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Mike Simpson, Geoff Sykes, Adini Abdullah, (1997),"Transitory JIT at Proton Cars, Malaysia", Management Research News,
Vol. 20 Iss 2/3 pp. 46-47 http://dx.doi.org/10.1108/eb028539
Dominique Hautain, (1999),"Proton World and CEPS: the best of both worlds", European Business Review, Vol. 99 Iss 4 pp.
271-273 http://dx.doi.org/10.1108/09555349910281478
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Introduction
This paper investigates the application and adaptability of just-in-time (JIT) in
the largest Malaysian automobile manufacturing company (Proton). The main
objective of this paper is to develop an understanding of a Malaysian version of
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JIT in its automobile industry and to examine the concept of JIT in a Malaysian
manufacturing setting. This is especially interesting and important since
Malaysia has not gone through the usual stages of a craft era (labour intensive,
highly-skilled workers) followed by Fordism (mass production of single
products, semi-skilled workers) and post-Fordism (mass customisation, multi-
skilled workers) (see Wilson, 1992). Although, some might argue that they have
actually gone through these stages but over a very short time, thus giving scope
to manufacturing management for a variety of approaches (Womack et al.,
1990). There are other ways of looking at the development of manufacturing
and operations management (Monks, 1987; Sykes et al., 1997). For example,
Monks (1987) suggests a framework based on US experiences with a Handicraft
era (circa 1700-1800), Industrial Revolution (circa 1800-1890), Scientific
Management era (1890-1940) and Operations Research and Computerised
Systems era (1940-present). However, these ideas seem even less applicable to
developments at Proton.
The secondary objectives of this paper are to:
Determine the amount of JIT activity in the company.
Look at the structure of the buyer-supplier relationships that support the
JIT system.
Draw out the factors that support and hinder the successful
implementation of JIT in the company.
Identify where the Malaysian version of JIT differs, if indeed it does, from
the conventional Japanese form of JIT.
Background
Industry and company
The automobile industry in Malaysia began in 1962 when Ford Motor Company
of Malaya was incorporated and began operation with 16 employees fitting
wheels, doing body repair and paint touch-up work in a rented shop-house in International Journal of Physical
Distribution & Logistics
Singapore. In 1963 the initial move for local production of automobiles in Management, Vol. 28 No. 2, 1998,
pp. 121-142. MCB University
Malaysia began. It was realised by various government bodies and politicians Press, 0960-0035
IJPDLM at that time that automobile production might be a worthwhile industry in
28,2 Malaysia. In September 1963, the Federal Government announced its intention
to encourage the establishment of an automobile industry as part of the
industrialisation programme and in May 1964 the government announced its
initial policy on automobile assembly (Abdullah, 1995). The automobile
industry was officially launched in Malaysia in 1967 when six assembly plants
122 were granted approval by the government to start operation.
The Malaysian Government took a very long-term strategic view to create an
automobile industry. Initially, completely built-up (CBU) units were reduced and
replaced by completely knocked-down (CKD) packs. Then in the mid-1970s, a
core leadership group of about six parts manufacturers organised a broader, more
coherent organisation and in 1978, the Malaysian Automotive Components Parts
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percent from other countries such as Thailand, Britain and Germany. Given this
background, the progress of Proton towards full (strategic) JIT can be assessed.
Social history
The recent history of Malaysia and the development of the Malaysian
automobile industry should be seen in context. Malaysia has a population of 19
million with over 40 percent of the people aged between 15 and 39. Malaysia is
a unique mix of some of the worlds oldest civilisations, including Malay,
Chinese and Indian. The national language is Bahasa Malaysia but English is
widely used in commerce, industry and institutions of higher education (Proton,
1995). The population is ethnically mixed, with just over 50 percent being ethnic
Malays (or Bumiputera), 30 percent Chinese, 10 percent of Indian origin and
various minorities such as Dayaks. The country also has an established system
of education providing at least 11 years of schooling. In addition, Malaysia has
a comprehensive system of incentives and grants to encourage participation in
research and development. Eight universities, together with several
polytechnics, technical colleges and vocational institutes train and develop the
large numbers of skilled people needed for the different developing industries. A
quarter of the national budget is spent by the Ministry of Education (Proton,
1995). This has resulted in a young, highly educated and productive workforce
able to absorb and adapt to new technologies.
