The Japanese Manufacturing Industries - Its Capabilities and Challenges -

June, 2011 FAIM Takahiro Fujimoto Professor, Faculty of Economics, Tokyo University Executive Director, Manufacturing Management Research Center Senior Research Associate, Harvard Business School

Evolutionary Analysis of Capability and Architecture Decisions and Behaviors of Designers

CapabilityBuilding Environment CapabilityBuilding Competition

Customer or Market Requirements

Manufacturing (monozukuri) Capability

Fit？

(Different by Products）

（local concentration） CapabilityBuilding Capability

Product-Process Architecture

Comparative Advantage of Design Sites

Other Environmental Factors, and Chances

C Takahiro Fujimoto, University of Tokyo

Constraints imposed by Society Constraints imposed by Technology

The Architecture - Capability Framework

1

Design-Information View of Manufacturing （Monozukuri)

2

Organizational Capability

3

Performance Measurement -- A Multi-Layer Approach

4

Product-Process Architecture

5

Capability-Architecture Fit --- Explaining Competitiveness

C Takahiro Fujimoto, University of Tokyo

– Controlling Design Flows

Design-Information View of Open Manufacturing （Monozukuri) Key Concept:

Design Information

=

Value

A firm’s products and processes are artifacts that has been designed. Manufacturing is essentially creation and transmission of design information to customers.

A firm’s manufacturing (monozukuri) capability is its distinctive ability to handle flow of design information toward customers. Product-process architecture is designers’ basic way of thinking when creating design information for the product and processes. “Design” is the common denominator for these analyses. C Takahiro Fujimoto, University of Tokyo

Open Manufacturing (Monozukuri) Means Creating Design Information Flows to the Customers We focus on design (as opposed to material) side of manufacturing

artifact = design information + medium c.f., Aristotle: object = form + material design information

where form is more essential

medium

form material

Products (goods and services) are the artificial (= something designed)

manufacturing, if medium is tangible

design information tangible medium

service if medium is intangible

Primary source of customer value is design information C Takahiro Fujimoto, University of Tokyo

design information intangible medium

Design Information

Body Exterior Design Embedded in Press Dies

Product Development

Production

0.8 mm thick steel sheet C Takahiro Fujimoto, University of Tokyo

Purchasing Media (Material)

Product = Design Information + Media

Body Exterior Design Embedded in Press Dies

0.8 mm thick steel sheet

Production = Marriage of Design Information Media C Takahiro Fujimoto, University of Tokyo

What is Going on at the Press Shop Body exterior design information, embedded in press dies (steel block), is transmitted to 0.8 mm thick sheet steel (media) Information transmission time = value-adding time Information non-transmission time = MUDA

press dies body design

transmission

cast iron

body design

steel sheet

body panel C Takahiro Fujimoto, University of Tokyo

Sheet Steel (Media) Absorbs Design Information through the Press Operation

press die press die body design

body design

cast iron

cast iron

press die

press die body design cast iron

Design information, embedded in press dies, is transmitted to sheet steel C Takahiro Fujimoto, University of Tokyo

body design cast iron

Open Manufacturing (Monozukuri) as a System of Design Information between Productive Resources Manufacturing activity is design information flows between productive resources productive resource design information

Design Information flow

medium

productive resource design information

product design Information flow

medium

design information

medium material (media) flow

customers

firms

development

C Takahiro Fujimoto, University of Tokyo

production

sales

Goods and service as flows of design information unsatisfied customers ① to tangible medium ② to customers

physical goods ・・・ 2 stage transmission： development

①

design info

production medium (tangible）

design info

sales

design info

design info

medium (tangible）

medium (tangible）

consumption

service・・・ intangible medium; direct transmission to customers development

medium (intangible） C Takahiro Fujimoto, University of Tokyo

design info medium (intangible）

sales

②

satisfied customers

unsatisfied customers

production design info

satisfaction

Design info

consumption satisfied customers

What is Genba (Manufacturing Site) ? A Place Where People on the Spot Work Together, Control Artifacts, and Thereby Create a Good Flow of Value (Function) to the Society People Manual Control of Artifacts

Receiving and Enjoying Value (Community)

Work together

Info. on Structures and Environments Automatic Control

Energy and Material Inputs

Structure of Artifacts (Controller) Structure of Artifacts (Controlled)

Info. on Functions

Feedback Info.

