Documente Academic
Documente Profesional
Documente Cultură
1. Introduction
During the past decade and now on, Toyota Production System (hereafter TPS) has
demonstrated its overwhelming strength in the restructuring process of the global auto
industry. This is evinced by the on-going diffusion of TPS as the world-class
manufacturing model (Oliver et al. 1994) or the machine that changed the world
(Womack et al. 1990), along with the unceasing advance of Toyota in global auto
market competition. Indeed, TPS has been spread from Toyota to other automakers and
different industries across the globe, in various forms, such as transplants, joint-venture,
imitative learning, and consultancies (Ebrahimpour & Schonberger 1984).
Korean automakers are no exception in attempting to adopt TPS for enhancing their
operational efficiency and business competitiveness. TPS has been the prime target of
benchmarking for Korean automakers, since they have viewed Toyota as an exemplary
role model having made successful inroads into global markets. At Korean auto plants,
however, TPS has not been adopted as it is in Japan, but rather implemented in a deviant
form for socio-contextual and organizational reasons.
Our study aims to examine the diffusion of TPS in Korea, by focusing on the
experience of Hyundai Motor Company (hereafter Hyundai). Hyundai can be an
interesting case on several grounds: First, Hyundai is a Cinderella case showing a
remarkable transformation from a mere low-cost domestic manufacturer of a developing
country in the early 1970s to a major player in the contemporary global auto
competition. At present, it is ranked as one of global top-ten automakers by production
volume and by product quality (Jo 2005). Second, Hyundai offers an exemplary case to
shed light on how TPS has been implemented by Korean manufacturing firms, since it
represents a typical or influential business model in terms of corporate governance,
management style, market strategy, and labor relations in Korea. Third, given the fact
that there exists little research literature on the transferability of TPS to developing
countries, the Hyundai case may contribute in broadening our cognitive horizon of TPS
diffusion to non-Western developing economies. Finally, Hyundai presents a good case
Department of Sociology, Chung-Ang University, 221 Heuksuk-dong, Dongjak-gu, Seoul, 156-751,
South Korea.
to figure out key factors constraining and shaping the adoption of TPS at a recipient site,
thereby helping further develop a theoretical framework to analyze the processes and
outcomes of TPS diffusion.
Drawing upon data gained from field research, this case study attempts to interpret
the diffusion of TPS from the evolutionary perspective. Our argument is that the
emulation of TPS is not to adopt TPS as Toyota developed in its context, but to develop
its own production model having competitive edge in the global competition. In this
vein, this case offers a new lens to view the diffusion of TPS across border.
In the field work which was conducted between April, 2005 and March, 2006, we
interviewed a number of senior managers and supervisors at production and production
technology departments, with having additional talks with union officials and collecting
primary company data. The next section delineates literature review of the
transferability of TPS, followed by the historical overview of TPS emulation at
Hyundai. The section four tries to explain why the deviant adoption of TPS has taken
place at Hyundai, and the Section five benchmarks Hyundais manufacturing
performance against Toyota. In conclusion, some implications of this case study will be
addressed. .
2. Literature Review
In examining the transferability of TPS, we need to start by clarifying the substance
of TPS to be diffused across border. Since Sugimori et al.(1977) shed light on the basic
concepts of TPS in their seminal article, a number of academics have tried to capture the
essence of this extraordinary manufacturing innovation by labeling and configuring it in
various ways. Over time, the conception of TPS has evolved from a combination of
waste-eliminating manufacturing techniques and full labor utilization (Sugimori et al.
1977) to the post-Fordist or lean production paradigm encompassing supply chain
management, R&D function, customer relations as well as lean production
organizations (Womack et al. 1990). As a consequence, TPS has been described as a
variety of analytical notions, such as method, process or program, strategy, goal, belief
or state of mind, and philosophy (Vokurka & Davis 1996). This multi-facet conception
of TPS creates some confusion over its generic entity to diffuse into different
organizational or social contexts (Bartezzaghi 1999). Moreover, in light that Toyota has
evolved its manufacturing operations to deal with labor shortage and changing market
demand in the 1990s (Benders & Morita 2004; Shimizu 1998; Katayama & Bennett
1996), TPS can be viewed as an evolutionary entity, rather than the fixed one, thereby
causing difficulties in benchmarking against it.