During the colonial era the British developed strategic resources of tin and
rubber, with infrastructure such as railways to support them, but little other
industrial development occurred. A post-war communist insurgency was
finally suppressed just after independence was granted in 1957. At first,
Singapore was incorporated within the Federation (1960) but had broken away
by 1965. The most pressing problem that Malaysia faced (and still faces) was
the perceived imbalance between the economic prospects of the Bumiputera
and the Chinese minority. This tense situation erupted into serious rioting in
1969 with a state of emergency lasting until 1971, with Bumiputera attacks on
Chinese and, to a lesser extent, Indian people and businesses. The eventual
social settlement reached involved a quota system in the allocation of public
sector jobs and a spur to industrial development designed to improve the
IJPDLM economic prospects of the Bumiputera. The development and employment
28,2 policies of Proton and its evident preference towards Bumiputera-owned
suppliers can be explained in this context.
Methodology
One of the authors (Adini Abdullah) is normally resident in Kuala Lumpur,
124 Malaysia, and spent some months researching into the production and
operations management systems at Proton. The methodology chosen for this
work has been called Triangulation (Yin, 1994) and is intended to reduce bias.
With triangulation, multiple sources of evidence are used to essentially provide
multiple measures of the same phenomenon and hence reduce problems of
construct validity and reliability. The case study of Proton is seen as a critical
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Theory
Just-in-time
The JIT approach to manufacturing originated in the Japanese Toyota company
in the 1950s. The oil shock of 1973 in Japan hastened the rapid development
Observations of
Case study:
Hayes (1981) transitory JIT at
Japanese owned Our observations Proton cars
Management practices factory Proton factory
year. (Note: The Ringgit or Malaysian dollar, RM, was 3.88 per pound sterling in
July 1996 at the time of writing the case). This small plant would also produce
spare parts for Proton and is expected to come on stream in 1997 or 1998. In the
long-term, Proton hopes to overcome the shortage of cars by setting up a second
manufacturing plant in Tanjung Malim, Perak. This is to be developed in stages
into Proton City, a 2,000 acre plant which would enable Proton to cope
comfortably with domestic and overseas demand. This sounds rather similar in
strategic concept to Henry Fords River Rouge plant in the 1920s (BBC2, 1994;
Womack et al., 1990).
example Lambert et al. (1996) say it is important to ensure scarce resources are
dedicated only to those relationships which will truly benefit from a
partnership.
In the areas where these vendors lack technology, they will be introduced to
those companies which do have the technology through a joint venture or a
technical aid agreement. This match-making activity has been very successful
and the results are shown in Table II.
Strategic alliances with foreign companies are made to acquire new machine
or process technology, as well as seconding Protons staff into the overseas
vendors. Quality agreements are also made between Proton and the suppliers. It
would appear that Proton tend to view relationships with suppliers over a
spectrum from an arms length approach through collaboration to Strategic
alliances. Although Proton do not have a model of supply chain management, it
would appear that certain customs and practices have evolved.
Other supporting mechanisms such as the Quality, Cost, Delivery (QCD)
targets and the 3M and 2S improvement programmes are used to
complement the use of the JIT system in Proton. The 3M (Mura, Muri and
Muda) approach is an improvement programme which focuses on the
elimination of these 3Ms. These are, according to Proton:
(1) Irregularities (Mura): often caused by uneven performance, lack of co-
ordination in operations and the repair of rejected parts. This might
contrast with the definition by Imai (1986) where Mura is regarded as a
discrepancy.
(2) Excessiveness (Muri): can be the result of over-provision in Protons
operations. Again Imai (1986) uses a different word, taking Muri as
strain.
(3) Wastefulness (Muda): results from unnecessary work and operational
waste which has occurred in the factory. Imai (1986) uses the word
waste for Muda but the meaning is essentially the same.
In addition to the 3M improvement programme Proton uses the 2S approach
to achieve its objectives. The 2S requires tidying up (Seiri) and ensuring that
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28,2
130
Figure 1.
IJPDLM
Proton vendor
development system
IDENTIFICATION IDENTIFICATION SELECTION OF ONGOING LONG TERM
OF PARTS OF VENDORS VENDORS ASSISTANCE OBJECTIVES
(SECURED MARKET)
1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 Total
Component
In-house 176 47 14 108 174 5 4 (269)* 135 394
Local 52 50 59 19 190 110 159 131 + 2 1,439 532 3,010
69
Sourced 12 (2) 0 8 9 13 40
Total 228 97 73 127 376 113 163 139 1,583 545 3,444
Number of
vendors 17 16 7 6 21 11 21 7 19 9 134
Match-making
companies
Source Joint Technical Purchase
country venture assistance agreement
Japan 15 35 4
Germany 3 _
Taiwan 5 1 _
Korea 5 _
Australia 2 1 _
Others 3 3 _
Total 33 40 4
Note:
* Stamped parts transferred to local vendor
companies
match-making
transitory JIT at
achievement and
Proton localisation
131
Case study:
Table II.