Energy and Material Outputs

Function, Service, Value

Noises and Changes

Environments

Service to Themselves – Community, Family Service to Customers – Service Site Service to Materials – Production Site

Broader View of Lean Manufacturing Production

Narrow View of Manufacturing

Manufacturing Production Sites in Sector Manufacturing Sector NonManufactur ing Sector

Production

Broad View of Manufacturing Shifting attention from Materials to Designs 東京大学 藤本隆宏

Development/Sales

Manufacturing Production Sites in Sector Manufacturing Sector NonManufactur ing Sector

Operation Sites in Service Sector

Development/Sales Development and Purchasing Sites in Manufacturing Sector Development Sites in Service Sector

The Architecture - Capability Framework

1

Design-Information View of Manufacturing

2

Organizational Capability

3

Performance Measurement -- A Multi-Layer Approach

4

Product-Process Architecture

5

Capability-Architecture Fit --- Explaining Competitiveness

C Takahiro Fujimoto, University of Tokyo

– Controlling Design Flows

Design-Based Comparative Advantage Decisions and Behaviors of Designers

CapabilityBuilding Environment CapabilityBuilding Competition

Customer or Market Requirements

Manufacturing (monozukuri) Capability

Fit？

(Selected by Products）

（local concentration） CapabilityBuilding Capability

Product-Process Architecture

Comparative Advantage of Design Sites

Other Environmental Factors, and Chances

C Takahiro Fujimoto, University of Tokyo

Constraints imposed by Society Constraints imposed by Technology

Organizational Routines and Capability of Manufacturing Organizational routine of manufacturing ------

Repeated control of design information flow between productive resource

routine design info

design info

medium

medium

A system of organizational routines for fast, efficient and accurate flows of design information to customers

Organizational capability ------of manufacturing

routine

routine

routine

routine

routine

routine

design info

design design info info

design design info info

design design info info

design design info info

design design info info

design info

medium

medium medium

medium medium

medium medium

medium medium

medium medium

medium

C Takahiro Fujimoto, University of Tokyo

(1) Higher Productivity and Shorter Throughput Time

Figure 9

Organizational Capability Regarding Productuvity and Throughput Time (Toyota) product design for manufacturab ility Product Design (M+A+B)

B

revision of work designs b y supervisors

multi-skilled worker flexib le task assignment (shojinka)

pull system

in-house design of equipment Work Design Equipment Design incremental impovement of equipment

B

visualizing non-value time (JIT, andon, line stop cord)

reduction of finished goods inventory

C Takahiro Fujimoto, University of Tokyo

A

process step 2

M

low cost automation

Worker and Equipment

supplier's Kaizen (impronements)

flexib le equipment quick set-up change preventive maintenance

regular pace of information transmission (levelization, small lot) supplier Kanb an

A

reduction of work-in-processi inventory or piece-b y-piece transfer

process step 1

designing process flow pror to work & equipment design

M

JIT delivery

M

M+A

mixed-model (small lot) assemb ly

Parts Design (M)

M

communication

M+A+B

levelization of product mix (heijunka)

A

workers participate in Kaizen (improvements)

Worker and Equipment

maximizing value-adding time

lshort-term levelization of production volume

b lack b ox parts system

Work Design Equipment Design B

customer dealer

parts design for manufacturab ility

supplier

reduction of raw material inventory

（2） Higher Manufacturing Quality Figure 10

Organizational Capability Regarding Manufacturing Quality (Toyota) design for manufacturab ility Product Design (M+A+B)

M+A+B

M+A+B

Worker and Equipment

Worker and Equipment

quick feedb ack of defect information

B

M+A+B

dramatizing the defect information (andon, jidoka, etc.)

prevention from sending A error messages (poka-yoke, jidoka, etc.)

M+A M+A+B?

yes

M+A+B?

M+A?

yes process step 2

no

no

scrap or rework

scrap or rework

information flow material flow A,B,M

information content

reduction of inventory or piece-b y-piece transfer

on the spot inspection

process step 1 no

scrap or rework

yes

M?

elimination of inspection of receovomg parts no

scrap or rework

inspection transformation productive resource

Toyota-style system as an integrative manufacturing capability C Takahiro Fujimoto, University of Tokyo

M

supplier's on the spot inspection

M

yes

final inspection

Key:

maintenance of process information stock (total productive maintenance, worker training, standard operating procedures)

Worker and Equipment Kaizen (continuous impronements)

customer

M+A

supplier

supplier's Kaizen (impronements)

The Lean Principle (Manufacturing) Design Information is Transmitted to Materials Creating Good Flows of Good Design (Value) to Customers

Reducing MUDA (Non-Value-Adding Time) Maximizing Value Adding Time Ratio Total Process First, Individual Operations Next Lead Time Reduction First, Cost Cutting Next Pursue High Quality First – Quantity Follows as a Result

C Takahiro Fujimoto, University of Tokyo

Efficient/Accurate Information Processing at Toyota Integrative Manufacturing Capability Production --- Dense and Accurate Transmission of Design Information from Process to Product

Development --- Early and Integrative Problem Solving Cycles For Fast Creation of Design Information Purchasing --- Long-Term Relationship, Capability-Building Competition, Bundled Outsourcing for Joint Creation of Design Information with Suppliers

Toyota’s Manufacturing capability Smooth, dense and accurate transmission of design information between flexible (information-redundant) productive resources.

