The Japanese new production philosophy was built on revolutionary approach to quality control, flexibility and short product cycles. We have already discussed the Japanese reorganization to achieve total quality control in their products.
a. Flexibility: The US standard for manufacturing was to organize very long production runs to reduce the unit cost of setup. The Japanese philosophy has been to create plants which could switch from producing one product to another quickly. This eliminated the need for production for inventory. (Japan with much higher cost of land than the US has very high economic incentives to save space.) The economic value of flexibility is that a firm can produce for final demand and not for inventory. Better matching of supply and demand results in better prices and greater profits.
b. Short product cycles: The Japanese firm organizes the design and development of product in a design team which has representatives from all functions of the firm. The team leader has the authority to make decisions. Coordination between the various aspects of the firm is automatic because they are represented in the design team. A problem in the previous organization for design was that the design team would finish the design and present it to the manufacturing engineers to set up the production process. The manufacturing engineers would take one look at the design and send it back to the original designers with the comment we can not make this. The two groups would then redesign a product which could be manufactured. With design teams the coordination takes place before the design is released to manufacturing.
In contrast, until recently the US firm with its multilevel hierarchy had no one in charge in the design process. Conflicts would be resolved by vice-presidents. Moreover, design was not coordinated with other aspects of the firm such as manufacturing.