But
was it more talk than action? Executives at four
remanufacturers (two of automotive engines and two of
components such as alternators and starters) would say
so. They agree that Japanese proliferation of component
parts long has and still does make their remanufacture
complex and costly (Schonberger, 2004), as compared
with Ford and General Motors. Whether or not Ford and
GM truly are advanced in DFMA (opinions on this seem
to be mixed), they should be since DFMA originated in
their own back yard. The advantage clearly goes to the
Japanese, however, as regards standardized automobile
platforms. Toyota’s and Honda’s ability to run mixed
models in a single plant and to quickly launch new
models is closely related to their attention to this
alternate (though not necessarily more important) kind
of standardization (Robinet, 2001; Naughton et al.,
1997). This standardization furthers the cause of
flexible response, for which the Toyota production
system is noted.
4.4. Modular sourcing
Modular design is an element of DFMA. Modular
sourcing is much more. The end-product assembler
bestows upon a few suppliers responsibility for
delivering pre-assembled modules. One result is
order-of-magnitude reduction of the number of parts
at the final assembly site, greatly simplifying assembly
and shrinking assembly-line length and plant size. It
also reduces the supplier base to a more manageable
number. The modular supplier, or integrator, gains more
expertise, more value added, and presumably more
stability.
In the electronics industry modular sourcing began in
the mid-1980s. Companies such as Hewlett-Packard,
IBM, and Calcomp had their sheet-metal suppliers
become modular integrators who fabricated metal
frames and then loaded the frames with wiring and
 R.J. Schonberger / Journal of Operations Management 25 (2007) 403–419
certain other components. Today, the modular suppliers
have grown into that role so deeply as to have spawned a
mostly new, fast growing industry sector, contract
electronics manufacturing.
Modular sourcing is not nearly so advanced in
automotive, but General Motors, Ford, Volkswagen, and
Daimler-Chrysler have been working at it. In the early
to mid-1990s GM, Ford, and VW built pilot plants in
Brazil, and Daimler did so in Hambach, France (the
Smart car), and in Vance, Alabama. Each is a smaller
plant usually with modular suppliers nearby or even
occupying space within. On the other hand, ‘‘Unlike the
U.S. and European auto industries, the Japanese auto
industry has shown few visible initiatives toward
modularization’’ (Takeishi and Fujimoto, 2001).
An irony is that, by reducing complexity, parts, flow
distances, and suppliers, modular sourcing furthers the
goal of the Toyota system to become lean. Japanese
automakers’ reluctance to take advantage of this may
partially explain why their plants are generally much
larger than those of U.S. automakers (for plant size data,
see McAlinden, 1997). An advantage of the larger
Japanese automotive plants is less potential damage in
moving large on-site produced components – such as
monocoque auto bodies – to final assembly. Very large
plants, however, have a built-in bias against leanness,
since long distances from receiving docks and among
major processes necessitate larger in-process inven-
tories, and greater investment in non-value-adding
conveyors holding large quantities of inventory; the
conveyors and that inventory, in turn, introduce their
own opportunities for damage and represent delays in
discovering quality or other problems and their likely
causes.
5. State of the art: global best practices
anchored by an enduring Japanese core
The proposition has been advanced that Japanese
production management, while potent itself, becomes
stronger when linked with several complementary
Western innovations. The combination makes up a
lengthy list of essential elements of highest global
standards of competitiveness. Supporting evidence
comes from a study of inventory turnovers for more
than 1200 companies in 32 countries grouped into nine
regions and 35 industry sectors. The research includes
only publicly held companies and only those for which
at least 15 recent years of data are available—from
audited financial statements. Descriptions of the study
and main findings have been published elsewhere
(Schonberger, 2002, earlier findings, when the database
415
was less than 600 companies; Schonberger, 2003b,
when the database had exceeded 1000 companies). The
topic at hand limits discussion here to a few highlights,
plus brief commentary about inventory turnover in the
accompanying box.
Inventory turnover—surrogate for lean-
ness
While inventory turnover (annual cost of
goods sold divided by value of inventory) is
an imperfect competitiveness metric, it is a
rather telling, highly visible and countable
measure of leanness. Inventory is a catch
basin for a multitude of ills needing
correction in order to stay on the world-
class pathway.
Though low/reducing inventory is a good
surrogate for the lean side of Japanese
management, there is no such objective
way to gauge and compare quality or
employee involvement from company to
company or year to year. However, a lean
system – one lacking in protective buffer
inventories – will self-destruct without
quality, which tends to thrive in an envir-
onment of an empowered work force. For
that reason, the inventory-turnover data
tell something about process quality and,
to some extent, employee involvement.
5.1. Lean trends
A central purpose of the research (which continues,
new data added each year) is to probe ability to sustain a
lean trend. All of the 1200-odd companies are graded on
an A–B–C–D–F scale, then converted to a numeric. A
company with clearly increasing inventory turnover for
the most recent 10 or more years is graded A, worth 2
points. The same but with stagnation or backsliding in
the following 5–7 years downgrades to B, 1 point. C is
for no clear trend up or down, no points. D is for a long
improvement trend followed by at least 10 years of
declining turnover, minus (1/2) point. F is for worsening
inventory turnover throughout the years in the database,
also minus (1/2) point. If a 10-year downward or flat
trend is followed by 5 or more years of improvement,
the grade becomes B+, C+, D+, or F+, worth (1/2) point.
This awarding of points reveals a few patterns
pertinent to this paper. We consider, first of all, how
Toyota, as a central figure in JPM, ranks in the
416 R.J. Schonberger / Journal of Operations Management 25 (2007) 403–419
automotive industry. Next remarks concern lean’s
penetration among various industries. Finally, we look
at regional leanness rankings.