--- Integration-Based Manufacturing Capability C Takahiro Fujimoto, University of Tokyo

Information Transmission and Reception in Production productivity (#1station) （person-hour per unit）

Value adding time (transmission） Value adding time (reception）

productivity (#2station) （person-hour per unit）

Non-value-adding time Inventory, waiting, transporting, etc. Productive resource

cycle time

cycle time

Worker

Worker

Transmission side (working)

Work-in-process

materi al

Reception side (process) design information flow

material flow

C Takahiro Fujimoto, University of Tokyo

#1 station

product

#2 station

Inven Tans Inven -tory port -tory

inventor y time cycle time

inventor y time

cycle time production lead time

Basics in Product Development Themes in Clark & Fujimoto (1991) Product Development Performance

(1) Early Supplier Involvement in PD (2) Applying JIT-TQM to PD (3) Overlapping Problem Solving (4) Compact and Coherent Team (5) Heavy-Weight PM as Champion The Key is “Early and Integrated Problem Solving “

New Information Technology is Necessary, but not Sufficient Organizational Capability is Key After All

C Takahiro Fujimoto, University of Tokyo

History Matters in Industry’s Capability-Building Decisions and Behaviors of Designers

CapabilityBuilding Environment CapabilityBuilding Competition

Manufacturing (monozukuri) Capability

（local concentration）

CapabilityBuilding Capability

Other Environmental Factors, and Chances

C Takahiro Fujimoto, University of Tokyo

Evolutionary Hypothesis for Integrative Manufacturing Capability Common Experience during the High-Growth Era May Create A Common Set of Capabilities at Manufacturing Sites of the Same Country “Economy of Scarcity” ・・

Hungry Organizations Are Forced to Become Lean

Common Experience of “Poverty” (Input-Hungry Situations) When the Organization Was Young, Small and Growing. →

Limiting Intra-Firm Division of Labor (= Multi-Skilled Workers) Promoting Inter-Firm Division of Labor (= Supplier Systems) 、 Promoting Coordination Inside and Between Firms (= Team Work)

→

Forced Increase of Productivity (High Altitude Trainings of Marathon Runners)

→

Subsequent Increase of Inputs Results in Rapid Expansion of Outputs, But Expansion of Supplies Also Intensifies Competition Among Firms. Capability-Building Continues in the Sectors of Tradable Goods.

・・ Partly Unintended Results of Industrial Histories in the Late 20th Century. C Takahiro Fujimoto, University of Tokyo

The Architecture - Capability Framework

1

Design-Information View of Manufacturing

2

Organizational Capability

3

Performance Measurement -- A Multi-Layer Approach

4

Product-Process Architecture

5

– Controlling Design Flows

Capability-Architecture Fit --- Explaining Competitiveness

C Takahiro Fujimoto, University of Tokyo

Design-Based Comparative Advantage Decisions and Behaviors of Designers

CapabilityBuilding Environment CapabilityBuilding Competition

Customer or Market Requirements

Manufacturing (monozukuri) Capability

Fit？

(Selected by Products）

（local concentration） CapabilityBuilding Capability

Product-Process Architecture

Comparative Advantage of Design Sites

Other Environmental Factors, and Chances

C Takahiro Fujimoto, University of Tokyo

Constraints imposed by Society Constraints imposed by Technology

1 Measuring and Analyzing Industrial Performance -- From Competitiveness to Profitability Figure 12 Capability, Competitiveness, and Profitability other factors of environments and strategy

Organizational Capability organizational routine

Productive Performance

Market Performance

price productivity delivery lead time conformance quality perceived quality etc. etc.

Arena of Capability-building Competition

C Takahiro Fujimoto, University of Tokyo

Profit Performance

Example: Productive Performance of Japanese Auto Firms -- Development Productivity (Adjusted Person-Hours per Project) --

?

3500000 3000000 2500000

USA Europe Japan

2000000 1500000 1000000

?

500000 0 Period 1 1980-84

Period 2 1985-89

Period 3 1990-94

Period 4 1995-99

2000~2010

Adjustment scheme: (1) # of body types=2, (2) New design ratio=0.7, (3) Supplier’s contribution=0.3, (4) Product class=compact/sub-compact C Takahiro Fujimoto, University of Tokyo

*Following Graphs Cited from Nobeoka & Fujimoto(2004)

Example: Productive Performance of Japanese Auto Firms -- Assembly Productivity (Adjusted Person-Hours per Vehicle) -50 41.0 40

35.5

30 20

25.3

24.9 21.9 16.816.5 12.3

29.7 28.0

20.1

16.8

10 0 JP/JP 日/日 (Hours*Person)

US/NA 米/北米

1989

EU/EU 欧/欧

1994

Developi 新興国 ng Cont.

2000

Source: M. Howleg & F.K. Pil, The second century (IMVP Survey) C Takahiro Fujimoto, University of Tokyo

Final Assembly Productivity (2006) Assembly Productivity (person hours per vehicle) Factories of Asian Multinationals in Asian Countries Productivity（man-hour/vehicle） (assemble) 16.0

14.5

14.0 12.0

9.8

9.7

10.0

9.7 7.5

8.0 6.0

5.1

4.0 2.0

(3 )

er ag

di a In

Ch in a&

In di

a

Av

Av er nd Th ail a

Av er ag e

e( 6)

ag e( 6)

er ag e( 3) Av an Ta iw

an &T aiw Ko re a

Ja

pa

n

Av

er ag

Av er ag e( 6)

e( 10 )

0.0

30 C Takashi Oshika, and Takahiro Fujimoto, IMVP

30

Example: Productive Performance of Japanese Auto Firms -- Assembly Throughput Time (from Welding to Assembly) --

Throughput Time (Start of Body Assy-Final Line off) 40.0

36.3

35.0 30.0

25.5

25.0 20.0

20.5

20.1 17.1

15.0 10.0 5.0 （hr.)

