Literature review

1. Introduction:

“The reviewing of existing literature relating to a topic is an essential first step and foundation when undertaking a research project. The purpose of a literature review is to demonstrate that one is familiar with what is already about a subject”

Baker (2000)

With this consideration, this chapter will review the literature under two main categories: Theoretical background for the research and literature on TPS.

Theoretical Background

Introduction:

The Resource Based View (RBV) extended with dynamic capabilities is of particular relevance to this dissertation as it focuses on how resources and capabilities provides better performance and generates competitive advantage to manufacturing firms. This section of the literature review contains a detailed review of theoretical view point of RBV mainly related to achieving ‘competitive advantage' by firms. Following the background to the theory, limitations and recent developments have been discussed to gain a better understanding of the theory as it applies to manufacturing organizations. Final part of this section presents the justification of RBV as a theoretical lens for this dissertation.

Background to Resource Based Theory:

The resource based view of the firm (RBV) is one of the most widely accepted theories in the field of strategic management (Barney, 1991; Peteraf, 1993; Priem and Butler, 2001). Edith Penrose made contributions to RBV theory as early as 1959 by emphasizing the importance of resources to a firm's competitiveness. The time line of RBV highlights some of key the contribution made by authors to the resource based theory. In addition to the resource perspective, inclusion of concepts like sustained competitive advantage and economic perspective over years has increased the robustness of RBV theory. Although RBV theory has taken different conceptual stand points since 1959, focus on the firm's resources to achieve better performance has remained as its central tenet.

Taking a resource perspective, resources (internal and external) are viewed as the key to firm's growth (Barney, 1991; Penrose, 1959) and balance between exploitation of existing resources and development of new ones leads to superior performances (Wernerfelt, 1984). The above views raise a question ‘do all resources contribute to firm's growth?' answering the question Teece (1982) argues that not all the resources in a firm are specialized and emphasizes firm's need to effectively utilize its valuable and lesser valuable resources. In addition to the stand point of resource focus on firm's growth, ‘Sustained competitive advantage' gave new insights to resource based theory describing how firms can win over potential competitors by implementing inimitable value creating strategies (Barney, 1991; Porter, 1985; Rugman et.al. 2002). Rumelt (1984) introduced the term ‘isolating mechanism' in an attempt to explain ‘uncertain imitability' i.e. why certain firms perform better than their competitor's.

Barney (1991) suggests that firms as ‘bundle of resources' and heterogeneous resources which are inimitable and immobile create sustain competitive advantage with maximum profits for firms. These benefits can be reaped when the resources of the firms are considered to be, valuable i.e. enables a firm to implement strategies that improve its performance; rare i.e. valuable resources are not possessed by large numbers of competing firms; imperfectly imitable because of: unique historical conditions, causal ambiguity, and social complexity; and finally non-substitutable i.e. no strategically equivalent valuable resources are available (Barney, 1991).

Taking a economic perspective, work of Mahoney and Pandian (1992) has added an significant dimension to RBV by suggesting that firms may achieve rents, defined as ‘returns in excess of owners opportunity cost' (Tollison,1982) not by mere possession of superior resources but through effective utilisation of these resources. Similarly, Peteraf (1993), argues that sustained competitive advantage is defined as “above normal rates of return” (rents) and is achieved when resources in a firm meets the following four conditions: heterogeneity (superior resources), expost limits to competition i.e. ‘forces to limit competition for rents', imperfect resource mobility and ex ante limits to competition i.e. ‘limited competition to superior resources in the market' (Peteraf, 1993).

Heterogeneity

Ex-ante limits to competition

Imperfect mobility

Ex-post limits to competition

Rents obtained

Rents captured by the firm

Rents not offset by cost

Rents sustained

Competitive advantage

As a summary to the background of RBV theory, Rugman and Verbeke (2002) point out that writings in RBV have focused extensively on the creation of sustained competitive advantage by superior resources to the extent that no competitor has the ability to imitate such resources.