Given its confusing conception, the transferability of TPS has entailed heated debate
among three theoretical approaches: the paradigmatic convergence perspective, the
structuralist perspective, and the contingency perspective. The convergence perspective,
which mainly draws upon the IMVP research, highlights the superb performance of TPS
achieved by Japanese manufacturers, including Toyota, and Western emulators.
According to this perspective, TPS, which was invented under the originator(Toyota)s
idiosyncratic context, is recognized as the dominant production paradigm of the 21st
century, verified by its performance superiority in the global competition (Womack et
al. 1990; Krafcik 1988; Cusumano 1988). This school treats TPS or lean production as a
universal set of management norms to be transferred to anywhere (Womack & Jones
1994; Adler & Cole 1993). Despite some variation in the form of its diffusion reflecting
the recipients strategy and context, they insist, TPS becomes the one-best way
manufacturing paradigm into which every business player tends to converge in the
survival game of the contemporary global competition (Forza 1996).
The structuralist perspective denies the universal transferability of TPS, emphasizing
the unique socio-economic context of Toyota (Williams et al. 1994). Nakamura et al.
(1996) note that the transfer of TPS across national boundaries is considerably more
difficult than the diffusion of specific TPS components, against a background of
different social contexts, including cultures and social relations, economic conditions,
and business practices. Thus, this school insists that TPS has historically evolved under
the idiosyncratic condition of Toyota and its substance can hardly be transferred to
differing structural contexts (Williams and Haslam 1992).
Between these two polar positions, the contingency perspective posits a
compromising view, by considering the paradigmatic superiority of TPS and
preconditions or constraints of its transferability. This academic group stresses that the
successful implementation of TPS as a new manufacturing paradigm is dependent upon
such organizational contingencies at recipient sites as long-term management strategy,
labor-management cooperation, employee and union involvement, open
communication, and substantial training investment (White et al. 1999; Harber et al.
1990). They also point out that the processes and outcomes of TPS emulation are
conditioned by external contexts (i.e.: market situation, international division of labor,
local institutional environment, social culture) as well as organizational contingencies
(Mehta & Shah 2004; Liker et al. 1999) In a similar vein, Doeringer et al. (2003) reveal
national differences in actual adoption of TPS, by comparing Japanese multinationals
across U.S., U.K. and France.
Among the three different theoretical views of the existing literature, the contingency
green-field plant, for instance, the Asan plant consisted of a set of segmented assembly
lines with inter-line buffers (about three vehicle units) and improved working
environments by automating production facility in the ergonomic design. It is
noteworthy that the new plant attempted to adopt the pull production system,
controlled by the MRP-based scheduling rather than by the Kanban system, thereby
remarkably improving the ratio of completed sequential production up to 95%
(compared to 75% at the brown-field plants) and reducing parts inventory down to 0.8
days (compared to 1.7 days at the old plants) in its start-up stage (Chung 1997).
However, this attempt was halted by the economic crisis in 1997 and the companys
unprecedented massive downsizing in 1998, and this plant went back to the traditional
push production model (Jo 2001). Furthermore, this green-field plant implemented
such new programs as direct supplier delivery (of auto parts to production lines), 100
PPM quality assurance campaign and work teams quality guarantee plan, and various
fool-proofing tools, for emulating and catching up Toyota.
After recovering from the economic slump of 1997-1998, Hyundai officially began
making efforts to develop its own unique production model, the so-called Hyundai
Production System (HPS) in pursuit of a global manufacturing network. In devising
HPS, Hyundai management continues to benchmark itself against Toyotas
manufacturing performance. At the same time, they makes clear that HPS is deviated
from the core principles of TPS pull production and worker involvement -, which
were tried at the Asan plant, but to little effect.
The core part of HPS is demonstrated by its ambitious multi-year plan of production
management innovation, as illustrated in [Table 1]. In accordance with this strategic
plan, the company implemented APS in 2002 and E-BOM in early 2006, while planning
to install ERP by the end of 2006 and establish a comprehensive production
management system combining SCM and OTD in 2007. Hyundai management expects
that once the OTD system that can complete a business process of order-to-delivery
within a week is active, HPS can become as lean and responsive to market demands as
TPS. Despite its effort to emulate the JIT operation of TPS, HPS, equipped with the
ERP and OTD, is primarily governed by the traditional principle of the push
production.
Insert [Table 1]
HPS is also a technology-oriented and engineer-driven approach toward the
minimization of worker involvement, which is in sharp contrast to TPS. Hyundai
management has made massive investments in automation over the past two decades.
