Japanese Continuous Improvement Practices Implementation in Vietnamese Manufacturing Companies Phan Chi Anh and Nguyen Dang Minh

This study investigates the implementation of Kaizen practices in Vietnamese manufacturing companies. Statistical techniques such as ANOVA and regression are applied to analyze the data are collected from 64 Vietnamese manufacturing companies through a questionnaire survey during 2011-2012. The results of statistical analysis indicate that Japanese continuous improvement practices have positive relationship with companies performance on quality, cost, and delivery. We conclude that Vietnamese companies should further emphasis on implementing Japanese management practices to enhance the performance.

Introduction Vietnam is facing the challenges of developing the supporting industries that can supply parts with stable quality, cost, and delivery (QCD) to foreign-affiliated assembling companies in order to enhance its international competitiveness amid ongoing globalization. In recent years, Vietnamese Government has gradually paid

attention to develop its supporting industries, however the industries have facing many difficulties in human resource, skills, techniques, technologies, management methodologiesetc. In order to increase productivity and quality in supporting industries in Vietnam, the cooperation of Japanese Government and Japanese private sector is very important. Since the late of 1990s, many Vietnamese companies try to learn and implement different types of Japanese management methods and techniques such as 5S, QCC, SPCRecently, the Japanese management methods and techniques is more promote in Vietnam by supports Japanese Government. Many JICA experts and senior volunteers are dispatched to Vietnam to transfer Japanese management methods and techniques in manufacturing companies, especially companies belonging to supporting industries. However the current literature does not show us much about the current situation and the effectiveness of Japanese management methods and techniques implementation in Vietnamese industries. This study is conducted to address this need. The main objective of this study is to examine and evaluate the impact of different Japanese continuous improvement practices (Kaizen) on different business performance indicators of Vietnamese manufacturing companies. To study the current situation of the implementation of Japanese management methods and techniques in Vietnam industries To study the impact of implementation of Japanese management methods and techniques in Vietnamese manuafacturing companies
1

The implementation of Japanese continuous improvement practices including 5S, quality management, production control, Kaizen continuous improvement, human resource management practices that have been introduced and transferred by Japanese experts to Vietnamese companies is examined by sites visits, questionnaire survey, and interview with related parties. We find out the evidence that Japanese continuous improvement practices have positive relationship with companies performance on quality, cost, and delivery. We conclude that Vietnamese companies should further emphasis on implementing Japanese management practices to enhance the performance. The next section of the paper summaries the literature reviews on Japanese management transformation. The third section describers about the analytical framework and data collection. The forth section explains data analysis and the main findings. The last section shows implications of this study, recommendations, and final conclusions. Literature Review
Continous improvement (Kaizen) has been regarded as a key element in Japanese management and has been presented as one of the sources of the competitiveness of Japanese manufacturers. Over the past few decades, a considerable number of studies, which have focused on Japanese manufacturing techniques (Schonberger, 1982), the Toyota production system (TPS) (Liker, 2004;Ohno, 1988), or lean production (Womack et al., 1990; Womack and Jones, 1996), have illustrated the importance of Kaizen. Furthermore, studies of kaizen activities in countries outside Japan, such as Australia (Chapman et al., 1997), Sweden (Lindberg and Berger, 1997) and the UK (Oliver and Wilkinson, 1992), suggest that the concept of kaizen have become routinely accepted throughout the world. Kaizen transformation is hot topic in Japanese management studies over the past few decades. Many studies haven been conducted to examine the transferability of Kaizen from Japan to other countries US (Kenney and Florida, 1993; Linker et al. 1999), UK (Saka, 2004; Elger and Smith, 2005), China (Taylor, 1999; Hong et al. 2006). Those studies suggest that implementation of Japanese Kaizen practices in oversea plants is situated in cultural and social context Literature on transferability of Japanese management practices suggested two approaches: Universalistic view/Convergence: Japanese model and practices can be transposed regardless of setting (Womack et al.1990; Elger and Smith, 2005) Divergence: Diffusion of Japan model (Oliver and Wikinson, 1992; Abo, 1994)