Limitations of Resource based theory:

Inspite the significant contribution to the field of Strategic Management, resource based theory has faced several criticisms along its evolutionary path. The major limitations of RBV are:

  • Static nature of RBV:

According to Priem and Butler (2001), Sustained competitive advantage comes about a period of time and may shift over time. Based on this view, they point out that RBV is static in nature i.e. changes with regard to the evolution over time of the resources and capabilities have been neglected in the theory.

  • Ambiguity in definitions and concepts:

1). Definitions of key concepts such as resources, competences, capabilities have not been agreed upon or remain ambiguous and controversial (Mahoney and Pandian, 1992; Helfat et al. 2002); “tautological” (Priem and Butler, 2001) which has lead to inconsistencies in the theory

2). Within the RBV, there is a lack of conceptual model that includes an explanation on origin and value creation ability of heterogeneous resources (Priem and Butler, 2001) and without this explanation, it becomes difficult to understand how firms use RBV to achieve sustained competitive advantage (Priem and Butler, 2001; Helfat et al. 2002).

3). RBV does not address appropriately the question of explicating the process by which advantage was created and that activities are appropriate focus of analysis than resources (Porter, 1985).

4). Empirical research and validation is problematic in RBV due to inclusion of non measurable variables (Godfrey & Hill, 1995; Priem and Butler, 2001).

Recent developments in RBV:

Recent developments in RBV are presented here in an attempt to overcome the limitations of resource based theory. One such recent development to overcome the limitation of ‘static nature of RBV' (Priem and Butler, 2001) is the dynamic capability (Teece et al., 1997) perspective that has extended the resource based theory to the concept of developing capabilities. According to Teece et al. (1997), a firm can stay ahead of its imitators and have sustained competitive advantage by developing capabilities based on sequences of path-dependent learning ‘routines'. The underlying principles of this approach is that firms develop dynamic capabilities by “engaging in learning activities - market research, collection of competitive intelligence, development of deep customer knowledge, research and development activities, strategic alliances, benchmarking, and test marketing” (Teece et al., 1997). Building on the initial dynamic perspective, Eisenhardt and Martin questions the credibility of RBV to withstand the ‘high velocity' markets as initially proposed by Teece et.al.(1997) According to Eisenhardt and Martin (2000), dynamic capabilities are the “organizational and strategic routines by which firms achieve new resource configurations as markets emerge, collide, split, evolve, and die”. The value of dynamic capabilities for firms “for competitive advantage lies in their ability to alter the resource base: create, integrate, recombine, and release resources” achieved through idiosyncratic strategies of the firm.

Another significant development in RBV is the development of VRIO framework by Barney (1995). According to him, in order to have a sustainable competitive advantage, a resource or capability should not only be Valuable, Rare, Inimitable (including non-substitutable) but also organized i.e. readiness to exploit the resources with a firm level orientation. Further he suggests that firm's structure and control mechanisms must be aligned to allow for the exploitation of the heterogeneous resources. This framework can be used as a tool to help managers to identify the firm's internal strengths and weaknesses, value creating resources, source of competitive advantage, and effective utilisation of resources.

Empirical work in RBV

Given that resource based view is one of the most widely accepted theory in strategic management, it could be easily assumed that RBV has rich empirical support towards its core findings (Barney and Arikan, 2001), however, such assumption is not true (Priem and Butler, 2001; Newbert, 2007). Table 1 highlights some of the recent contributions made to empirical studies in the RBV theory.

Note: Total tabulated does not equal their sums because several articles employ multiple approaches.

Author

Contributions

Barney (2001)

  • Empirical works in RBV have mainly focused on testing relationships between heterogeneous resources and their performances.