As a result, the automation of the press and body-welding shops reaches almost 100%
and that of the assembly lines increases up to the comparable level of 15% to Toyota.
Hyundai management has chiefly pursued the automation to save labor, compared to
Toyota where automation is treated as a supplementary means to make workers job
efficient and easy. Similarly, according to Hyundai management, HPS approach to foolproofing machinery is somehow different from Toyota: the first puts stress on the
elimination of job tasks on which workers may make a mistake, whereas the latter
underlines the prevention of workers faulty operation. Another example of Hyundais
engineer-oriented approach is identified in its emphasis on modular production.
Hyundai management set out a long-term plan to develop the modular production
system for establishing the Just-in-Sequencing (JIS) operation, as illustrated in [Table
2]. According to the plan, the overall level of modularization soared from 30% in 2005
to 40% by 2006. The modularization has entailed the outsourcing of parts sequencing
jobs, automation of modular parts assembly, and simplification of main production lines
(Lee 2003). As displayed in [Figure 2]. HPS also includes a Toyota-style workplace
innovation program, comprised of basic management strengthening the shopfloor ethic
of hard work and substance management stressing Kaizen activities and manufacturing
performance (i.e.: quality, operational costs, productivity). However, the workplace
innovation program (and the previous shopfloor campaigns) at Hyundai is contrary to
the TPS principle of worker involvement, in that it is solely driven by shopfloor
management, without production workers commitment. Instead, college-graduated
engineers are the main force of production process innovation, since they are very
motivated to apply for numerous patents (i.e. four patents per engineer in 2005) by
merit pay system and other performance incentives.
Insert [Table 2]
Insert [Figure 2]
To sum up, Hyundai has developed its production model deviant from TPS, ironically
although it has tried to emulate TPS through replica of manufacturing prototype,
technical consultancies, and benchmarking over time. Hyundais emulation of TPS is
characterized as being (1) a selective and graduated adoption linked to the expansion of
manufacturing capacity, (2) technology-driven radical innovation (Liker et al. 1999;
Fujimoto 1999), and (3) engineer-led and worker-exclusive approach.
10
interfered with managements policy to promote workplace innovation and flexible job
rotation, thereby resulting in the rigid and Kaizen-free working practices on the
shopfloor. In fact, the labor union forced management to reduce the items of TQC from
30 to 10 and use the increasing number of irregular contracted workforce in the early
2000s. In this organizational condition of the militant labor union and workers mistrust,
Hyundai management has been unable to promote the systemic flexibility of labor
utilization and workplace innovation, aided by the performance-based HRM schemes,
which are a key part of and a prerequisite for TPS, and, therefore, further moved toward
the engineer-led production model.
In summary, the external conditions (i.e. supplier-dominated market, the authoritarian
governments labor control policy, parts suppliers poor technical capability, and
economic crisis) and internal contingencies (top managements emphasis on high
utilization, the militant labor union, and workers distrust) are combined to contribute in
forging the technology-driven and push-mode Hyundai production model, which has
over time been more deviant from TPS, albeit the companys unceasing efforts to
emulate it.
5. Benchmarking of Hyundai Production Model to TPS
Hyundai managements efforts to emulate TPS, which have been resolved into its
unique production model, have made a remarkable achievement in boosting its
manufacturing competitiveness to the level of Toyota. Drawing upon the recent
manufacturing performance of Hyundai, HPS can be benchmarked to TPS. As shown in
Figure 3], HPS has enhanced the utilization ratio up to 95.6%, close to TPS (97%)
during the past five years. It has also improved the product quality (measured by the
sign-off ratio) up to 92.3%, drawing near the level of Toyota (94-95%), in the same
period. In particular, Hyundais quality improvement is evidenced by the recent
favorable recognition of overseas markets: for instance, its passenger cars rank as one of
highest quality products in the J.D. Powers IQS. Moreover, despite its push-mode
production system, Hyundai reduces its inventory of parts delivery to two hours,
comparable to Toyota, through tight control of parts suppliers. These notable
accomplishments of HPS manufacturing performance are mainly attributable to the
companys great efforts for engineer- or technology-driven production management
innovation.
