Introduction

Lead.jpg
(Biddle and Brown, 2006)
The ever accelerating process of globalisation is effecting businesses all over the world. Multinational companies are in abundance, each competing for brand reputation and an increasing base of customers from across the globe. Through efficient transport and improving communications, it has become increasingly easy to manufacture a range of products where it is cheapest and then send them to customers all around the world (Carson 1998; cited in Akkermans, Bogerd and Vos, 1999). With the aim of spreading globally, decreasing costs and increasing profits, more and more companies continue to use suppliers and manufacture products overseas. However, the demand for companies to address matters circulating issues such as Supply Chain Management and Corporate Social Responsibility is growing, thus pushing them to scrutinise operations at every part of the supply chain. Whilst there are many organisational, political and ethical reasons for companies to take responsibility for their manufacturers operations and management practices, it is also to the benefit of the company’s competitive advantage. It is argued that employees are a key source of sustainable competitive advantage thus efficient management of human capital will ultimately determine a company’s performance (Youndt et al., 1996). Whilst this may initially appear to be less relevant to manufacturing, the adoption of advanced manufacturing technology is leading to an increasing reliance on employee skills and commitment, thus, it is vital that manufacturers harness employee productivity through effective, ethical management (Youndt et al., 1996). Even though many companies are separate from their manufacturers, there is often a level of interdependence where the actions taken within one subunit, such as the manufacturers, affect the actions and outcomes of another subunit (McCann and Ferry 1979; cited in Mascarenhas, 1984). Furthermore, if a manufacturing firm is seen to be exercising unethical management practices, it can severely effect the reputation and, ultimately, sales of the client company. Consequently, with such an array of issues surrounding manufacturing, it is imperative that companies are aware of manufacturing management practices, something that is increasingly difficult with the global spread of the supply chain.



Current Problems and Challenges


In todays contemporary world, most large corporations have an increasing global presence, with their operations spread throughout different countries. The current business world is under increasing pressure to be ever more innovative and provide a more diverse range of products, whilst current society also demands improved management of supply chains and ethical management of labour. The present problem then becomes managing the activities and initiatives employed at all levels of the supply chain, particularly manufacturers who are often based over-seas from company head quarters. Many companies manufacture in foreign plants in order to gain from ‘tariff and trade concessions, cheap labour, capital subsidies and reduced logistics costs’ (Ferdows, 1997, p.73). Hoover, who shifted production from Britain to France, reduced their manufacturing costs considerably (Onkvisit and Shaw, 2008). However, despite these advantages, there are also those who aim to benefit by getting ‘closer to their customers and suppliers, to attract skilled and talented employees, and to create centres of expertise for the entire company’ (Ferdows, 1997, p.73). For example, Alcatel Bell manufacture worldwide with their two most innovative plants based in Shanghai (Ferdows, 1997). In these cases, managers have simply discovered the best means of capitalising on the global locations of their manufacturing plants in using them to their competitive advantage. It would seem that current manufacturing is growing in class along with the need to have superior suppliers, thus many companies are prioritising infrastructure and skills over low wages (Ferdows, 1997). For example, 3M, for want of skilled labour and suppliers, manufacture in Bangalore even though it has the most expensive land and wages compared to other areas of India (Ferdows, 1997). However, regardless of the reasons behind manufacturing overseas, the problem becomes how a company is to monitor the management of these operations.


The Lean Approach
Leanchart.gif
(Buker, n.d.)