Newbert (2007)

  • Newbert carried out a study to investigate the extent to which RBV has been empirically tested and the support it has received.
  • Key findings from a sample size of 55 articles (empirically tested) on RBV,

1) resource based theory is only marginally empirically supported (53%) as against 98% consistency concluded by Barney and Arikan (2001) through their study of 166 empirical research articles;

2) Resource heterogeneity approach (91%) has been the most widely used whereas dynamic capability approach is the least used (5%);

3) researchers have begun to deploy variety of theoretical approaches in RBV;

4) Much of articles (85%) have heavily relied on the work of Barney (1991). Based on his findings, he recommends future researchers to shift their focus from Barney's (1991) work towards dynamic capability approach of RBV in order to reduce the wide variation found across the theoretical approaches used in the empirical studies.

Armstrong and Shimizu (2007)

  • Through a review of 125 empirical studies they have identified several key issues ‘associated with the design (i.e. operationalizing resources and performances) of empirical test for RBV'.
  • Theoretical approaches of RBV are complementary to each other i.e. one might provide useful insights to another and with this “integrative framework”
  • Researchers can extend their empirical work to relate to others to overcome the criticism of fragmentation of empirical studies in RBV as stated by Newbert (2007).
  • “Non-significant results obtained through carefully crafted empirical study design can contribute to further understanding of values and boundaries of RBV”.
  • Armstrong and Shimizu (2007) conclude that RBV can become robust with a closer tie between theoretical advancement and empirical rigor.

RBV applied to Manufacturing paradigm

Theoretical developments in RBV have created strong insights for firms while formulating manufacturing strategy (Schroeder et.al.2002). The theory of RBV extended with dynamic capabilities is of particular relevance to this dissertation as it focuses on how resources and capabilities provides better performance and generates competitive advantage to manufacturing firms. RBV lens applied to manufacturing firms help in investigating the competencies, source of competitive advantage, production capabilities and the resulting performance outcomes (Coates and McDermott, 2002). For firms trying to adapt a best manufacturing practice, RBV can help in understanding and developing skills that needs to be built idiosyncratically to create competitive advantage for the firm (Schroeder et.al.2002).

Justification of RBV for dissertation

The use of Resource Based View (RBV) as a theoretical lens for this dissertation is justified in two steps; firstly the suitability of RBV is justified from ‘TPS perspective' i.e. suitability of RBV as theoretical lens for understanding TPS; secondly the RBV is justified from Transferability perspective i.e. suitability of RBV as theoretical lens for understanding production system of specific manufacturing firm that has adopted TPS.

TPS perspective:

Following the research objective presented in Chapter 1, aim of this dissertation is to understand the core concepts of TPS and identify its transferability to other automotive manufacturing firms. Even though TPS has spread across borders of Toyota, it could not be imitated with any success of Toyota because of the value created through first entry advantage (Barney, 1991), complex system remaining ambiguous. Taking a dynamic resource based view of TPS, we see that the resources or capabilities (JIT, Jidoka, Kanban, Kaizen, Poka yoke) developed by Toyota over years are valuable, rare among competitors, cannot be imitated perfectly and not easily substituted (equivalent to TPS in achieving end results) (Barney, 1991). Applying the work of Schroeder et.al. (2002) to this dissertation, TPS could be viewed as a proprietary manufacturing technology which has evolved constantly through a combined process of internal learning (Kaizen, Jidoka i.e. automation with human intelligence) and external learning (JIT, Customer service). The fact that TPS has evolved over time by constant learning and embracing new technology proves its dynamic capabilities. These arguments justify the suitability of RBV to be used for this dissertation from TPS perspective.

Transferability perspective:

Following the research objective presented in Chapter 1, it could be seen that scope of this dissertation is to map TPS with a firm specific production system and bring out the transferability of TPS. To support the justification, Schroeder et.al. (2002) suggests that RBV is a suitable frame work for manufacturing research which aims at understanding how manufacturing processes (resources) contribute to competitive advantage when multiple competitors adopt same innovation (TPS). Problems experienced in simplistic transferability of TPS have led to evolution of firm specific production system which is deviant from original TPS (Ebrahimpour and Schonberger et al., 1984). Taking an resource based approach we can see that the above statement goes in hand with Schroeder et.al.(2002) view that proprietary process (TPS) are inimitable and cause ambiguities (Barney,1991). On a similar note, Barney (1991) states that, to obtain competitive advantage, RBV emphasizes that the firms should develop idiosyncratic capabilities in manufacturing process that cannot be duplicated. Taking a dynamic capability perspective (Eisenhardt and Martin, 2000; Teece et.al.1997), this dissertation will identify learning and knowledge creation process established by the specific firm that would give competitive advantage and inhibit transfer (Barney, 1991, 1995, 2001; Teece et.al.1997). These arguments justify the suitability of RBV to be used for this dissertation from Transferability perspective.

