transitory jit in proton cars

Case study: transitory JIT at

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Case study: transitory JIT atProton Cars, Malaysia

Mike Simpson, Geoff Sykes and Adini AbdullahSheffield University Management School, Sheffield, UK

IntroductionThis paper investigates the application and adaptability of just-in-time (JIT) inthe largest Malaysian automobile manufacturing company (Proton). The mainobjective of this paper is to develop an understanding of a Malaysian version ofJIT in its automobile industry and to examine the concept of JIT in a Malaysianmanufacturing setting. This is especially interesting and important sinceMalaysia has not gone through the usual stages of a craft era (labour intensive,highly-skilled workers) followed by Fordism (mass production of singleproducts, semi-skilled workers) and post-Fordism (mass customisation, multi-skilled workers) (see Wilson, 1992). Although, some might argue that they haveactually gone through these stages but over a very short time, thus giving scopeto manufacturing management for a variety of approaches (Womack et al.,1990). There are other ways of looking at the development of manufacturingand operations management (Monks, 1987; Sykes et al., 1997). For example,Monks (1987) suggests a framework based on US experiences with a Handicraftera (circa 1700-1800), Industrial Revolution (circa 1800-1890), ScientificManagement era (1890-1940) and Operations Research and ComputerisedSystems era (1940-present). However, these ideas seem even less applicable todevelopments 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 theJIT system.

• Draw out the factors that support and hinder the successfulimplementation of JIT in the company.

• Identify where the Malaysian version of JIT differs, if indeed it does, fromthe conventional Japanese form of JIT.

BackgroundIndustry and companyThe automobile industry in Malaysia began in 1962 when Ford Motor Companyof Malaya was incorporated and began operation with 16 employees fittingwheels, doing body repair and paint touch-up work in a rented shop-house inSingapore. In 1963 the initial move for local production of automobiles inMalaysia began. It was realised by various government bodies and politicians

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Management, Vol. 28 No. 2, 1998,pp. 121-142. © MCB University

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at that time that automobile production might be a worthwhile industry inMalaysia. In September 1963, the Federal Government announced its intentionto encourage the establishment of an automobile industry as part of theindustrialisation programme and in May 1964 the government announced itsinitial policy on automobile assembly (Abdullah, 1995). The automobileindustry was officially launched in Malaysia in 1967 when six assembly plantswere granted approval by the government to start operation.

The Malaysian Government took a very long-term strategic view to create anautomobile industry. Initially, completely built-up (CBU) units were reduced andreplaced by completely knocked-down (CKD) packs. Then in the mid-1970s, acore leadership group of about six parts manufacturers organised a broader, morecoherent organisation and in 1978, the Malaysian Automotive Components PartsManufacturers Association (MACPMA) was established. In 1979, the governmentannounced its intention to move towards an all-Malaysian car through theprocess known as mandatory deletion of parts of completely knocked-downvehicles. Under this process, foreign assemblers were prohibited from includingcertain components in the imported CKD packs, thereby creating opportunitiesfor local component makers. Government policy was to move from completelybuilt-up to completely knocked-down to completely made locally (CML).

However, the development of the motor vehicle industry in Malaysia wasconfined largely to the assembly of vehicles. It was a giant leap for the Malaysianautomobile industry to manufacture the first Malaysian car, the Saga. Thisproject was called the Malaysian National Car project and the companyentrusted to undertake this project, Proton, was incorporated on 7 May 1983,under the name Perusahaan Otomobil Nasional Berhad. From 1985 only onemodel was produced: the Saga. Since then, the Saga has been upgraded andthree other models added to the range (i.e. the Wira, the Perdana and the Satria).Each of these models has a number of variations of door and engineconfiguration. The objectives of the Malaysian National Car project were to:

• Rationalise the local automotive industry.• Spearhead the development of a local component industry and to

enhance greater use of local components.• Encourage the upgrading of technology, engineering knowledge and

technical skills of the country’s workforce.• Assist and develop Bumiputera (the indigenous people of Malaysia)

participation in the automotive industry.Proton had established four subsidiary companies based locally and overseas.Proton had also established a total of eight associate companies or direct localand overseas suppliers, which involve components manufacturing to providesynergy to the company’s operations. These associate companies are similar tothe Japanese keiretsu with interlocking minority shareholdings and mutualtrading, although here Proton was not using this approach to manage theirsuppliers in the same way as NEC (Ferguson, 1990; Whittington, 1993).