Of the motor-vehicle companies (cars, trucks, RVs,
off-road, motorcycles) included in the database, Toyota,
fount of lean’s core, ranks 52nd out of 54 companies.
Toyota’s inventory turnover has not improved in 17
years and in the last 12 has been halved, from 22.9 to a
still respectable 11.1 turns. The decline averages 4.3%
per year—mostly owed to growth of finished goods, but
also of purchased materials and work-in-process
inventories. Topping the motor-vehicle list is Harley-
Davidson with nearly opposite numbers: 4.3% per year
improvement, and for 19 years. Generally, companies
with best long-term trends also have the highest
inventory turns in current absolute numbers. Even if
that were not the case, trend is the more revealing metric
as regards management effectiveness.
To some extent Toyota’s decline may be related to
global expansion, the problems of which tend to inflate
inventories. However, other automakers have expanded
more or less similarly, and some have stellar improve-
ment records. (GM has improved for 30 years at more
than 2% annually, to about 12 turns in 2005 without the
infusions of cash that come from all that disinvestment in
inventories, GM’s financial plight today would be much
worse. Honda has improved for 26 years at 2.3%
annually, to a current 7 turns.) Hall (2004) comments on
Toyota’s historical home base in Aichi Prefecture, where
most of its suppliers were in close proximity: ‘‘No other
auto company has ever had operations so geographically
concentrated. . . Communication by see-and-do was
easy.’’ With the Toyota system having grown up in that
compact, simplified environment, it may be more
difficult for Toyota than other automakers to adapt its
lean/quick-response system for global operations.
Among 35 industry groups in the study, high ranks go
to electronics, machinery, plastic/rubber/glass/ceramic,
and metalworking. Vehicular components is down the
list, 19th of the 35 sectors. At the OEM level, the light
vehicles and heavy vehicles sectors are near the bottom,
in 32nd and 33rd places. As judged by long-term
inventory trends, the automotive industry is not a high
performer.
Table 2 shows the regional rankings and sample sizes
for the most recent data. The Scandinavian countries
have the best long-term improvement score, averaging
0.88. From there the scoring for seven other regions
descends from 0.78 to 0.60. Far below that is Japan, at
0.35.
Japan’s low average score is not the only surprise.
Overall, the unaggregated data show 62% of the 1213
Table 2
Lean trends—best to worst, by region
Sectors Score Sample size
1 Scandinavia 0.88 68
2 United Kingdom 0.78 92
3 Southern Europe 0.77 64
4 Asiana/South Africa 0.67 111
5 United States 0.67 511
6 Germany/Austria 0.61 61
7 Benelux/Ireland 0.66 36
8 Canada/Mexico/Israel 0.60 88
9 Japan 0.35 182
Grand average 0.64 1213
companies receiving grades of C, D, and F. This means
that in the past 10 or more years the majority of
companies studied have not been improving or have
been getting worse—worse on what seems to be a large
component of good operations-management practices.
The public companies for which data are readily
available are among the world’s largest, best known,
and, one would think, most up-to-date in the practice of
management.
In light of high interest in lean management in recent
years, one might expect that long-term scores would at
least be on the rise. That is not the case. Not only are the
current-year scores heavy on grades of C, D, and F; the
numbers of those grades have been on the increase, and
As and Bs on the decrease, for the last few years—in
every region except Japan. Japan’s scores, though still
lowest by a great deal, have improved at a little over a
percentage point per year for the past four years. That
improvement in inventory turns might be expected in
view of earlier discussion suggesting that Japan has
finally embraced restructuring, off-shoring, and DFMA.
Notwithstanding Japan’s recent improvements, the
regional findings tend to confirm the proposition that
Japanese industry has generally not kept up with the
state of the art in production management, losing
ground to other regions in inventory turnover, the most
visible indicator of leanness. For Western companies
the data date back far enough to show impressive
improvements in inventory turnover through the 1980s
and into the 1990s, but with many companies back-
sliding in recent years. Before the recent-years’ slump,
Western gains in competitiveness seem likely to have
come, in part, through implementation of the Japanese
core coupled with complementary Western innovations.
Poor leanness grades for the Japanese companies in
the study suggest that Japanese production management
may to be difficult to sustain; this despite the under-
lying simplicity and good sense of its elements, its
 R.J. Schonberger / Journal of Operations Management 25 (2007) 403–419
customer-slanted advantages, and its competitive
benefits. Moreover, declines in average grades for
Western companies in recent years suggest that
Western-enhanced JPM seems also to be prone to
faltering.
5.2. Japanese production management: a
continuing evolution
Reasons why so many companies are not doing well
on the inventory-turnover scale invite speculation. Is
lean management only skin-deep in most companies?
Are companies relying excessively on consultants and
inadequately on depth of knowledge and employee
involvement? Are manufacturers too focused on near-
at-hand, in-plant improvements while avoiding the
tough issues requiring inter-company collaborations? Is
the lack of one big idea – instead, a multitude of smaller
ones – a limitation requiring higher levels of sustaining
energy? Overall impressions from the inventory-turn-
over studies, plus my own collection of anecdotal field
data, suggest the answer is yes to each of these
questions. Further research on these and other
possibilities may provide corroboration, along with
yielding alternate explanations.
The core of Japanese management – the quality,
flexibly quick response, and employee involvement
concepts and techniques – now more than a quarter-
century old, seem built to endure. A large set of Western
innovations blend well with those from Japan. The story
of Japanese production management does not end here.
Many aspects of manufacturing company management
still beg for innovative solutions: better ways of tapping
the hearts and minds of customers, advances in the
management of innovation itself, and insights in how to
sustain and build on best practices readily come to
mind. We may expect further breakthroughs on these
kinds of issues, and that they will lattice with and
enhance the Japanese core, just as so many Western
innovations of recent decades have done.
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