The most widely adopted technique within todays manufacturing is Lean Production. The technique evolved from methods developed by Taiichi Ohno and used within Toyota in the 50’s and 60’s (Johnston, 1995). Lean production is based on the aim to eliminate waste, whether it be wasted time or materials. The lean approach focusses on creating a responsive, predictable, consistent and flexible production operation, ultimately leading to continuous improvement through measures of output (Feld, 2000). Methods ofJust-In-Time (JIT) production and Autonomous Defect Control (Johnston, 1995) are often used within the lean approach. Just-In-Time production, as the name suggests, is the method by which goods are produced only at the required time of demand in the necessary quantities (Johnston, 1995). Autonomous Defect Control relies on employees to be responsible for and able to identify and prevent defects travelling from one part of the production line to the next (Johnston, 1995). Whilst processes within the lean technique are highly standardised and simplified, there is an arguably heavy reliance upon the workforce to have the skills and flexibility to keep up with JIT demands and identify defects, thus human resource management is still crucial even within such a regulated technique (Johnston, 1995). Feld (2000), however, criticises how many lean manufacturing initiatives focus too heavily on areas of Manufacturing Flow, logistics and Process Control, ultimately failing to address changes in culture and infrastructure logistics which, arguably, lead to sustained improvements and change. A strong focus on techniques and mechanics leads to improvements based around formulas and calculations rather than workforce improvements (Feld, 2000). Furthermore, Purcell and Wright (2007), recognising the ever increasing demand for innovation, question whether the lean production model, with such a focus on volume, efficiency and standardisation, can meet the challenges that modern manufacturers face. It is argued that, along with technological advances, consumer markets are becoming increasingly sophisticated, demanding product differentiation, ultimately placing a huge pressure on manufacturers’ creativity (Purcell and Wright, 2007). Although lean production may encourage skill development and require a high level of responsibility, the standardised processes could arguably be limiting employee creativity. These market changes have, arguably, urged firms to take a more integrated view, ultimately having important implications for human resource management (Purcell and Wright, 2007). As a result, it is argued that modern manufacturing is beginning to put a larger emphasis on skills, creativity, learning and improvement, with broader participation my workers in both innovation and operations (Purcell and Wright, 2007). Such a reliance on employees calls for better management practices within manufacturing and demands companies to be aware of the management practices their manufacturers are implementing.


Japanese Manufacturing Management


A management approach that has been highly commended, also originating from Japan, is the ‘Japanese Leadership Style’ (JLS) which focusses on encouraging employees to admit and respect differing values and practices whilst also encouraging them to use and express unconventional way’s of thinking (Doyukai, 1990; cited in Taka and Foglia, 1994). The management approach seemingly places a high value on employees by encouraging them to realise their full potential whilst trusting each other and appreciating their different abilities (Taka and Foglia, 1994) Taka and Foglia (1994, p.145) argue that it is the ethical characteristics of JLS that ‘also foster the incremental innovation that contributes to Japanese business performance’. Within manufacturing, including the Lean approach, employee activities are often standardised and repetitive, often resulting in the lack of any form of obvious Human Resource Management. However, with the increasing demand for product diversity and innovation, the adoption of a JLS approach would foster the creativity needed to meet these new demands. Many manufacturers may argue that taking an approach similar to that of JLS is too lenient and would lead to decreased productivity, however, on the contrary, Taka and Foglia (1994, p.146) argue that, instead of making the company less competitive, the management approach ‘engenders the loyalty and initiative which promotes incremental innovation and competitive advantages’. Japan is fast becoming the worlds largest manufacturing country, specifically within the automobile, electronics, iron and steel industries. With an increasing amount of companies now buying their products from manufacturers in Japan, it is important that such companies are aware of the management practices within their Japanese suppliers. Furthermore, with Japan now a leading manufacturing competitor, many companies, especially US firms, are looking to mirror Japan’s model in order to gain the same level of success.