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After several disputes with Mitsubishi (who owned a 30 percent stake inProton at that time) early on in the project Proton began to work more closelywith local parts suppliers. The Joint Co-ordination Committee (JCC) on the localcontent for the national car was established. This interagency group was set upby the Trade and Industry Ministry to press the Japanese on the use of localparts manufacturers. Proton soon began fulfilling its obligation in acceleratinglocal parts content programmes. This started from 18 percent local content byvalue (or about 14 component parts) in 1983, to 40 percent locally obtained partsin 1987. By 1992, the target was 80 percent local parts content. This wasachieved through joint venture programmes between local vendors and foreignvendors from Japan, Taiwan, Korea; the latest venture is with France. Theremaining components are still mainly imported from Japan, with only 1percent from other countries such as Thailand, Britain and Germany. Given thisbackground, the progress of Proton towards full (strategic) JIT can be assessed.

Social historyThe recent history of Malaysia and the development of the Malaysianautomobile industry should be seen in context. Malaysia has a population of 19million with over 40 percent of the people aged between 15 and 39. Malaysia isa unique mix of some of the world’s oldest civilisations, including Malay,Chinese and Indian. The national language is Bahasa Malaysia but English iswidely used in commerce, industry and institutions of higher education (Proton,1995). The population is ethnically mixed, with just over 50 percent being ethnicMalays (or Bumiputera), 30 percent Chinese, 10 percent of Indian origin andvarious minorities such as Dayaks. The country also has an established systemof education providing at least 11 years of schooling. In addition, Malaysia hasa comprehensive system of incentives and grants to encourage participation inresearch and development. Eight universities, together with severalpolytechnics, technical colleges and vocational institutes train and develop thelarge numbers of skilled people needed for the different developing industries. Aquarter of the national budget is spent by the Ministry of Education (Proton,1995). This has resulted in a young, highly educated and productive workforceable to absorb and adapt to new technologies.

During the colonial era the British developed strategic resources of tin andrubber, with infrastructure such as railways to support them, but little otherindustrial development occurred. A post-war communist insurgency wasfinally suppressed just after independence was granted in 1957. At first,Singapore was incorporated within the Federation (1960) but had broken awayby 1965. The most pressing problem that Malaysia faced (and still faces) wasthe perceived imbalance between the economic prospects of the Bumiputeraand the Chinese minority. This tense situation erupted into serious rioting in1969 with a state of emergency lasting until 1971, with Bumiputera attacks onChinese and, to a lesser extent, Indian people and businesses. The eventualsocial settlement reached involved a quota system in the allocation of publicsector jobs and a spur to industrial development designed to improve the

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economic prospects of the Bumiputera. The development and employmentpolicies of Proton and its evident preference towards Bumiputera-ownedsuppliers can be explained in this context.

MethodologyOne of the authors (Adini Abdullah) is normally resident in Kuala Lumpur,Malaysia, and spent some months researching into the production andoperations management systems at Proton. The methodology chosen for thiswork has been called Triangulation (Yin, 1994) and is intended to reduce bias.With triangulation, multiple sources of evidence are used to essentially providemultiple measures of the same phenomenon and hence reduce problems ofconstruct validity and reliability. The case study of Proton is seen as a criticalcase in testing a well-formulated theory in an extreme situation (JITimplementation and the achievement of multiple national and social objectives)(see Yin, 1994). Hence, in this study semi-structured interviews were used withfour of Proton’s senior managers (two vendor development programmeexecutives, a production executive and a production officer), focus groupdiscussions with ten shopfloor workers in the plant and direct observation ofthe plant in operation, on four occasions, were used to collect primary data.Short, semi-structured interviews were also carried out with representatives of15 companies which supply the Proton plant. It is worth noting that supplierswere fairly co-operative but there is doubt about some of their views since theymay not have wanted to compromise relations with Proton. The main objectiveof the interviews was to provide evidence and information which on analysiswould be capable of comparison with existing theory. Additionally, a check-listbased on work by Hayes (1981) was used to collect data while observing theplant in operation. This list was adapted from Hayes (1981) since he had usedthis method of research to determine whether the practices listed from Hayes’Japanese experiences were used in factories in the USA (Table I). Secondarydata were obtained from company reports, company newsletters, localliterature and local newspapers.