Literature on TPS

2. Introduction

The literature on TPS will first introduce lean production and define several key words and concepts that are included in the research project. Following the introduction, it will be possible to introduce and analyse the literature on Toyota Production System more commonly used in manufacturing firms under two categories: ‘TPS perspective' and ‘Transferability perspective'. Literature on key principles of TPS is discussed in the first section and with this foundation; the second section will discuss the literature on transferability of the TPS including the issues faced by automotive manufacturing firms implementing the TPS. Finally the section is concluded by drawing out the research questions for this research project based on the review of the literature.

Introduction to Lean production:

“Lean production” was coined by John Krafcik, an International Motor Vehicle Program (IMVP) researcher and was introduced by Womack et.al. (1990) through the book “The Machine that changed the world”. The literature review on lean production needs an examination of the transition in the history of automotive industry from “Craftsmanship” to “Mass production” (1915) and from “Mass production” to “Lean production” (1970's). Bureaucratic attitude towards workers and inflexibility of the system led to the down fall of mass production system and eventually lead to losing its credibility as the best manufacturing practice (Krafcik, 1988; Womack et.al. 1990). Lean production arose at the fall of Henry Ford's mass production system (Womack et.al., 1990). Even though the term “Lean” came into existence only in 1990, its history dates back to post Second World War II period, when Taichi Ohno and Shingo of Toyota Motors Inc. over period of thirty years (1940's - 1970's) developed “Just in Time (JIT)” which became “Toyota Production System (TPS)”. TPS was developed in response to weak economy in Japan, together with problems like limited capital availability, shortage of manpower and limited sources of raw materials (Ohno, 1988; Womack et.al., 1990).

Literature Review on TPS

TPS

Perspective

Introduction

to Lean Production

Definitions in

TPS

Building Blocks

of TPS

Benchmarking

of TPS

JIT

Heijunka

Kaizen

Jidoka

Standardized work flow

Transferability Perspective

Factors affecting implementation of TPS

Transferability of TPS

The principles of lean production have been exclusively derived from TPS and interchangeably used. The advantages of lean production over mass production are that, “it uses less of everything when compared to mass production-half the manufacturing space, half the investment in tools, half the engineering hours to develop a new product in half the time, far less than half the needed inventory on site, results in many fewer defects, and produces a greater and ever growing variety of productions” (Womack et.al. 1990).

The fact that Toyota made profits using TPS amidst economic turbulence caused by oil crisis in Japan in 1974 led to the spread of TPS outside the borders of Toyota (Ohno, 1988; Womack et.al., 1990). In the 1970's and early 1980's, the western world was absolutely clueless as to what TPS was or how Japanese industries were flourishing in international competition with this new production practice since most of the literature on TPS was in Japanese language. The TPS entered the western world in 1984 when a joint venture ‘NUMMI' (New United Motor Manufacturing, Inc) was formed between Toyota Motor Company and General Motors in California. Seminal contributions to literature on TPS (in English) were: Monden's “Toyota Production System” (1983) and Ohno's “Toyota Production System: Beyond large-scale production” (1988). However, it was mainly through the extensive research work carried by Krafcik, James.P.Womack, Daniel T.Jones and Daniel Roos, knowledge about TPS in the form of Lean production and its principles came into light to rest of the world. With several US manufacturing adapting Lean production in 1990's, it gained importance as the “exemplary manufacturing practice” (Oliver et al. 1994). Womack and Jones (1996) in their book “Lean Thinking”, proposed a five step lean transformation process for companies and includes: 1) Valuation from the point of the end customer, 2) Identification and elimination of non value adding steps in value stream, 3) Integrated sequence of product flow to the customer, 4) let customers pull value from the next upstream activity, 5) pursue perfection through continuous improvement. Based on their work, it could be speculated that Lean Production is the western way for understanding Toyota's production principles.