Insert [Figure 3]
11
At the same time, HPS has a crucial problem in its labor productivity. As illustrated in
[Figure 3], the level of allocation ratio at Hyundai assembly plants has declined from
75.8% in 2000 down to 67.4% in 2005. The rough comparison of labor productivity by
production unit per worker reveals that Hyundai (31.9) was below half of Toyota (65.6)
in 2003. This problem could be explained by rigid work practices and little worker
involvement in shopfloor innovation against a backdrop of confrontational labormanagement relations climate and low employee trust in corporate management.
Nonetheless, as shown in [Table 4], since the labor cost of Hyundai is around 40% of
Toyota (as of 2003), the former has been able to maintain its price competitiveness,
despite the poor labor productivity.
Insert [Table 4]
In short, Hyundai has achieved fairly good manufacturing performances (in terms of
utilization, product quality, and parts inventory) with its own production model, HPS,
deviant from TPS, while it has also experienced the declining labor productivity, caused
by the deviation, that is, worker-exclusive production management.
6.
Conclusion:
Over the past 40 years, Hyundai has developed its own production system, HPS, by
emulating, re-interpreting, and benchmarking TPS in a manner of radical innovation. In
other words, HPS, into which the company.s social and organizational contingencies
are embedded, is a mutagenized form of TPS adoption. Although it is deviant from the
ideal model of TPS (JIT pull production, equipped with flexible human buffer and
incremental innovation capacity), HPS, based on the technology-driven push
production) has gained a remarkable competitive advantage in manufacturing
utilization, product quality, and inventory management, thereby jumping over the
limitation of the pre-existing low wage business model, indicated by Womack et al.
(1990). Of course, it should also be noted that HPS is dampened by its worker-exclusive
manufacturing approach, derived from authoritarian management style and unstable
labor relations and contrary to TPS.
Our case study addresses several implications for the future research to decode the
diffusion mechanism of TPS. First, The Hyundai case reveals that the adoption of TPS
entails a complex evolutionary process of organizational learning and interpretation by
recipients, as indicated by Bartezzaghi(1999) and Liker et al.(1999). In contrast to the
convergence perspective stressing the universal transferability of TPS in a simplistic
manner, the emulating process of TPS involves the complicate interaction with
12
13
References
Adler, P. and Cole, R. 1993, Designed for learning: a tale of two auto plants. Sloan
Management Review, 34(3), 85-94.
Bartezzaphi, E., 1999, The evolution of production models: is a mew paradigm
emerging? International Journal of Production and Operations Management, 19(2),
229-250.
Benders, J. and Morita, M., 2004, Changes in Toyota Motors operations management.
International Journal of Production Research, 42(3), 433-444.
Chung, M. 1997, Implementation of new production system and changes of human
resource management: a case study of Asan plant of Hyundai Motor. Korean Labor
Studies, 3(1): 81-108. (in Korean)
Cho, S. and Lee, Y., 1989, New labor process and Korean auto industry: the possibility
and limitation of Just-in-Time production. Korea Sociological Journal, 23(2), 73-92.
(in Korea)
Cho, S., Lee, B., Hong, J., Lim, S., and Kim, Y. 2004, Subcontracting Structure and
Hierarchy of Employment Relations in the Auto Industry (Seoul: KLI). (in Korean)
Cusumano, M., 1988, Manufacturing innovation: lessons from the Japanese auto
industry. Sloan Management Review, 30(1), 29-39.
Doeringer, P., Lorenz, E. and Terkla, D., 2003, The adoption and diffusion of highperformance management: lessons from Japanese multinationals in the West.
Cambridge Journal of Economics, 27. 265-286.
Ebrahimpour, M. and Schonberger, R., 1984, The Japanese just-in-time/total quality
control production system: potential for developing countries. International Journal
of Production Research, 22(2), 421-430.
Forza, C., 1996, Work organization in lean production and traditional plants: what are
the differences? International Journal of Operations & Production Management,
16(2), 42-62.
Fujimototo, T., 1999, The Evolution of a Manufacturing System at Toyota (Oxford:
Oxford University Press).
Harber, D., Samson, D., Dohal, A. and Wirth, A., 1990, Just-In-Time: the issue of
implementation. International Journal of Operations and Production Management,
10(1), 21-30.