After conducting research on several Japanese manufacturers, Hayes (1981) identified superior manufacturing management practices. Facilities were clean, products were never rejected, there was little if not any need for inventories, efficient Just-in-Time methods were in place and employees proved to be highly responsible (Keys and Miller, 1984).
picture_just_in_time.jpg
(12 Manage, n.d.)
There is the view that the Japanese are never fully satisfied with product quality, despite defects being at a minimum, they continually strive for improving quality (Keys and Miller, 1984). The Japanese are also well known for their Quality Circles, in which small groups of employees meet to discuss how to develop and improve operations so as to overcome problems relating to productivity, quality and cost (Keys and Miller, 1984). Many authors have argued that these types of small group activity are a key to Japanese manufacturing success. Such activities integrate organisational and individual learning, thus helping to identify new and improved routines and then diffusing them across all levels of the company (Liker, Fruin and Adler, 1999). In this case, employee participation is vital at all levels. Japanese managers encourage employee contributions and shared decision making, leading to increasing employee motivation, commitment and job security, ultimately leading to higher productivity (Keys and Miller, 1984). Arguable, it is the implementation of such high involvement practices, such as team work and multi-skilling, which leads to continuous improvement and increased competitive advantage (Cappelli and Neumark 2001; cited in Purcell and Wright, 2007). Many Japanese manufacturers have successfully adopted the belief that employee participation is significant to effective management, something many U.S firms have failed to do (Keys and Miller, 1984).

However, the success of Japanese management is not solely due to employee participation, but due to the emphasis on lifetime employment, striving to ensure that employees spend almost their whole career within one firm (Keys and Miller, 1984). The Japanese almost guarantee employees a lifetime career and consequently make large investments in employee training and development, ultimately promoting employee loyalty and keeping employee turnover costs to a minimum (Keys and Miller, 1984). This job security ultimately harnesses employee resilience making them more accepting of change, especially that of technological change which is most common within the manufacturing industry (Keys and Miller, 1984). These various management practices are all empirical to Japanese firm success. The last two decades have seen Japan’s dominance of manufacturing multiply vastly due to their ‘evolved manufacturing management systems that companies throughout the world have been striving to emulate’ (Liker, Fruin and Adler, 1999, p.3). Current and future demands on manufacturing industries for innovation point to an increased reliance on management practices that develop employee knowledge, skills and commitment thus fostering an environment in which creativity can thrive (Purcell and Wright, 2007). It is arguably only by effective human resource management that this will happen (Purcell and Wright, 2007), something that many Japanese manufacturing management models demonstrate.



Ethical Management & Codes of Conduct


Not only will efficient management encourage increasing production and creativity, it will aid in maintaining a positive company reputation. In the last decade, Multinational Corporations (MNCs), in order to gain a competitive advantage and easily adapt to changing consumer demands, have been using flexible production methods which rely on a big number of both producers and suppliers (Levy, 1997; cited in Mamic, 2005). Ultimately, this has lead to increasing pressures for such companies to effectively manage their growing supply chains, focussing particularly on the work conditions under which products are being manufactured in the different countries from whom MNCs purchase their goods (Mamic, 2005). Inevitably, with the increasing global spread of many companies, Supply Chain Management (SCM) is a huge challenge for many MNCs.

globalsupplychain.jpg
Global Supply Chain (Kerr, 2006)

This challenge also draws attention to Corporate Social Responsibility (CSR) as many academics, consumers and activists have begun to scrutinise company issues surrounding labour (Mamic, 2005). A method that has been adopted by many MNCs, in an attempt to resolve issues surrounding both SCM and CSR, is the implementation of a Code of Conduct (CoC) which sets out expected standards for the organisation and encourages their business partners, such as manufacturers, to adopt the same practices (Mamic, 2005). Ethical issues addressed within a typical CoC include wages, benefits, child labour, working hours and forced labour (Mamic, 2005).
code_of_conduct_pyramid.jpg
Code of Conduct (Transfield Services, 2012)
However, there is little known about how companies implement their labour policies and if they are actually being put into practice across the supply chain (Mamic and ILO 2004). Even less is apparent as to how developing country enterprises are implementing and reaching labour practice objectives established by MNCs in their CoCs (Mamic and ILO, 2004). Many global companies, as mentioned previously, use manufacturers in developing countries due to cheap land, materials and labour costs, thus the ability for developing countries to meet code of conduct standards is of great interest to MNCs. However, this push for responsible management across the supply chain has been less of an internal push from within the companies. The 1990’s witnessed many MNCs establishing CoC’s due to growing external pressures. The last two decades have seen vast improvements in technology; news travels fast through the mediums of developing communication technologies. Whilst providing companies with huge opportunities, the internet can have devastating effects on brand image, especially when websites dedicated to reporting social and labour issues of companies can quickly and easily distribute information to a huge target audience (Mamic and ILO, 2004). Furthermore, public awareness has further multiplied due to increasing exposure through news media, shedding light on labour issues, specifically on a number of US companies in the early 1990’s who received considerable negative coverage (Mamic and ILO, 2004). Through increased coverage, many public campaigns have been spurred, for example the Clean Clothes Campaign, dedicated to raising awareness and pushing for change within clothing and sportswear industries where ethical management practices are scarce. MNCs are under increasing scrutiny as we live in an age of growing awareness and concern over social and labour issues. Codes of conduct are a somewhat simple step for companies to address and prevent such issues.