In the recent years, lean manufacturing is viewed by many companies as the latest management trend for cost-reduction and improving operational sustainability to meet the ever changing customer demand. Informed by many other fields of management, lean production is growing significantly to include and promote “lean thinking” up and down the organization to improve the profitability and the efficiency of the company (Womack and Jones 1996). Today the concepts of Lean have traversed beyond the manufacturing paradigm and have adopted a “Lean enterprise” approach extending throughout the value chain right from customer order until delivery (Reicchart and Holweg, 2007). Liker (2004) in his book “The Toyota Way” suggests that lean enterprise is an end result of application of TPS to all the business areas of a company.

With continuous improvement achieved through lean thinking and lean enterprise approach emerging to be the key thrust of lean in recent years, there seems to be subtle difference between lean and TPS as suggested by Haak (2004). Further, he states that TPS is a production management system specific to Toyota whereas Lean production although derived from TPS, can be used for any industrial or service sector companies.

TPS perspective

Introduction:

The Toyota Production System (TPS) is a comprehensive production management system which combines management philosophy and practices to reduce lead-time, inventory and cost while improving productivity and quality at the same time (Monden, 1981; Ohno, 1988). Ideas and works of Edwards Deming (PDCA cycle), Henry Ford and several others have been borrowed by Taichi Ohno while developing TPS. Taking an enterprise perspective, Womack et al. (1990) describes TPS as an integrated system which draws together manufacturing, logistics with suppliers and customers functions.

Key Target Areas for TPS:

The key target areas for TPS are, establishing continuous flow and elimination of waste in a production system (Monden, 1981; Ohno, 1988). According to the Ohno (1988), TPS aims at designing out Muri, Mura and Muda in manufacturing processes, of which elimination of waste has greater impact on the manufacturing process. Further according to Ohno (1988) waste in manufacturing firms can be grouped into seven main categories: overproduction, waiting, inventory, motion, conveyance, processing and correction; and points out the wastes due to overproduction as the most important since it conceal other types of wastes.

Building blocks of TPS:

Research project in TPS requires a thorough understanding of its core concepts. The TPS House model developed by Taichi Ohno will be adopted for the purpose of this research project to answer the research objectives and question. JIT and Jidoka are the “two pillars” of Toyota Production System (Ohno, 1988). Sugimori et al. (1977) states that there are two distinctive features in TPS; 1) ‘Just-in-time' (JIT) production which is “only necessary products at necessary time in necessary quantity aimed at cost reduction through elimination of waste and minimized inventory levels”; 2) ‘respect for human' which lays emphasis on the active participation of empowered workers with full capabilities termed ‘Jidoka'.

(Source: Adapted from )

Just-in-Time (JIT) Production

JIT is a production system that makes and delivers exact quantity of products needed by the customers just in the time it is needed with a minimum resources of manpower, material and machinery. Three elements of JIT are Continuous flow, Takt time and Pull production.( Ohno and Mitto, 1988)

Continuous flow

Establishing the material flow is one of the key target areas in TPS. Continuous flow aims at minimizing Work In Progress (WIP) inventory by manufacturing and transporting the exact quantities at the time when its is needed (Monden, 1983; Ohno, 1988, Shingo, 1987; Sugimori et al. 1977). Continuous flow eliminates build-up of inventory and defects with in the system, enables quick response time, facilitates standardized work and thereby improves efficiency of the process (Monden, 1981; Ohno and Mitto, 1988).

Takt Time - reference

Takt time is the pace of production needed to meet customer demand. The purpose of takt time is to precisely match production with demand. Takt time was first used as a production management tool in the German aircraft industry in the 1930s. The concept was widely utilized throughout the Toyota supply base by the late 1960s.