Proton cars
IJPDLM things are put in place (Seiton). This 2S approach is only a part of the 5S
28,2 kaizen movement, of which the other three are: Seiso (clean up), Seiketsu
(personal cleanliness) and Shitsuke (discipline) (Imai, 1986). Undoubtedly, these
concepts are Japanese imports. To implement these programmes, ten teams
comprising five people each from various departments and supplier
representatives were formed at Proton, specifically working to eliminate waste
132 and achieve the QCD targets.
About 124 companies were involved in components and parts
manufacturing for Proton in 1993 and from these, 19 were recipients of financial
and technical assistance grants under the VDP. Vendors in this programme
produce more than 900 different parts for Proton. Their total contribution to
Protons value-added is about 52 percent. Together with in-house production of
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sizing 26 78.8 Yes
Kanban 23 69.7 Yes
134
Flexible
workforce 23 69.7 Some
JIT purchasing 22 66.7 Yes
Dedicated lines 21 63.6 No
Plant
compression 20 60.6 No
Quality circle 20 60.6 Yes
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Preventative
maintenance 20 60.6 Yes
Mixed model
production 19 57.6 Yes
Level
production 18 54.5 Yes
U-shaped
layout 17 51.5 Yes
Cellular
manufacturing 17 51.5 No
Table III. Autonomation 8 24.2 No Hidden Very hard
Relative popularity Note:
of the 13 major * 33 organisations in total
JIT practices Source: Adapted from Im and Lee (1989)
Proton uses several practices that correspond well with the results of Im and
Lee (1989). At Proton, rather than the normal kanban system, a more
generalised signal system is employed where short daily meetings of shopfloor
workers and their supervisors are held to make sure that lot movements are
synchronised. As a result, there will be no making and pushing lots forward
unless the next stage is ready to process them.
Out of the 13 major practices, a few do not exist in Proton. There has been no
compression of the Proton plant since it was set up in 1985 as this was not
deemed possible. On the other hand, there have been active expansion plans
where new plants were set up to cope with increased car demand. The plant
studied in this case has a product-orientated, U-shaped layout. The U-shaped
line minimises the operators walking time and distance and also prevents other
disruptions such as unnecessary handling of materials. There was no evidence
of cellular manufacturing being practised in Proton partly because of the not-
so-flexible workforce. However, Proton is providing constant training and
workshops, so increased workforce flexibility might be attained in the future.
A fully-integrated JIT system operates on the basis that only those items
required are produced which in turn means that there should be no, or a very
low level of, inventory. Even though the relevant parts are transferred to the
Aspect of Traditional
Case study:
purchasing practice JIT Proton transitory JIT at
Proton cars
Lot size Economic order As required, perhaps Varies
quantity (EOQ) no more than one
days supply
Frequency of delivery To suit EOQ Very frequent Ranging from 135
three times a
day to twice a
week to once a
month
Contract with supplier(s) Short term Long term One-year
contract
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assembly line only when needed, Proton still maintains an average stock of one
or half a day near the assembly line. Having to cope with high demand for cars,
Proton refuses to take too high a risk of the production line being stopped due
to insufficient or delayed arrival of parts. This happened to Proton in 1995 when
the earthquake in Kobe, Japan, resulted in Protons production line stopping for
two days. Hence, the use of buffer stocks and safety stocks. Proton also tries to
cope with internal uncertainties as much as possible through measures like
preventative maintenance. This is helped by daily briefings where a close
working relationship among operators, maintenance crews and supervisors has
developed.
Fluctuations in product variety and volume resulting from increased world
competition and diverse customer needs can be difficult to cope with. Hence,
mixed model production is practised by Proton, where different models of cars
are produced on the same line in a mixed fashion. According to Suzaki (1987),
while the mixed production will make the total production operation smoother,
a sudden production volume change will have a negative effect if not managed
well. In order to cope with the mixed model production Proton has levelled total
IJPDLM production volume. Levelled production keeps volume constant for a certain
28,2 period of time and this results in less confusion on the shopfloor. It is then easier
to expose and deal with problems should they occur.
In general, at the level of detailed application of techniques, there are more
similarities to Toyota than there are differences with Protons internal
operations and JIT practices.
136
JIT supply external JIT practices at Proton
The work of Sykes (1988) was used to analyse and compare the purchasing
practices at Proton with accepted JIT practices (Table IV). Proton only awards
suppliers a one-year contract which is not considered long-term. The length of
contract differs for Protons suppliers according to the amount of capital Proton
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has invested in each supplier. This criterion is also used in determining whether
to use single or dual source suppliers.