Jo. H., 2005, Is Korean Production System Applicable? Examining the Possibility of
Hyundaism (Seoul: Hanul Publisher). (in Korean)
Jo. H., 2001, A comparative study of green-field factory in Japan and Korea; focused on
14
the relations between production system and human resource management. Korea
Sociological Journal, 35(2): 147-177. (in Korean)
Jo, H., 1998, Flexible production system and changes in work organization. Economy
and Society, 38, 244-264. (in Korean)
Kang, M., 1986, Strange Koreans Who Made Pony (Seoul: Jungwoo Publisher). (in
Korean)
Katayama, H. and Bennett, D., 1996, Lean production in a changing competitive world:
a Japanese perspective. International Journal of Operations and Production
Management, 16(2), 8-23.
Krafcik, J., 1988, Triumph of the lean production system. Sloan Management Review,
30(1), 41-52.
Lee, B., 2003, Restructuring and employment relations in the Korean auto industry.
Bulletin of Comparative Labour Relations, 45, 59-94.
Lee, B. 1997, Workplace transformation at incrementalist plants: a cross-national
comparative study of a US and a Korean auto plant. Ph.D. Thesis of the Industrial
and Labor Relations School, Cornell Univeristy.
Lee, C. and Lee, K., 2005, A comparative analysis on Toyota production system
implementation of Korean and Japanese firms. Korea-Japan Economic and
Business Review, 31, 135-162. (in Japanese)
Lewis, M., 2000, Lean production and sustainable competitive advantage. International
Journal of Operations and Production Management, 21(8), 959-978.
Liker, J., Fruin, M., and Adler, P., 1999, Bringing Japanese Management Systems to the
United States: Transplantation or Transformation? In Liker, J., Fruin, M., and Adler,
P., eds., Remade in America: Transplanting and Transforming Japanese
Management Systems (New York: Oxford University Press).
Nakamura, M., Sakakibara, S., and Schroeder, R., 1996, Japanese
manufacturing.method at U.S. manufacturing plants: empirical evidence. The
Canadian Journal of Economics, 29, S468-S474.
Oliver, N., Delbridge, R., Jones, D. and Lowe, J., 1994, World class manufacturing:
further evidence in the lean production debate. British Journal of Management,
5(S), 53-63.
Plenert, G., 1990, Three differing concepts of JIT. Production and Inventory
Management Journal, 31(2), 1-2.
Shimizu, K., 1998, A New Toyotaism? In Freyssenet, M., Mair, A., Shimizu, K., and
Tolliday, S., One Best Ways? Trajectories and Industrial Models of the Worlds
Automobile Producers, Oxford: Oxford University Press.
15
Sugimori, Y., Kusunoki, K., Cho, F., and Uchikawa, S., 1977, Toyota Production System
and Kanban system: materialization of just-in-time and respect-for-human-system.
International Journal of Production Research, 15(6), 553-564.
Vokurka, R. and Davis, R., 1996, Just-in-time: the evolution of a philosophy.
Production and Inventory Management Journal, 37(2), 56-58.
White, R., Pearson, J. and Wilson, J., 1999, JIT manufacturing: a survey of
implementation in small and large U.S. manufacturers. Management Science, 45(1),
1-15.
Williams, K., Haslam, C., and Johal, S., and Willams, J., 1994, Cars (Providence, RI:
Berghahn Books).
Williams, K. and Haslam., 1992, Against lean production. Economy and Society, 21,
321-354.
Womack, J., Jones, D., and Roos, D., 1990, The Machine that Changed the World (New
York: Rawson Associates).
Womack, J. and Jones, D., 1994, From lean production to the lean enterprise. Harvard
Business Review, March-April, 93-103.
16
Description
2002
2003
2004
2005
2006
Cockpit Module
Chassis Module
Simple
assembly
parts development
Front-end Module
Integrated modules
parts development
development
Toyota
Production mode
PUSH
PULL
MRP system
JIT (Kanban)
Operational goal
Planning-led production
Minimization of inventory
17
Production management
Production condition
2001
Toyota
2002
2003
2000
2001
2002
2003
30.3
37.0
31.9
62.1
60.3
62.5
18
65.6
Recipient
Mutigenization
of TPS
TPS
Manufacturing method
& techniques
Work organization
HRM
Supplier management
Emulation channel
-Prototyping
-Technical transfer
-Benchmarking
Internal
contingencies
External
constraints
[Japanese context]
Basic Management
Work Environment
Worker Morale
Safety & Energy-saving
Work Attitude
Substance Management
Common Management
Objective Management
Organizational Management
19
20