0.0

(Hours) JP/JP 日本

海外日本 北米 JP/NA NA/NA

欧州 EU/EU

韓国 KR/KR

Data: IMVP2000yr. Survey, made by Jeweon Oh, MMRC C Takahiro Fujimoto, University of Tokyo

The Architecture - Capability Framework 1

Design-Information View of Manufacturing

2

Organizational Capability

3

Performance Measurement -- A Multi-Layer Approach

4

Product-Process Architecture

5

– Controlling Design Flows

Capability-Architecture Fit --- Explaining Competitiveness

C Takahiro Fujimoto, University of Tokyo

Design-Based Comparative Advantage Decisions and Behaviors of Designers

CapabilityBuilding Environment CapabilityBuilding Competition

Customer or Market Requirements

Manufacturing (monozukuri) Capability

Fit？

(Selected by Products）

（local concentration） CapabilityBuilding Capability

Product-Process Architecture

Comparative Advantage of Design Sites

Other Environmental Factors, and Chances

C Takahiro Fujimoto, University of Tokyo

Constraints imposed by Society Constraints imposed by Technology

Architectural Thinking and Industrial Classification Product architecture, Basic way of thinking of engineers when they design functions and structures of a new product

Figure 4

Product Function

Product Architecture

Mapping between Functional and Structural Elements

Product Structure

Compo nent Interface

Interface Component

Sub-functions

C Takahiro Fujimoto, University of Tokyo

Basic Classifications of Product-Process Architecture Modular architecture one-to-one correspondence between functional and structural elements

Computing

PC

Projection

Projector

Printing

Printer

PC System

Integral architecture Handling many-to-many correspondence Ride between the functional Fuel Efficiency and structural elements

Body Suspension Engine

Automobile

Open architecture： “mix and match” of component designs across firm Closed architecture： C Takahiro Fujimoto, University of Tokyo

mix and match only within a firm

Three Basic Types of Product Architecture (1) Closed-integral, (2) Closed-modular, (3) Open-modular

Figure 6

Basic Types of Product Architecture Integral

Modular

small cars mainframe computer motorcycle machine tools Closed game software LEGO (building- block toy) compact consumer electronics

Open

C Takahiro Fujimoto, University of Tokyo

personal computer (PC) bicycle PC software internet

Closed-Integral Architecture (Car)

Figure 6 Basic Types of Product Architecture Integral small cars

Modular

mainframe computer

motorcycle Closed

game software compact consumer electronics

machine tools LEGO (building-block toy)

personal computer (PC) Open

bicycle PC software internet

C Takahiro Fujimoto, University of Tokyo

Closed-Modular Architecture (Mainframe Computer)

Figure 6 Basic Types of Product Architecture Integral small cars

Modular

mainframe computer

motorcycle Closed

game software compact consumer electronics

machine tools LEGO (building-block toy)

personal computer (PC) Open

bicycle PC software internet

C Takahiro Fujimoto, University of Tokyo

Open-Modular Architecture (PC)

パソコンの写真を貼 り付ける Figure 6 Basic Types of Product Architecture Integral small cars

Modular

mainframe computer

motorcycle Closed

game software compact consumer electronics

machine tools LEGO (building-block toy)

personal computer (PC) Open

bicycle PC software internet

C Takahiro Fujimoto, University of Tokyo

Closed-Integral Architecture (unit-body)

Figure 6 Basic Types of Product Architecture Integral small cars

Modular

mainframe computer

motorcycle Closed

game software compact consumer electronics

machine tools LEGO (building-block toy)

personal computer (PC) Open

bicycle PC software internet

C Takahiro Fujimoto, University of Tokyo

Closed-Modular Architecture (Body-on-Frame, or Truck-type)

Figure 6 Basic Types of Product Architecture Integral small cars

Modular

mainframe computer

motorcycle Closed

game software compact consumer electronics

machine tools LEGO (building-block toy)

personal computer (PC) Open

bicycle PC software internet

C Takahiro Fujimoto, University of Tokyo

Quasi-Open-Modular Architecture? (Chinese local makers)

Figure 6 Basic Types of Product Architecture Integral small cars

Modular

mainframe computer

motorcycle Closed

game software compact consumer electronics

machine tools LEGO (building-block toy)

personal computer (PC) Open

bicycle PC software

C Takahiro Fujimoto, University of Tokyo

internet

Evolution of Architectures － a Macro-Micro Loop －

Customer or Market Requirements

ProductProcess Architecture (Selected by Products)