Pull production

Pull control system is a scheduling system of production instructions that replaces what has been utilized by the following process to result in a short lead time from order to shipment (Monden, 1981). It allows for minimal inventories and easily adjusts to changes in demand (Ohno, 1988). Sugimori et al (1977) states that Kanban is a signaling device that gives authorization and instructions for the production or withdrawal (conveyance) of items in a pull system. There are two kinds of Kanban typically used: Withdrawal Kanban specifies quantity of product the subsequent process should withdraw from the preceding process and Production Kanban specifies the quantity of product the latter must produce.

Jidoka

Jidoka is one of the two pillars of the Toyota Production System along with just-in-time. According to Ohno (1988), Jidoka refers to empowerment provided to machines and operators to detect when an abnormal condition has occurred and immediately stop work. Jidoka is also referred to as ‘Autonomation', meaning automation with human intelligence (Ohno, 1988). Sugimori et al. (1977) states that ‘respect for human' lays emphasis on the active participation of empowered workers with full capabilities termed Jidoka. Two common prevention techniques in Jidoka are Pokayoke and Andon (Monden, 1981; Shingo, 1987; Ohno 1988). A Pokayoke is an element of the process that senses a defect or non-conformance and will not allow the process to proceed. Andons are visual displays such as lights, flags, etc. which indicate the operating status of work centre. Together these help in identification of problems, elimination of defects, variability reduction and capacity maximization (Ohno, 1988; Womack et al.1990).

Heijunka

Heijunka is a production planning method which evenly distributes the production volume and production variety over the available production time (Ohno, 1988). According to Shingo, (1987), Heijunka prevents preceding operations from experiencing uneven workload and makes the planning process easier. Heijunka uses a card or tag at the final work station to pull parts into shipping. According to Monden, (1983) pull system with Heijunka in a TPS environment can convey products to delivery in less than ten minutes.

Standardized work

Standardized work is the foundation for process improvement in production as it organizes and defines worker movements (Ohno, 1988). According to Monden (1981); Shingo (1987) and Ohno (1988), the expected results of implementing standardized work flow includes: 1) higher quality; 2) providing safer and more efficient operations; 3) ensuring proper use of equipment and machinery; 4) helps in problem solving and 5) independent control of cells. In assembly operations, where quality issues are frequently caused by human variation in methods, standardized work forms help in serving the process control function. (Sugimori et.al. 1977)

Kaizen

Kaizen means “ongoing improvement involving everybody without spending much money” (Imai, 1986). According to Lander and Liker (2007), Kaizen refers to the learning at an organizational level by establishing known standards. Kaizen or continuous improvement relates to the value creation for an entire or an individual process with less wastage (Ohno, 1988). Based on this, there are two levels of kaizen: (1) System or flow kaizen focuses on the overall process (2) process kaizen focuses on individual processes.

Benchmarking of TPS

Delbridge et.al (1995) states that, the need for continuous improvement drives manufacturing firms to benchmark with their competitors. This view is supported by Partovi (1994), who argues that benchmarking is the search for the best industry practices, which will lead to exceptional performance through its implementation. The benchmarking studies on TPS carried out by IMVP between 1985-1990 remains to be the best example till date. The systematic comparison of the performance of the major car manufacturers made by IMVP was published in the book The Machine that Changed the World written by Womack et.al (1990).

Similarly, based on the study of 18 plants, Delbridge et.al (1995) extended the work of the IMVP study to develop a generic benchmarking methodology, which would provide measures of manufacturing performance that could be tested against the use of the lean production model.

Transferability perspective

Introduction:

This section of the literature review will focus on the transferability perspective of TPS associated with manufacturing firms. To understand the transferability of TPS, it becomes important to identify and acknowledge the factors that affect its implementation positively and accordingly discussions on transferability perspective are presented in two sections, ‘Factors for implementation of TPS' and ‘Transferability of TPS'.