Quality management is now regarded as the key management issue in Vietnamese companies. The focus of Vietnamese businessmen and managers over the late thirty years could be summarized as follows. 1980s-1990s: Companies focused on setting up the quality control activities along with standardization. 1990s-2000s: Companies focused on the ISO 9000 and other standard implementation, and Vietnam Quality Award (since 1996). Late 2000s: Many companies which ISO 90000 certified considered implementing several Japanese management methods and techniques such as 5S, QCC, SPC. By 2010 the situation of quality management and standadization practices of Vietnam The number of on-effect national standard is about 6700 national and 40% of them are complies with international standards. Every year, a number of 200 organization participates Vietnam Quality Award 7000 international certificates in Vietnam including ISO 9000, ISO 14000, ISO 18000, ISO 22000) Since 2000s, the transformation of Japanese management methods and techniques in Vietnamese could be sumarised as the follows Though Japanese customers and suppliers network: Japanese consultants, managers, and engineers. Japanese Government provided a big supports through many projects handed by JICA , Japan Productity Center,AOTS, etc Through local government and local consulting and training services. This focus on training and guiding in some practical topicts such as 5S, QCC, shop-floor improvement. Self-study: Vietnamese companies sent their staffs to visit Japan. The lessons learned though theses study missions then are implemented in Vietnamese companies to solve their specific problem.

Though the attention of Kaizen and quality managemeny in Vietnamese companies is constanly increased, there is a lack of Kaizen and quality management studies because of the resources limitations. There is several questions regarding the performance of Japanese management teachniques implemented in Vietnamese companies and how do they fit to the culture and organization structure of Vietnamese companies. Theses issues should be further examined for better understanding on the tranformation of Japanese management in Vietnam.

Analytical framework and data collection

This section presents the analytical framework and data collection of this study. Survey design and data collection and data analysis are summarized in three below subsections. The main research questions of this study are: What is the current situation of the implementation of Japanese improvement practices in Vietnam manufacturing companies? What is the impact of implementation of Japanese improvement practices in Vietnamese manuafacturing companies?

To answer these questions, an empirical study will be conducted through a questionnaire survey and deep interview in Vietnamese manufacturing companies. The respondents of the survey are the managers, engineers, and workers of 52 manufacturing companies that received supports from Japanese consultants in the past. To get reliable information from companies, the survey targets to the respondents who are the key decision maker in the companies, i.e. members of Management Board. Questionnaire items were developed after reviewing the literature of Japanese management studies, Kaizen transformation studies, quality management and production management in developing countries studies, etc. The content validity is managed by reviewing a large set of empirical studies on such issues. The evaluation of question items was made through Likert 5 points scale, from Strongly agree to Strongly disagree. This way of evaluation has proved strong
effectiveness as indicated in Kaizen literature. Current situation of Japanese improvement practices in the company is evaluated by 30 question items and business performance is evaluated by 11 question items.

Data has been collected during December 2011 to January 2012. Number of returned questionnaire is 52. Questionnaire respondents are Member of Board of Management (43%) and Middle management level (57%). We find that missing data are kept in minimum (less than 0.003%) and measurement test was conducted to ensure that data is valid and reliable.

Data analysis To answer the research questions, statistical methods such as ANOVA and regression analysis will be used to analyze the collected data. This section summarized
4

the results of data analysis processes. We would like to highlight the general observation, positive points, and rooms for improvement in the following tables

Table 1: Survey Results Summaries

No Issues The current situation 1 of Japanese management methods and techniques in the company General evaluation Quality management and Kaizen activities are very focused in companies Positive points High percentage of companies implementing the following activities Training 5S awareness for employees (82%) Formulating 5S committee (84%) Developing and establishing 5S standard (82%) Production schedule is made and implemented (83%) Maintaining daily 5S at office and showroom (77%) Employees are trained on quality awareness (77%) Employees are trained to match the skills requirements (77%) Issues need more improvement Low percentage of companies implementing the following activities Maintaining daily 5S at shop-floor (44%) Promoting 5S to suppliers network (38%) QC 7 tools are trained for employees (48%) QC 7 tools are used for process control and improvement (44%) QC 7 tools are used for problem solving (46%) QC 7 tools help to improve product quality (42%) Small group problem solving activities are conducted (44%) Small group problem help to improve quality problems (48%) Products and service standards are developed, established, and maintained (55%) 2 The current situation of business performance Companies have good High percentage of companies having high Low percentage of companies having high performance on Product cost (48%) Price (50%) Market share (45%)

competitive positions in term of performance on quality, delivery performance, service, satisfactions. and customer Customer service (71%) Customer satisfaction (67%) Product quality (63%) Fast delivery (63%)