Constraints imposed by Society Constraints imposed by Technology

C Takahiro Fujimoto, University of Tokyo

Evolution of Architectures Designers’ Intentions -- or Chances

variation

selection

retention

Over-Performance Surviving Architectures Improving Functions

Designer

-- by Performance

Unintended Design Changes -- by Cost Simplifying Structures Under-performance

MicroArchitecture

C Takahiro Fujimoto, University of Tokyo

Constraints by Society, Markets, Physics --

MacroArchitecture

Loops of Macro-Architectures and Micro-Architectures Macro Architectures ・・ are Selected by Society, Market and Technology Architecture of the Whole Product ＝ Aggregation of Parts’ Architectures Macro-Architectures Affect Structures and Cultures of Industries and Firms Macro-Architectures Affects Micro-Architectures through Structures/Cultures

Micro-Architectures ・・ are Selected by Designers’ Intended/Unintended Behaviors The Same Product may Have Different Architectures Layer by Layer (Vertically), or Area by Area (Horizontally) Ex Ante, Designers Intend to Improve Performances or Decrease Costs by Changing Micro-Architectures

Ex Post, Micro-Architectures that Survived in Internal/External Selection Environments are Aggregated into a Macro Architecture of the Whole System C Takahiro Fujimoto, University of Tokyo

Selection of Macro Architectures ・ Technological Progress Expands Cost-Performance Frontier ・ The Same Kind of Products with Different Architectures May Have Different Cost-Performance Frontiers ・ Customers of Different Tastes (e.g., Performance-Oriented or Cost-Oriented) May Select Products of Different Architecture Performance-Oriented Customers May Choose Integral Architecture; Cost-Oriented Customers May Choose Modular Architecture

・ Architectures, Coordination Mechanisms, and Industrial Structures are Selected Simultaneously Modular Architecture -- Market Coordination -- Dispersed Industrial Structure Integral Architecture – Organizational Coordination – Concentrated I Structure ・ Organization’s Coordination Capability Building → Market’s Coordination Capability Building →

Shift to Integral Architectureｓ Shift to Modular Architectures

・ Middle Range in the Architecture Spectrum Relational (Long-Term) Contracts and Other Hybrid Coordination Mechanisms. C Takahiro Fujimoto, University of Tokyo

Technological Progress Expands Cost-Performance Frontier Average 平均費用 Cost (Price) （価格）

t

ｔ＋1

ｔ＋2

Technological 技術進歩 Progress

性能 Performance

C Takahiro Fujimoto, University of Tokyo

Expanding the Frontier (Electric Calculator)

Casio

Price (yen)

Function Index C J.Shintaku

Sharp

Architectures and Cost-Performance Frontier

Average Cost (Price)

Modular

Intermediate

Integral

Performance

C Takahiro Fujimoto, University of Tokyo

Overall Cost-Performance Frontier (Envelope) Average Cost (Price)

Integral

Modular Performance

C Takahiro Fujimoto, University of Tokyo

Overall Cost-Performance Curve and Choice of Architectures Overall Cost-Performance Curve Average Cost (Price)

Customer Types and Overall Reservation Price Curves Price

Integral

▲

Modular

▲

Indifference Curve of Performance-Oriented Customers

Indifference Curve of Price-Oriented Customers Performance

C Takahiro Fujimoto, University of Tokyo

Modular

Intermediate

Choice of Price-Oriented Customers

Choice of Intermediate Customers

Integral

Choice of PerformanceOriented Customers

The Architecture - Capability Framework

1

Design-Information View of Manufacturing

2

Organizational Capability

3

Performance Measurement -- A Multi-Layer Approach

4

Product-Process Architecture

5

– Controlling Design Flows

Capability-Architecture Fit --- Explaining Competitiveness

C Takahiro Fujimoto, University of Tokyo

Design-Based Comparative Advantage Decisions and Behaviors of Designers

CapabilityBuilding Environment CapabilityBuilding Competition

Customer or Market Requirements

Manufacturing (monozukuri) Capability

Fit？

(Selected by Products）

（local concentration） CapabilityBuilding Capability

Product-Process Architecture

Comparative Advantage of Design Sites

Other Environmental Factors, and Chances

C Takahiro Fujimoto, University of Tokyo

Constraints imposed by Society Constraints imposed by Technology

Hypothesis: Capability-Architecture Fit at National Level A group of firms in the same country or region, facing similar environmental constraints, national-regional institutions, demand patterns or other forces specific to a particular geographical area may develop similar types of organizational capabilities Products with the architecture which fits this organizational capability tend to demonstrate competitive advantage (-- if not profitability) Figure 6 Basic Types of Product Architecture

History matters

Integral small cars

Modular

mainframe computer

motorcycle Closed

machine tools game software compact consumer electronics

Japan’s Architectural Comparative Advantage

LEGO (building-block toy)

personal computer (PC) Open

bicycle PC software internet

C Takahiro Fujimoto, University of Tokyo

Ratio of Export and Integral Architecture Index Scatter chart(1) （Regression Equation for Assembly products：52sample）

Ratio of Export and Integral Architecture Index　Scatter chart（assembly products：52sample） 100.0% 90.0% 80.0%

