Should lean tremor?

Posted on 21 Mar 2011 by The Manufacturer

Will the Japanese earthquake change Toyota’s and the manufacturing world’s view of lean manufacturing? Automotive writer Matthew DeBord suggests the disaster may generate more speculation about the vulnerabilities that lean supply chains are exposed to.

The recent earthquake and subsequent tsunami in Japan rank among the most devastating natural disasters the world has ever seen. But along with the enormous loss of life and damage, events on and since March 11 in Japan have also dealt major blows to the country’s innovative manufacturing sector.

Ever since Henry Ford invented the assembly line, car manufacturers have focused on improving their bottom lines via a range of different manufacturing strategies.

But it was the Japanese who developed the concept of lean manufacturing, also known as the Tokyo Production System after its creator, Sakichi Toyoda. Lean manufacturing is a supply chain management strategy that seeks to produce high levels of throughput with a minimum of inventory by focusing on having small stockpiles of inventory in strategic locations around the assembly line, rather than in centralised warehouses.

According to automotive writer Matthew DeBord, it is a methodology that has served auto giant Toyota well. “Lean manufacturing has allowed Toyota to produce better cars and adjust more nimbly to fluctuations in demand.”

The flipside, however, is that lean manufacturing is also highly vulnerable to exactly the sort of “catastrophic breakdown” that has followed Japan’s recent earthquake and tsunami.

“Lean manufacturing is more complex and requires more brain and communications power to operate than the old model of having a plentiful supply of components on hand. A disaster of the magnitude of the Japanese earthquake destroys and undermines all kinds of advanced-economy systems. Automakers are no longer self-contained enterprises that build all the things that go into a car themselves. They are instead the prime movers of complex supply chains. In Japan, much of Toyota’s operations are now either inoperable, damaged or understandably distracted.”

Following the 8.9 quake and tsunami that ravaged the Pacific coast northeast of Tokyo on March 11 and left more than 16,000 dead or missing and a nuclear power plant at risk of a catastrophic meltdown, Toyota reportedly shut down the 12 plants it operates in Japan. The move effectively stalled production of almost all of its Lexus and Scion vehicles.

“Toyota also operated facilities in Japan’s north, so the lack of electricity, damage to roadways, not to mention the full-on search for survivors, is going to have an enormous impact,” says DeBord.

Fortunately, Toyota has diversified its manufacturing operations, including having a US manufacturing base for a number of years. “This means a tragedy at home won’t shut it down completely – nor starve one of its biggest markets, North America, of product. In fact, this may be the most important lesson that other automakers can draw from the Japanese earthquake: if they are able, they should attempt to base manufacturing operations in multiple markets.”

The big question, of course, is whether Toyota will change tack with its lean manufacturing strategy in order to be better prepared for natural disaster. “Obviously, as the largest automaker, any decision it makes will have repercussions for other car companies,” concludes DeBord.

Overcoming the challenges of lean manufacturing – particularly in the European context – is an issue that will be no doubt be on the agenda Next Generation Manufacturing Europe Summit 2011, which takes place from September 20-22 in Vienna, Austria. The event will discuss the potential of so-called ‘SMART Manufacturing, the business case for green manufacturing and the collaboration between IT, process automation vendors and customers. Speakers at this closed-door summit will include Brian Chesterman, Global Head of Supply Chain Management at BP, Gerald Weber, EVP Operations at Airbus and Ton Guerts, Chief Procurement Officer at Akzonobel.

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