Table 2: Scores on Japanese improvement practices in companies

5S 1 2 3 4 5 6 7 Training 5S awareness for employees Formulating 5S committee Developing and Establishing 5S standard Maintaining daily 5S at office and showroom Maintaining daily 5S at shop-floor Maintaining daily 5S at warehouse Promoting 5S to suppliers network Quality Management 8 9 10 11 Employees are trained to match the skills requirements Employees are trained on quality awareness Operations standards are well developed, established, and maintained Products and service standards are developed, established, and maintained 12 13 Inspection standards are developed, established, and maintained Acceptance sampling standards are developed, established, and maintained 14 Quality records is well documented and maintained Kaizen Continuous improvement 15 16 17 18 19 20 21 22 23 Kaizen philosophy is trained and introduced to employees QC 7 tools are trained for employees QC 7 tools are used for process control and improvement QC 7 tools are used for problem solving QC 7 tools help to improve product quality Small group problem solving activities are conducted Small group problem help to improve quality problems Scheme for employee suggestion is established and implemented Improvement suggestions of employee help to improve product quality Production Control 24 25 26 27 Production schedule is made and implemented Production plan is made and maintained Production plan is incorporate with marketing and sale plan Production process is under statistical process control Human Resource Management 28 29 30 Job-based training is provided to employees Skill-base training is provided to employees Performance assessment is implemented 2.00 2.00 3.00 5.00 5.00 5.00 4.12 4.08 4.02 0.78 0.79 0.78 2.00 3.00 3.00 2.00 5.00 5.00 5.00 5.00 4.18 4.16 4.14 3.86 0.70 0.62 0.68 0.84 1.00 1.00 1.00 1.00 1.00 1.00 1.00 2.00 2.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00 5.00 3.94 3.60 3.51 3.57 3.50 3.43 3.46 4.09 4.07 0.92 0.96 0.92 1.00 0.98 1.17 1.17 0.84 0.80 1.00 1.00 5.00 5.00 3.88 4.00 0.90 0.82 1.00 1.00 5.00 5.00 4.04 4.06 0.89 0.86 1.00 1.00 1.00 5.00 5.00 5.00 3.96 4.00 3.94 0.92 0.89 0.88 Min 1.00 1.00 1.00 1.00 1.00 1.00 1.00 Max 5.00 5.00 5.00 5.00 5.00 5.00 5.00 Mean 4.28 4.24 4.10 4.00 3.75 3.98 3.54 STD 0.93 0.80 0.74 0.94 1.05 0.99 1.12

Table 3: Scores on business performance

Quality
1 2 3 4 5 Number of defective product is lower than competitors Number of returned product is lower than competitors Product performance and function are better than competitors Customer service is better than competitors Having higher customer satisfaction than competitors Cost 6 7 The price of product is lower than competitors The price of product is attractive to customers Delivery 8 9 Frequency of deliver on time more than competitors Deliver faster than competitors Market 10 11 Increasing of market share is faster than competitors Having lager market share than competitors Min Max Mean STD

2.00 2.00 2.00 2.00 2.00

5.00 5.00 5.00 5.00 5.00

3.71 3.86 3.90 3.98 3.96

0.82 0.76 0.80 0.75 0.77

2.00 2.00

5.00 5.00

3.52 3.65

0.77 0.73

2.00 3.00

5.00 5.00

3.75 3.90

0.73 0.72

2.00 2.00

5.00 5.00

3.77 3.60

0.84 0.88

Table 4: Correlation between the implementation of Japanese methods and techniques and business performance of the companies
Training 5S awareness for employees Formulating 5S committee Developing and Establishing 5S standard Maintaining daily 5S at office and showroom Maintaining daily 5S at shop-floor Maintaining daily 5S at warehouse Promoting 5S to suppliers network Employees are trained to match the skills requirements Employees are trained on quality awareness Operations standards are well developed, established, and maintained Products and service standards are developed, established, and maintained Inspection standards are developed, established, and maintained Acceptance sampling standards are developed, established, and maintained Quality records is well documented and maintained Kaizen philosophy is trained and introduced to employees QC 7 tools are trained for employees QC 7 tools are used for process control and improvement QC 7 tools are used for problem solving QC 7 tools help to improve product quality Small group problem solving activities are conducted Small group problem help to improve quality problems Scheme for employee suggestion is established and implemented Improvement suggestions of employee help to improve product quality Production schedule is made and implemented Production plan is made and maintained Production plan is incorporate with marketing and sale plan Production process is under statistical process control Job-based training is provided to employees Skill-base training is provided to employees Performance assessment is implemented + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + P1 + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + + P2 P3 + P4 P5 P6 P7 P8 P9 P10 P11

Note: +: indicates the significant correlation coefficients between methods and techniques and business performance of the companies