Factors for successful implementation of TPS

Given the benefits TPS brings to companies, its management and production concepts have caught the attention of academic and industrial world and this in turn has helped in the availability of rich literature in this area of study. Stand points on implementation factors of TPS or Lean Production put forth by some of the authors are presented in this section. Lee et al. (2007) have brought out several organizational factors that need to be in place for successful implementation of TPS, these include: management strategies, labour - management cooperation, employee and union involvement, open communication and investment in training. Lee et al. (2007) developed a hypothetical research model for explanation on diffusion of TPS across firms and borders. Mutation of TPS by companies takes place either through replicating entire manufacturing arrangements of TPS or technical knowledge obtained from consultancies. Degree of mutation by recipient companies is strongly dependent on the internal contingencies and external constraints with which the company operates.

Knill (1999) has identified 5 initiatives for successful implementation of Lean manufacturing and these include: supplier programs, continuous improvement; flexibility; elimination of waste; and zero defects. Taking a business process perspective, Motwani (2003) has developed a theoretical framework for implementation of lean manufacturing. Based on the study conducted in a tier one automotive supplier company, Motwani (2003) concluded several factors for successful implementation of lean manufacturing and these include: maximization of value addition, “common journey with common language”, strategic initiatives and support from management, use of visual controls and mapping techniques, measurement of progress in terms of total product cycle time, standardized work, training and empowering people, one piece flow through cell layout and improved relationship with suppliers. Shah and Ward (2003), argue that lean production is a highly integrated system with interrelated components that helps to achieve variability reduction in the process i.e. supply, processing time and demand. They have identified ten components of lean production that makes it a high performance system and these includes : supplier feedback, JIT delivery by suppliers, supplier development, customer involvement, pull system, continuous flow , set up time reduction, total preventive maintenance, statistical process control and employee involvement. According to Schonberger (1982), improved performance at shop floor level can be achieved by direct relationship between material flow and process improvements. Towill (2007) views the total TPS ‘package' to be inclusive of four sides: process, supply, demand and control and points out that system integration produces better results than the individual components. According to Deming (1986), “94% of errors in manufacturing belong to the system”, taking this into consideration, Motwani (2003) suggests that implementation of TPS should follow a systemic approach to reduce the variations. Liker and Wu (2000) have stated five principles that results in superior supply chain within the TPS environment, they are: development of suppliers; leveled scheduling; “delivery synchronization”; development of handling capabilities and encouraging JIT supply. Spear and Bowen (1999) point out that continuous identification of problems is the key to building a rigid, flexible and dynamic (adaptable to changes) TPS environment and in an attempt to decode TPS, they suggest that the “DNA of TPS” (Spear and Bowen, 1999) is a set of four rules:

Rule 1: Highly specified work in terms of content, sequence, timing, and outcome.

Rule 2:Direct customer-supplier relationship with unambiguous modes to send requests and receive responses.

Rule 3:The pathway for every product and service must be simple and direct.

Rule 4: Any improvement must be made scientifically, under the guidance of a teacher, at the lowest possible level in the organization.

Taking an industrial engineering stand point, Shingo (1987) argues that, use of industrial engineering concepts like motion study i.e. ‘learning by doing' along with TPS helps in identifying the source of improvements in the system. To support this view, Towill (2007) states that concepts of industrial engineering used with in the context of TPS not only help in achieving product flow but also information, capacity and cash flows across the entire business.

Following the argument of superiority between TPS and TQM in recent years, Motwani (2003) states that several companies have started to integrate elements of TQM and TPS into their process to draw potential benefits from both these ideologies. To support this, Motwani (2003) points out that while TPS aims at reducing variations and inventory in the process; TQM on the other hand helps in problem solving and continuous improvement at organizational level.