Ratio of Export

70.0% 60.0% 50.0% 40.0% 30.0% Regression Curve

20.0% 10.0% 0.0% -3.000

-2.500

-2.000

-1.500

-1.000

-0.500

0.000

0.500

Week　　　　　　　　　　　　　　　　　　　　　　　　　　Integral Architecture Index 　　　　　　　　　　　　　　　Strong Ratio of Export

C Oshika and Fujimoto, MMRC, University of Tokyo

1.000

1.500

Ratio of Export and Integral Architecture Index Scatter chart(2) （Regression Equation for Process-Oriented Products：43sample） Ratio of Export and Integral Architecture Index　Scatter chart（Raw Materials products：43sample） 100.0% 90.0% 80.0%

Ratio of Export

70.0% 60.0% 50.0% 40.0% 30.0% 20.0%

Regression Curve

10.0% 0.0% -2.500

-2.000

-1.500

-1.000

-0.500

0.000

0.500

1.000

Week　　　　　　　　　　　　　　　　　　　　　　　　　　Integral Architecture Index 　　　　　　　　　　　　　　　Strong Ratio of Export

C Oshika and Fujimoto, MMRC, University of Tokyo

1.500

2.000

Asian Industrial Performance

History matters Different history, different capability, different advantages Complementary nature of Asian trades

Design-Based Comparative Advantage (1)

Products may be Designed Where Organizational Capability and Product Architecture Fit

(2)

Products may be Produced Where Products are Designed (Scale Economy and Product Differentiation)

or

Where Organizational Capability and Process Architecture Fit or

Where Products are Sold (Production Located in the Market)

Design Matters When Policy Makers Choose Industries to be Promoted C Takahiro Fujimoto, University of Tokyo

Predictions on Architecture-based Comparative Advantage Japanese firms -- integration capability More competitive in products with closed-integral architecture based on integration-based manufacturing capability

Chinese firms – mobilization capability More competitive in labor-intensive products with open-modular (or quasi-open) architecture Korean (large) firms – concentration capability More competitive in capital-intensive products with modular architecture (moving toward integral?)

ASEAN firms – labor-retaining capability?? More competitive in labor-intensive products with closed-integral architecture? U.S. firms – conceptualization capability More competitive in knowledge-intensive products with open-modular architecture European firms – expression capability More competitive in closed-integral products based on brand-design-marketing capability C Takahiro Fujimoto, University of Tokyo

Architectural Geopolitics: A Prediction in the Pacific Region Integral Axis

Japan

Korea Modular Axis

China (south)

Taiwan

ＡＳＥＡＮ India?

C Takahiro Fujimoto, University of Tokyo

ＵＳ

Application of the Framework

Toyota Recall 2010 EV and Future of the Automobile 3.11 Earthquake and Supply Chain Robustness

Toyota’s Quality Issue 2010 No excuse! – but it is not so simple. Root Cause: over-complexity, over-speed, over-confidence The war against the demon of complexity continues. Toyota stumbled, but is still among the leading runners The rule of the game changed – stricter regulations & requirements Toyota may still have advantages in the long run. But difficult dual strategy may be needed – developing both complex and simple vehicles C Takahiro Fujimoto, University of Tokyo

Toyota Problem as Complexity-Capability Imbalance Decisions and Behaviors of Designers

CapabilityBuilding Environment CapabilityBuilding Competition

Over-Confidence of Quality-Handling Capability

CapabilityBuilding Capability

Customer or Market Requirements

Out of Balance

Explosion of Product Complexity

Toyota Problem In Design Quality

Other Environmental Factors, and Chances

C Takahiro Fujimoto, University of Tokyo

Constraints imposed by Society Constraints imposed by Technology

Capability, Complexity, Quality and Volume Capability-Building in Quality

Acceptable Toyota Quality

Complexity in Design, Production and Purchasing Frontier of Toyota’s Quality-Handling Capability Upper Limit of Production Volume Compatible with Toyota Quality

Over-Growth of Toyota’s Global Production?

© Takahiro Fujimoto, University of Tokyo

– Can EV Change the Industrial Structure? Currently – NO, for ordinary household use. Variable cost is too high. Volume does NOT solve this problem .

Breakthrough battery innovations may solve it, but when?? EVs for developed car markets are still integral architecture. It may become modular architecture, but unless battery cost goes down dramatically, EV use will be limited to the application with high utilization ratio, short-range, & limited area.

