rffrydr
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 Posted: Mon Apr 09, 2007 7:45 am Post subject: Japanese LEI |
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Leading Economic Indicators below 50 for eigth month despite recovering GDP. Broken? Or does it reflect the two-tiered nature of Japan's economy, the dismantling ofthe Kiertsu system (and rebuilding it elsewhere)--a process referred to as the "hollowing out of Japan."
| Quote: | Byline: MICHIYO NAKAMOTO
Not so long ago, Japan seemed destined to lose its pre-eminent place as the world's factory for electronic goods.
During the late 1990s, as one Japanese manufacturer after another announced plans to shift production to lower-cost countries such as China, public alarm about the hollowing-out of Japanese manufacturing gradually turned to resignation.
Recently, however, there has been a growing reappraisal of the country's potential as a manufacturing base. Companies such as Canon and Sharp have shown that it is possible to reap impressive profits while maintaining production in Japan if such production requires high technical or manufacturing expertise.
Kenwood, the maker of home and car electronics and wireless equipment, has gone a step further by showing that Japan offers advantages even to the manufacturers of commodity products.
Just two years ago, the company seemed on the brink of collapse and was forced to undergo drastic restructuring. Kenwood Yamagata, the group's manufacturing plant in the northern prefecture of Yamagata, was one of three factories that faced closure. The company had already pulled out of the mobile phones business, which was centred in Yamagata, so the factory was half empty by the time the group faced a decision on its future.
Furthermore, its manufacturing procedures were "20 years old", according to Haruo Kawahara, who had moved from Toshiba in June 2002 to become Kenwood's new president. But Mr Kawahara believed that the Yamagata plant still had potential because of its highly skilled workforce. "He said that if you looked at it another way, it was a treasure trove," recalls Kazuhiro Sato, the managing director of Kenwood Yamagata.
Mr Kawahara strongly believed that Japan could still compete with its Asian neighbours, and even outdo them. Instead of closing the facility, he decided to shift production of portable mini-disc players from Malaysia to Yamagata.
The production of mini-disc players was transferred in August 2003 and since then, Kenwood Yamagata has become a model factory, churning out the players at 10 per cent lower cost than Malaysia. This is in spite of the fact that labour costs in Yamagata are four times those in Malaysia.
Yamagata achieved this feat by revamping its manufacturing processes to raise efficiency and reduce costs. Two years ago, the problem at the Yamagata plant was that too many people were needlessly moving around the factory, delivering parts and performing unnecessary tasks. To Mr Nagatomo, it looked like the factory was having a sports day.
Mr Sato and his team changed the layout of the factory and the way parts were delivered to workers, so that rehandling - the number of people who deal with parts before they reach the production line - has been cut by half.
Everything a worker needs is placed no further than 75cm from where he or she is standing. The amount of space needed for production was reduced by 70 per cent, thereby freeing up space for additional production.
Crucially, the improved efficiency means fewer people are needed to make each product. In Malaysia it took 22 workers to make one portable mini-disc player but in Yamagata the same job requires only seven workers and, at a pinch, this can be reduced to just four.
"The more people there are the greater the overall loss in time - so the ideal is for one person to make the entire product," says Mr Sato.
Raising efficiency on the factory floor also helped reduce inventory - the largest element in overall costs. Mr Sato and his team also adopted a rigorous approach to deliveries so that any components that arrived earlier than needed were turned back. And in order to reduce defects an now inspector checks the product while it is being assembled, rather than after it has been completed.
"We have improved the inspection system to the point that it takes half the time to inspect products in Yamagata as it did in Malaysia and the defect ratio has fallen too," Mr Sato says.
The defect rate at Yamagata is 72 per cent lower than at the Malaysian plant. The time it takes the mini-disc players to reach the market has declined from five weeks to between two and three days, while inventories have fallen from 18 to just three days.
While production efficiencies have achieved impressive results, transferring production made sense for other reasons too. For one thing, the main market for mini-disc players is in Japan. Since the shelf life of such products is short, it is critical for production to be close to the market. So Yamagata's speedy production times allow Kenwood to respond more flexibly to the market and to reduce the high levels of inventory.
Yamagata may have succeeded in bucking the outsourcing trend, but Mr Sato has no illusions about the difficulties he faces in the future. "The day that (factories elsewhere in) Asia will be able to do the same thing is not far away," he says. "So, what can Japan do next? That is the key issue we face."
Source Citation: Nakamoto, Michiyo. "How to turn the tables on outsourcing: PRODUCTION STRATEGY: Kenwood shifted its production of mini-discs from Malaysia to Japan and is now reaping the benefits, writes Michiyo Nakamoto.(BUSINESS LIFE)." The Financial Times (Jan 6, 2005): |
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