Transferability of TPS

Following the literature on factors that affect the implementation of TPS, this section will present discussions on the transferability of TPS from the stand point of several authors. Lee et al. (2007) has explained the transferability of TPS along three perspectives: convergence, structuralist and contingent. Convergence perspective points out that TPS can be transferred completely to other organizations around the world. On the contrary, the structuralist perspective questions the universal transferability of TPS. Drawing ideas from the above two, the contingency perspective points out implementation of TPS for improved performance is conditioned and constrained by several internal and external operating factors. Adapting the standpoint of Lee et al. (2007) the discussions on transferability of TPS presented here will be based on these three perspectives i.e. convergence, structuralist and contingent.

Taking a convergence perspective, Oliver et al. 1994 describes TPS as an exemplary manufacturing practice that other automotive manufacturing companies want to implement, formation of NUMMI in 1984 between General Motors and Toyota provides the best example. Similarly according to Cusumano (1988) and Womack et al. (1990) TPS is the world class manufacturing system of 21st century and can be transferred to other organizations across the globe. The study on TPS carried out by IMVP provides a systematic comparison of the performance of the major car manufacturers against Toyota. Womack et.al (1990) through his book “The Machine that Changed the World” has detailed the principles of TPS and explained how companies across the world can implement TPS to sort their production problems.

Taking a structuralist perspective, Spear and Bowen (1999) argues that even though TPS has been implemented in western and eastern hemispheres, the overall success rate is relatively low and this is primarily because of confusions arising during selection of tools and techniques for implementation. Since TPS has its root in Japan, several critics have raised serious doubts about universal transferability of TPS. To support this view, Nakamura et al.(2006) argue that TPS is specific to the socio-economic context of Toyota in Japan, and hence adaptation of TPS outside the borders of Japan can be achieved only with greatly difficult mainly because of the huge cultural differences observed between eastern and western cultures.

Taking a contingent stand point, Shah and Ward (2003) argue that TPS is “conceptually multifaceted” and improved performance by manufacturing firms adapting TPS is achieved only by simultaneous implementation of several concepts. Ebrahimpour and Schonberger (1984) point out that along the years, TPS has taken various forms deviant from the original ideas put forth by Toyota in finding its application in manufacturing industries. To support this view, Womack et al. (1996) argues that with other business functions such as Supply chain management, R&D, customer relations embedded into concept of TPS, there is a paradigm shift observed in TPS from a manufacturing perspective to a holistic organisation wide management best practice ‘lean thinking'. Similarly Amasaka (2002) states that a “New TPS” has emerged to integrate the original principles of TPS with recent operational, quality management theories and best practices to advance the global production technology under the existing banner of TPS. According to Bartezzaghi (1999), several transmuted production models have been developed from TPS in an attempt to deal with changing business environments. To support this view, Sugimori et al. (1977)states that TPS in itself was developed as a unique production model by Toyota in 1960's in response to prevailing environment in Toyota i.e. lack of natural resources, work attitude, enterprise unions, employment practices, cultural settings. Similar to these views, Liker et al. (1999) points out that while adapting TPS, many manufacturers have developed their own production system strongly influenced by critical factors specific to the business environment such as market, culture, business strategies, workforce, production capabilities, supply structure, management involvement.

Summary

In summary, this body of literature on TPS has discussed its transferability from different stand points. Proponents of transferability claim that TPS can be implemented by automotive manufacturers and other manufacturing firms around the world; on the other hand the opponents argue that TPS is not transferable completely because of cultural differences and confusions in appropriate tool selection. Opposing these two views several authors argue that key to transferability of TPS depends on the specific business setting of a firm and development of capabilities within organizations to the extent which they are distinctive and consequently provide a competitive advantage to the firm. This leads to the main research question regarding the transferability of TPS to understand the degree of closeness between implementation and original principles together with the transferability issues faced by companies.

Research Question:

Is the Toyota Production System transferable to other automotive manufacturing firms?

This main research question can be broken into the following sub questions

a) How closely does the implementation follow the original principle of TPS?

b) What are the transferability issues faced by companies implementing the TPS?

Having identified the research question for this project, the chapter following will discuss about the methodology that was used for collection of information and analysis of the findings to answer the research questions mentioned above.