Car is not PC, after all Diversification of motive power in the first half of the 21-st century? C Takahiro Fujimoto, University of Tokyo

A Simple Economic Analysis of EVs Average unit production cost

Internal Combustion

Current EV

（steel, plastic, silicon -- ）

（Expensive rare metal included） fixed cost

fixed cost

variable cost

variable cost

Mainly cost of batteries. Can Innovations eliminate this gap??

volume

Mitsubishi’s commercialized EVs – Battery pack alone is 200kg, $ 20,000, practical range is 100km. Vehicle price is over $40,000 ( Less than $30,000 after subsidy) C Takahiro Fujimoto, University of Tokyo

volume

Diversified Mix of Motive Power in the 21st Century? このボックスを No technology dominates. すべてカバーできる 絶対的な駆動形式 Right vehicle for はない Right use

long

Range per Charge EV?

short

low C Takahiro Fujimoto, University of Tokyo

Utilization Ratio

high

East Japan Earthquake and Supply Chain Crises Unprecedented! Compared with Past Disaster

Complete Destruction in Broad Area → Restoration of Design Information Flows is Key

Past Example：Nihonzaka Tunnel Fire, Kobe Earthquake, Aishin Fire, Chuetsu Earthquake, etc. Difference from the Past Disaster： Global Operation, Global Competition, and Electronic Control

“A Huge Disaster that Happened in the Era of Global Competition” C Takahiro Fujimoto, University of Tokyo

The Tohoku Earthquake and Supply Chain Crises Critical Parts that Afffected Global Supply Chains ①

Microcomputer Chip ・・ Design Information is not Substitutive, not Portable ・・ But Restoration is Faster than Expected

②

Functional Chemical ・・ Rubber and Paints Tsunami and Nuclear Plant

③

Piece Parts & Expendable Supplies ・・ Lower-Tiers, -- not Visible

Toyota’s Recovery from the Supply Chain Destruction by the Earthquake is Faster than Initially Expected. C Takahiro Fujimoto, University of Tokyo

Supply Chain as Flow of Design Information 製品 Prod. 設計 Design

Prod. Design

Material

Proc. Design

工程 Proc. 設計 Design

Proc ess

実物 Proc 工程 ess

Info. Transfer

WIP

Flow of Design Information

Takahiro Fujimoto, Univ. of Tokyo

Info. Transfer

Product

Customer (Market)

Flow of Material (Medium)

The Tohoku Earthquake and Supply Chain Crises Analysis of Supply Chain Robustness/Weakness •

Monozukuri (Manufacturing) Theory Based on the Concept of Design Information Flow

•

Four Attributes of Supply Chain Robustness/Weakness 1

Dependence on Supply to one Supplier/Factory

２

Lack of Visibility of Supply Chain

３

Lack of Substitutability of Design Information

４

Lack of Portability of Design Information

C Takahiro Fujimoto, University of Tokyo

The Tohoku Earthquake and Supply Chain Crises Some Remedies Under Discussions -- Their Limits Robustness without Competitiveness is Not Feasible in the Long Run ①

Adding Inventories（×） Don’t Design Inventory Systems Based on Rare and Unpredictable Events Whose Probabilities Cannot be Calculated

②

Switching to Standard/Common Parts（×） Survivable Product Architectures are Selected by Customers

③

Duplicating Supply Chains and Equipment（×） Feasible only When Market Growth Absorbs Added Capacity

④

Transfer of Facilities out of Eastern Japan（×） In the Long, Run, There are Risks Everywhere in the World

C Takahiro Fujimoto, University of Tokyo

Counter Measures for Robust Supply Chaions Agaist Huge Disasters Goals: Recovery of Supply Chains within a Few Weeks after Huge Disaster?

③’ Virtual-Dual Tooling

③ Dual Tooling

Is Product Design Information Product-Specific or Substitutable?

Proc. Desi gn

Is Process Design Information Portable ?

① Reducing Product Inventory Back-up Equipment, etc.

material

Prod. Desi gn

WIP

Process, Equipment, Tools, Dies, Recipes

Dest royed?

①’ Adding Inventories for Safety

Product Inventory

Standard Parts

Supply Responsibility & Competitiveness

②Switching to Standard Parts？

④ Dual Sourcing (Dual Lines or Suppliers) ?

④’ Virtual-Dual Sourcing (Design Portability)? Takahiro Fujimoto, University of Tokyo

②’ Modifying Standard Parts to Customized/Optimized Parts?

Increasing Supply Chain Robustness Without Sacrificing Competitiveness •

Huge Disaster Someday – But Global Competition Everyday

•

The Goal is Recovering Design Information Flows (In A Few Weeks)

•

Improving Supply Chain’s Visibility

•

Improving Design Information’s Portability (Transferability)

•

Making the Supply Chains Virtual-Dual by Nominating Back-up Production Lines/Suppliers

•

Adding Article on “Back-up Lines” in the Supply Contract? Periodical Drills for Smooth Back-up in Case of Disasters ?

C Takahiro Fujimoto, University of Tokyo

(Getting Info in a Few Days?)

Industrial Marathon Continues in Asian Industries What is Going On in the Early 21th Century? Globalization – as Realization of International Division of Labor Microscopic Intra-industrial Trade based on Comparative Advantage

The Keys Are: Architecture-Capability Fit -- Comparative Advantage of Design Capability-Building Competition

Evolutionary Learning Capability Strong Strategies and Strong Operations C Takahiro Fujimoto, University of Tokyo

Across the Manufacturing-Service Boundary

Open-manufacturing (monozukuri) principles are applicable to both manufacturing and service sectors Inter-sectoral learning and knowledge-sharing is key!