Traditional purchasing practice and JIT purchasing practice can be
summarised in Table IV (after Sykes, 1988). Protons purchasing practices are
compared and contrasted. They show clear resemblance with JIT practices,
although they are not exactly similar. A cause for concern here is Protons
single- and dual-sourcing. A single-sourcing policy is usually stressed in a JIT
system as it creates confidence in suppliers and helps to retain high-quality
levels. The reasons for having both single- and dual-sourcing policies in Proton
is due to the lack of trust and communication between Proton and its suppliers.
Parts are dual-sourced in order to encourage competition among the suppliers
especially when keeping costs down (a western adversarial approach rather
than a Japanese collaborative one). In addition, Proton is encouraging the
formation and growth of the Malaysian components industry (really a national
as much as a company objective).
The situation is very different for Japanese car assemblers. They rely on
closer, longer term relationships with a small number of first-tier suppliers, who
will then take the responsibility for the second-tier suppliers (Carr and
Truesdale, 1992). In Japans case this is achieved through the keiretsu network
(Ferguson, 1990; Miyashita and Russell, 1994; Whittington, 1993). Although,
even in Japan, this approach is becoming less common and only about 10
percent of Toyotas suppliers are within the keiretsu network.
In contrast, Proton imports metal panels and plates which are pressed to
make car doors, bumpers and so on. The order for these panels is made seven
months before and a safety stock of one month is used. The pressed metal plates
are in various sizes and a stock of half a days production is sent to the assembly
line. Similarly, locally made parts can be divided into two types: big parts and
small parts. One days stock is needed for the big parts and up to two or three
days needed for the small parts. These parts will only be sent to the assembly
line for half a days production.
The situation is different for car seats. Proton uses synchronised supply in
assembling car seats. This means car seats are arranged in the suppliers lorry
according to the need of the assembly line. Therefore, Proton has to inform the
suppliers every 2 hours about requirements. Proton uses a materials Case study:
requirements planning (MRP) system which is fully computerised. Materials transitory JIT at
needed for Proton are determined, based on the number of cars the line Proton cars
produces each day. This type of hybrid MRP/JIT system is becoming well
known (Sillince and Sykes, 1993).
The distance between the manufacturer and its suppliers is an important
element in JIT supply. A short distance between manufacturer and supplier will 137
help the suppliers to fulfil the frequent delivery demands and to achieve the JIT
objectives. Some of Protons suppliers that are located quite far away had to set
up their own distribution centre near the car factory, so that frequent
deliveries could be made without too many problems (see also Dunn, 1992). The
various categories of items Proton has to deal with explains both the bulk and
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small scale transport arriving at Protons factory. The forms of transport used
by the suppliers are lorries, vans or even cars, with not more than one or two
workers handling each delivery. These suppliers are not dedicated to Proton;
they have other clients to serve and most of these clients are in the assembling
business.
suppliers were:
Lack of trust preventing the development of lean supply practices.
Communications which were not sufficiently developed to support
electronic data interchange (EDI).
Development of supplier associations aimed at improving logistics
through collaboration.
Proliferation of supplier assessment methods leading to confusion and
frustration for component suppliers.
Raw material suppliers were unwilling to adopt lean supply practices.
From the research of Abd. Hamid et al. (1988) the suppliers were found to have
a substantial amount of knowledge regarding JIT and how it affects them. This
is a positive sign in a JIT environment. In addition to the training organised by
Proton, the Proton Vendors Association (PPP) also handles extensive training
of Proton workers as well as the suppliers workforces. PPP is organised to
facilitate and enhance smoother and closer communication between Proton and
its vendors. The objectives of PPP perhaps reveal a wider appreciation of the
overall approach to strategic JIT than that of many individual vendors, who
were more oriented towards transitory JIT. The objectives of PPP are:
To foster closer relationship amongst the members and Proton.
To organise seminars and workshops to upgrade members on aspects
like quality improvement, productivity improvement, product
development and management.
To organise educational tours, local and overseas, to enhance members
capabilities further.
To promote organised export programmes and channels of request for
technical assistance arrangements with overseas manufacturers.
To promote good relationships within the auto component industry and
the government agencies.