Table 5: Regression Analysis

Dependent variables Quality Performance Cost performance Delivery performance Market performance

R2 Adjusted R F Significant level Beta coefficient 5S practices Quality management practices Kaizen practices Production control practices Human resource management practices
2

0.438 0.370 6.396 0.000 1.031 (0.053) 0.382 (0.045) 0.366 (0.050) 0.099 (0.591) 0.009 (0.957)

0.297 0.196 2.962 0.45 1.091 (0.059) 0.104 (0.674) 0.389 (0.042) 0.478 (0.035) 0.278 (0.193)

0.419 0.346 5.770 0.000 1.277 (0.020) 0.327 (0.050) 0.378 (0.108) 0.085 (0.656) 0.200 (0.323)

0.274 0.184 3.024 0.021 1.297 (0.071) 0.142 (0.545) 0.072 (0.780) 0.051 (0.812) 0.185 (0.384)

0.064 (0.755)

0.095 (0.636)

0.460 (0.019)

0.277 (0.089)

Significant level is set at 5% as suggested in literature

The relationship between the implementation and Japanese methods and techniques and business performance of the companies were analyzed by appying two statistical methods: simple correlation analysis and multiple regression analysis. Simple correlation analysis is taken first. We found the strong correlation between the implementation of Japanese methods and techniques and business performance of the companies (significant level was set at 5%). Companies having higher degree implementation of Japanese improvement practices would have higher performance when compared with their competitors Further test on the relationship between Japanese improvement practices and business performance of companies are conducted by developing the multiple regression analysis models. The dependent variables are four business performance as quality, cost, delivery, and, market performances. The independent variables are five factors as 5S, quality management, continuous management, production control, and human resource management (HRM) activities. Significant level is set at 5% as suggested in literature. The regression results indicate the links between the variables as described in the following figure.
10

We find that: The implementation of 5S and quality management practices significantly impact quality performance. The high implementation of 5S and quality management practices will lead to the advantage on quality performance. The implementation of quality management practices and Kaizen practices significantly impact cost performance. The high implementation of Kaizen practices and quality management practices will lead to the lower cost comparing with competitors. Delivery performance depends on the implementation of 5S and HRM practices. The high implementation on 5S and HRM practices will lead to the fast and ontime delivery.

As the result, we conclude that the implementation of Japanese methods and techniques such as 5S, quality management, Kaizen practices significantly improve companies performance on quality, cost, and delivery.

Conclusions The results of our questionaire survey and in dept intervew indicate the evidences that: The implementation of Japanese improvement practices matchs the companies expectation. The contents and methodology of Japanese management transferred by Japanese experts are understood and followed by Vietnamese companies. Companies highly appreciate Japanese experts methodology, results, and

performance. Many suggestions from Japanese experts have been noticed and implemented by the companies. Companies would like to extend the services from Japanese experts in the future aquired more Japanese experts services. Japanese experts services are very necessary for companies in the future. Japanese experts services contents and methodology should be arranged to match companies needs. In the future, future companies need more Japanese experts services which focus on productivity improvement, continuous improvement, production control, statistical process control, and 5S.
11

Japanese methods and techniques are implemented in different manners in companies. In general, companies show that 5S activities implementation is currently focused. In the future, SV services should support companies to implement QCC, QC 7 tools, and problem solving methods. Companies having higher degree implementation of Japanese methods and techniques would have higher performance when compared with their competitors. The implementation of Japanese methods and techniques such as 5S, quality management, and Kaizen practices significantly improve companies performance on quality, cost, and delivery perspectives.
Reference 1) Aoki, K., (2008), Transferring Japanese kaizen activities to overseas plant in China, International Journal of Operations& Production Management, Vol. 28, No.6, pp. 518-539. 2) Flynn, B. B. and Saladin, B. (2006), "Relevance of Baldrige constructs in an international context: a study of national culture," Journal of Operations Management, Vol. 24 No. 5, pp. 583-603. 3) Hofstede, G., (2001), Culture's Consequences: Comparing Values, Behaviors, Institutions and Organizations Across Countries. Thousand Oaks, CA: Sage Publications. 4) Naor, M., Goldstein, S. M., Linderman, K. W., and Schroeder, R. G. (2008), "The role of culture as driver of quality management and performance: Infrastructure versus core quality practices," Decision Sciences, Vol. 39 No. 4, pp. 471-702. 5) Recht, R. and Wilderom, C., (1998), Kaizen and culture: on the transferability of Japanese suggestion systems, International Business Review, Vol.7, No.1, pp. 7-22.

12