Case Study - Primark


A well known example of unethical management within global manufacturing is Primark. The global company, on more than one occasion, were accused in 2008, after a 6 month investigation, of being in business with manufacturers who used child labour. Three of Primark’s Indian suppliers were found to be using child labour to carry out embroidery and sequin work on garments (BBC, 2008). However, Primark seemed to be unaware of these unethical practices and quickly ended their contracts with the accused suppliers. The company, like most in todays world, have en establish code of conduct which clearly prohibits the use of child labour within it’s manufacturing chain (BBC, 2008). Unfortunately, Primark were accused again the following year when Manchester based suppliers TNS Knitwear Ltd were found to be practicing unethical management (BBC, 2008). Workers, often of non-UK nationality, were put under increasing pressures to meet order demands by working 12-hour days, in bitterly cold, unheated factories, for almost half the minimum wage (Dhariwal, 2009). Again, Primark, when informed of the allegations, again appeared ignorant to the issues and stated that TNS were under a strict programme to ensure they meet their CoC standards (Dhariwal, 2009). Both cases highlight the difficulty in implementing a CoC at all levels of the supply chain. Primark were unable to even successfully implement the code in a Manchester factory, let alone their manufacturers spread across the globe, some in developing countries. Whilst a CoCs may make a company appear to be ethically responsible, surely there is no guaranteed way of ensuring that all business partners respect and abide by the code, thus deeming the CoC somewhat powerless. However, many view such codes ‘as an innovative management approach to acting as a good corporate citizen’ (McIntosh et al., 2002; cited in Mamic, 2005, p.81).



The youtube video above is a news broadcast from Manchester News discussing concerns about management and employee treatment within TNS Knitwear Ltd.


Conclusion


With the ever increasing global spread of many companies, the difficulty in monitoring and controlling practices at all levels of the supply chain is becoming a growing issue, especially in an age of growing public awareness of poor labour management. Lean Manufacturing is now a universally adopted method focussing on waste elimination through initiatives such as Just-In-Time. Whilst the processes are often highly standardised, many argue that there is a heavy reliance upon employees to have the sufficient skills and knowledge to identify any defects and maintain a high level of quality along the production line. However, this is not the only Japanese bred method that has been globally adopted. Japanese management methods such as the Japanese Leadership Style have been analysed and adopted by many companies world wide. Japan is, by large, one of the largest competitors within the manufacturing industry, and their high level of success is arguably as a result of their effective manufacturing management. Not only are firms kept to the highest standards, employees are actively encouraged to be involved at all levels, from decision making at management level, to operations on the production line. By working in groups, workers are able to share and learn knowledge, ultimately developing their individual skills. This investment in employee development not only leads to loyalty but fosters an environment for creativity, something that todays markets are demanding more and more of. Many Multinational Companies seek to imitate Japanese manufacturing management methods in order to have equal success and production rates. Furthermore, Japanese methods are not only efficient, but they are considerably ethical. Increasing news coverage and communication developments have lead to vastly growing public awareness of social and labour issues within companies. If a company, like Primark, is identified to be employing unethical management practices, their reputation is at stake, thus adversely affecting sales also. These issues surrounding Supply Chain Management and Corporate Social Responsibility highlight the importance of companies being aware of the management practices being used across the supply chain. As expected, the ability of MNCs to monitor the management practices across their supply chain and successfully implement their code of conducts at all levels is seemingly poor. Many companies continue to source their products from manufacturers over-seas, arguably deeming effective Supply Chain Management as somewhat complex.





