Inventory to Mr. Ohno was the biggest waste and he started a lot of his
initial efforts to reduce inventory. Prior to his thinking most managers
considered inventory a valuable asset for Wall Street loved it. The more
inventory you produced the higher your profits. You did not have to sell
your products. For example, GM made over 5 billion around three years ago
and lost close to 14 billion the next – they couldn’t sell what they made.

To me ROI is the same. What is a reasonable expectation for your return on
investments? When I went to NYU Graduate School of Business we were taught
to factor in the interest cost to borrow and the expected rate of return of
your capital invested. The Japanese continually look at the long term and
their ROI reflects that. Too often in America we want very fast ROI¹s,
which keeps us looking at this quarter. An example is Dana Corporation
where every manager knew they were measured on ROI. Dana went bankrupt.

Fast return on investments is good for the stockholder but can be bad for
the company in the long term. I feel that is a prime reason we have lost so
much business to Japan, China, Korea, etc.

Cheap labor might have some factor but if Toyota can do it here, make cars
in America, then so can we if we are willing to make sacrifices for the long
term.

Chasing cheap labor is very inviting and hard to turn down, but it is part
of this short-term thinking and it is “selling America short.”

It is much better to wring out the wastes, get all employees empowered and
trained in problem solving activities to demonstrate that we can compete
internationally. Wring out this waste before you consider closing plants
and going overseas.

The Japanese companies are faced with fierce competition with Korea, China
and other low cost countries but they don’t want to sell Japan short. I
believe their approaches are:

1. Automate everything possible for those machines running night and day
can easily compete with cheap labor.
2. Use part time employees in the non-skilled jobs. This protects the
permanent employees. I saw that at the factories where part time workers
were doing the repetitive tasks and the skilled permanent employees were
repairing the machines, doing the complicated assembly work, the inspection,
the design engineering, etc. Part time people can only work for a maximum of
three years in a company in Japan. The part time employee does not receive
the same training and development as the permanent employees. It is not easy
on the part time employees, at all, but it does give the companies an
opportunity to automate those unskilled tasks.

I believe that Toyota is still probably one of the best manufacturing
companies to work for in Japan.

I recommend two books: Rebirth of American Industry, which covers the first
issue and my new book by Dr. Shingo Kaizen and the Art of Creative Thinking.
Shingo was a great master. His new book shows you how to develop your
employees from their ability to identify and solve problems. It is a jewel.

Best wishes,
Norman Bodek

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Also extremely curious about Japan outsourcing to China and increasing temporary workers. Seems like a distressing trend for those of us trying to convince leadership that chasing cheap labor is not the answer!

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Thanks a ton, Mark, for making this available!!

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