To organise any functional activities which are considered beneficial to Case study:
the members and Proton. transitory JIT at
Proton cars
Protons social policy in a Malaysian context
Proton has responded to Malaysias call for corporate participation in the
development of a caring society by contributing RM 10 million (2.6m) to the
Low Cost Housing Fund in May 1994 and launching a scholarship programme 139
where the company sponsors the tertiary education of deserving students at
local or overseas universities. In 1994 the company was granted the Most
Caring Employer Award by the Malaysian Human Resource Ministry (Proton,
1994). This ministry has also recognised Protons social responsibility to its
employees by commending the remuneration package that is intended to retain
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trained personnel.
The issue of Bumiputera employment and rights has been raised. From the
outset of the venture on 7 May 1983 the government had three objectives based
on the policy of promoting unbalanced growth of the economy by identifying
specific sectors of industry for special help and promotion. These objectives
were (Ismail and Berma, 1994):
Developing a local automotive industry.
Increasing the level and depth of local engineering and technological
expertise.
Increasing Bumiputera participation in industry.
The government has allocated RM 13 million (3.35m) as a subsidy to Proton
with the specific purpose of increasing Bumiputera participation. In 1991
Proton awarded RM 7.5 million (1.93m) to 16 Bumiputera vendors who were
producing 87 different components (Ismail and Berma, 1994). So far 18
Bumiputera vendors have received a total of RM 11.3 million (2.91m) and these
produce 135 components for Proton. Similarly, selected Bumiputera vendors
have been given opportunities to participate in supporting industries. Grants
are only awarded to firms which have at least 70 percent Bumiputera equity and
Proton will not award any contract for supplies to a firm with less than 50
percent Bumiputera equity (Ismail and Berma, 1994). This approach is certainly
racial and some would call it racist. Nevertheless, it is claimed that Malaysia is
an outstanding example of a harmonious, multi-religious, multi-racial society
(Proton, 1995).
Conclusions
So far, Proton has been a successful venture in that it has met the objectives set
for it when it was conceived. It is clear that the National Car Project has been a
success. However, Proton needs a period of development at least as demanding
in the next few years if it is to continue to succeed in the global market it intends
to enter with the construction of its new factory. From the JIT frameworks noted
here it is clear that JIT (more particularly transitory JIT) is practised at Proton
IJPDLM and that certain technical improvements will be possible internally (and on
28,2 lights and the like). However, these are easy things to achieve. More difficult will
be the integration of suppliers into an overall chain to achieve strategic JIT and
gain competitive advantage. Nevertheless, the use of transitory JIT as a means
of national strategy is impressive. Perhaps the point is that Proton has the
flexibility to use transitory JIT to achieve the desired national policy be that
140 increasing the number of component manufacturers and suppliers, increasing
Bumiputera participation, reducing costs, carrying out technology transfer,
competing globally and so on. It is clear from this case study that these multiple
objectives have been met and it is debatable whether they would have been
achieved using strategic JIT.
There are several important factors that support JIT in Proton such as the
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company-wide obsession with quality and the work culture already has a
Japanese feel with the kaizen approach (e.g. 2S and 3M and 4M
programmes). However, there are some hindering factors to full JIT such as lack
of trust and communication with some suppliers, that JIT is perceived as a
tactical manufacturing method and also there are some common external
problems (e.g. traffic congestion, machine breakdowns at suppliers and poor
quality parts supplied on occasions). The dependence on imported parts creates
problems because of the delivery time and the risks involved. These problems
are also reasons for Proton to continue having a certain level of inventory,
taking into consideration an orders lead time, including safety stocks. However,
even Nissan in the UK experiences these types of problem with overseas
suppliers and has developed the vicarious supply system to deal with it
(Matsunami, 1992).
As for locally made parts, the amount of inventory held depends on the size
of the parts and the synchronised supply method used. Another important
factor is the multi- and dual-sourcing concept practised in Proton. This type of
sourcing seems to be the only solution arrived at by Proton to abolish
complacency among the suppliers, while maintaining high levels of Bumiputera
involvement. This involvement has still not eradicated the lack of trust and
communication between buyer and suppliers. This is the main reason why full
strategic JIT in the supply chain cannot be achieved.
The Proton plant is one of the better laid-out materials handling-oriented,
serial production plants in operation (Sims, 1991). Proton is clearly enjoying the
benefits of the various JIT practices it uses. With the constraints imposed by the
social policies of ethnic quotas in component suppliers, staff development and
the multiple objectives of both increasing the proportion of indigenous
suppliers whilst attempting to adopt JIT practices, full strategic JIT in the
Japanese sense seems to be beyond Protons reach in the foreseeable future.
Although transitory JIT is ultimately unsatisfactory from the point of view of
world-class manufacturing, it has served Proton well so far and has been
instrumental in furthering Malaysian social policy and industrial development
strategy (Simpson et al., 1997).
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