Reference List


  • 12 Manage (n.d.) Supply Chain Planning. Explanation of Just-in-time philosophy of Taiichi Ohno [Online] Available from: http://www.12manage.com/methods_jit.html [Accessed: 20.3.12]

  • Akkermans H, Bogerd P and Vos B (1999) Virtuous and vicious cycles on the road towards international supply chain management. International Journal of Operations & Production Management, 19 (5/6), p.565-581

  • BBC (2008) Primark fires child worker firms [Online] BBC News. Available from: http://news.bbc.co.uk/1/hi/business/7456897.stm [Accessed: 2.2.2012]

  • Biddle J and Brown J (2006) Achieving quality global manufacturing networks [Online] Fabricators & Manufacturers Association. Available from: http://www.thefabricator.com/article/forceos/achieving-quality-global-manufacturing-networks [Accessed: 20.3.12]

  • Buker (n.d.) Lean Manufacturing [Online] Buker, inc. Available from: http://www.buker.com/lean-manufacturing [Accessed: 20.3.12]

  • Dhariwal N (2009) Primark linked to UK sweatshops [Online] BBC News.Available from: http://news.bbc.co.uk/1/hi/7824291.stm [Accessed: 2.2.2012]

  • Feld W.M (2000) Lean manufacturing: tools, techniques, and how to use them, Parts 2-4. USA: CRC Press

  • Ferdows K (1997) Making the Most of Foreign Factories. Harvard Business Review, 75 (2), p.73-88

  • Hayes R.H (1981) Why Japanese factories work. Harvard Business Review, 59 (4), p.57-66

  • Johnston R.B (1995) Making Manufacturing Practices Tacit: A Case Study of Computer-Aided Production Management and Lean Production. The Journal of the Operational Research Society, 46 (10), p.1174-1183

  • Kerr B (2006) the dell theory of conflict prevention [Online] Available from: http://billkerr.blogspot.co.uk/2006/04/dell-theory-of-conflict-prevention.html [Accessed: 20.3.12]

  • Keys J.B and Miller T.R (1984) The Japanese Management Theory Jungle. The Academy of Management Review, 9 (2), p.342-353

  • Liker J.K, Fruin W.M and Adler P.S (1999) Remade in America: Transplanting and Transforming Japanese Management Systems. New York:Oxford University Press

  • Mamic I and International Labour Office (2004) Implementing codes of conduct: how businesses manage social performance in global supply chains. GenevaInternational Labour Organisation

  • Mamic I (2005) Managing Global Supply Chain: The Sports Footwear, Apparel and Retail Sectors. Journal of Business Ethics, 59 (1/2), p.81-100

  • Mascarenhas B (1984) The Coordination of Manufacturing Interdependence in Multinational Companies. Journal of International Business Studies, 15 (3), p.91-106

  • Onkvisit S and Shaw J.J (2008) International marketing: strategy and theory. 5th ed. Abingdon: Taylor and Francis

  • Purcell J and Wright P.M (2007) The Oxford handbook of human resource management. New York: Oxford University Press

  • Taka I and Foglia W.D (1994) Ethical Aspects of "Japanese Leadership Style". Journal of Business Ethics, 13 (2), p.135-148

  • Transfield Services (2012) Code of Business Conduct [Online] Available from: http://www.transfieldservices.com/page/Investor_Centre/Corporate_Governance/Code_of_Business_Conduct/ [Accessed: 20.3.12]

  • Youndt M.A, Snell S.A, Dean J.W and Lepak D.P (1996) Human Resource Management, Manufacturing Strategy, and firm performance. Academy of Management Journal, 39 (4), p.836-866