Learning Across Industries Front Runners Can Learn Each Other Toyota

→

Canon

Toyota

→

A Fashion Company (World)

Toyota

→

A Super Market Chain (Ito Yokado)

Toyota

→

Japan Post Office

Toyota

→

Toyota Dealers

Ritz Carlton →

Toyota

Lean Knowledge Transfer across Industries is Key C Takahiro Fujimoto, University of

Service and Manufacturing -- Difference in Media The Medium is Intangible and Ephemeral in Typical Service Proceses Service Products are Produced and Consumed at the Same Place and Time

Cars Perishable Foods

Tangible

Semiconductors Non-Durable Goods

design information

Software

Face-toFace Service

Financial Products

tangible medium medium

Broadcasting

Other Durable Goods

Intangible

Durable C Takahiro Fujimoto, University of

Ephemeral

Transfer of Toyota System to Service Sectors Hospital（５S, streamlining client flows), Insurance Firms (Customer Oriented Product Development) Government （Project Management）、 Police （Preventive Maintenance?） ・・・ Different Aspects in Different Industries Post Office：

Living with Input Volume Fluctuation Creating Standard Units of Flows (15 min) at the Entrance

Ito-Yokado Super Market Backyard 2S、JIT Tempura、JIT Meet Cutting、 Piece-By-Piece Cabbage Flow ・・ Toyota Automobile Dealer：

Showroom Sales（Home Game by Team） “Home Doctor” System (Sales Personnel) 45 Minute Inspection (work standardization)

Broad Definition of Customers’ Flow of Total Customer Experience is Key! C Takahiro Fujimoto, University of Tokyo

The Lean Principle Applied to Service Design Information is Transmitted to Customers, Not Materials. Creating Good Flows of Total Customer Experience Total Customer Experience is a Part of Customer’s Life Custoner’s Life is a Flow -- Imagination on Their Lives is Key What is Customers’ Muda/Value Experience ? -- Not So Clear Optimizing (Not Maximizing?) Value Adding Time Ratio

Customer Experience First, Service Operations Next Lead Time Optimizing (e.g. Waiting Time) First, Cost Cutting Next Pursue High Quality – Quantity Follows as a Result C Takahiro Fujimoto, University of

Creating a Good Flow of Customer Experience: A Super Market Reception

Floor Design

Talks to Customers

設計 Design 情報 Info

設計 Design 情報 Info

Intangible Medium

Tangible Medium

Product & Price Design

Cashier

設計 Design 情報 Info

設計 Design 情報 Info

Design Info

Intangible Medium

Tangible Medium

Intangible Medium

Quality = Information Sending Accuracy

Productivity = Information-Sending Efficiency Lead Time = Information-Receiving Time

Entrance – Unsatisfied Customers

Timely and Accurate Information Transmission to Customers

C Takahiro Fujimoto, University of Tokyo

Exit – Satisfied Customers

Good Flow of Customer Experiences (Harley Davidson Japan) 設計 Design 情報 Info

Promotion Design

Design 設計 Info 情報

Product Design

Production Tangible Medium

Potential Customer①

Consumption

Production Intangible Medium

Flow of Customer Experience

設計 Design 情報 Info

Design Info

Satisfaction Intangible Medium

Potential Customer② 設計 Design 情報 Info

Sales

Tangible Medium

設計 Design 情報 Info

Consumption Tangible Medium

Existing Customer① Design Info

Design Info

Production Sales Floor Design Intangible Intangible Medium C Takahiro Fujimoto, University of

Medium

Design Info

Satisfaction Consumption

Existing Customer②

Manufacturing Instructor School for Diffusing Momozukuri Knowledge to SMEs

Transforming Manufacturing Veterans to Manufacturing Instructors

Teaching across industries Helping the regions and SMEs share manufacturing knowledge

Tokyo University Manufacturing Instructors’ School

Educating Instructors Who Can Teach Lean Manufacturing Across Industries

Tokyo University Manufacturing Instructors’ School

Over 50 people are now active as lean manufacturing instructors

Reference •

Asanuma, B. (1989). “Manufacturer-supplier relationships in Japan and the concept of relation-specific skill,” Journal of the Japanese and International Economies, Vol. 3, pp.1-30.

•

Baldwin, C. and Clark, K.B. (2000). Design Rules, MIT Press

•

Clark, K.B. and Fujimoto, T. (1991). Product Development performance, Harvard Business School Press, Boston.

•

Fujimoto, T. (1999). The Evolution of a Manufacturing System at Toyota (OUP)

•

Fujimoto, T. (2007). Competing to be Really, Really Good, I-House Press, Tokyo.

•

Fujimoto, T. (2007) “Architecture-Based Comparative Advantage – A Design Information View of Manufacturing.” Evol. Inst. Econ. Rev. 4(1): 55-112.

•

Ohno, K., and Fujimoto, T., ed. (2006) Industrialization of Developing Countries: Analyses by Japanese Economists, National Graduate Institute for Policy Studies

•

Ulrich, K. (1995). “The role of product architecture in the manufacturing firm,” Research Policy, Vol. 24, pp. 419-440.

•

Womack, J., et al., The Machine That Changed the World (Rawson)