In order to gather the data needed for this research questions were developedas follows:

• How does Proton run its manufacturing process?

• What are the elements of JIT (if any) practised in Proton?

• What are the buyer-supplier relationships?

• What are the factors that could support or hinder JIT practices inProton?

TheoryJust-in-timeThe JIT approach to manufacturing originated in the Japanese Toyota companyin the 1950s. The “oil shock” of 1973 in Japan hastened the rapid development


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of the approach in an attempt to reduce any type of waste associated withmanufacturing; not just waste of materials but waste of space and waste of timetoo. The approach attracted increasing attention in the West during the 1970s,although many production engineers in Europe and the USA were already

Observations of Hayes (1981)Japanese owned Our observations

Management practices factory Proton factory

A. Practices reported by Hayes to be prime factors of Japanese success1. Clean orderly workplace Yes Yes2. Minimised inventory

Little inventory on the shopfloor Yes YesGoods delivered JIT in small lots Yes YesRapid set-ups Yes YesNo buffer stocks Yes SomeClearly marked inventory Yes Yes

3. Problem preventionPreventing machine overload Not observed Not observedMonitoring systems Not observed Not observed

No crisis atmosphereLong stable master schedule Yes YesCapacity based on actual measures Yes YesNo overload Yes Not applicableMinimising changeovers Yes Yes

4. “Pursuing the last grain of rice”All problems considered important Yes SometimesStrive for continuous incremental improvement Yes Yes

5. Thinking quality inBuilding quality into design Done in Japan YesTraining all the workforce Yes YesWorkforce do inspection (checking) Yes YesFeedback to workforce Yes Yes

6. EquipmentEquipment independence Yes Not applicableWell-maintained standard machinery Yes Not applicableExcellent material handling Yes Yes

B. Practices considered by Hayes not to be prime factors of Japanese success7. Quality circles No Yes8. Robots No Yes

C. Practices mentioned by other authors9. Kanban No Yes

10. MRP No Yes11. Worker ability to stop line No No12. Attention to detail Yes Yes13. “Operations strategy” Not observed No

Source: Adapted from Hayes (1981)

Table I.Checklist used during

Proton factory tour

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striving for similar improvements without articulating them in such a coherentform. JIT can be regarded as either a set of techniques to be applied in apiecemeal manner or as an overall approach (even a philosophy) to the runningof an organisation. Although the detail of the techniques is always important,the overall aspect has been defined as follows (Voss, 1987):

JIT is a disciplined approach to improving overall productivity and eliminating waste. Itprovides for the cost-effective production and delivery of only the necessary quantity of partsat the right quality, at the right time and place, while using a minimum amount of facilities,equipment, materials and human resources. JIT is dependent on the balance between thesupplier’s flexibility and the user’s flexibility. It is accomplished through the application ofelements which require total employee involvement and teamwork. A key philosophy of JIT issimplification.

This definition brings in some interesting aspects beyond those of pureproduction engineering; the emphasis on teamwork and employee involvement,for example, yet all within a disciplined framework. It also implies thatsuppliers should be considered as part of a team and not simply exploited by alarge and powerful user. There is no place in the JIT organisation for those whofight their own corners without consideration of the effects on others; the overalleffect is paramount. The approach takes in the importance of quality, since anyform of non-conformance is pure waste leading not only to scrap and reworkbut to waste of management time. JIT also encompasses the use of teamwork toeffect continuous improvement (“pursuing the last grain of rice” as discussed byHayes (Voss, 1987)).

Despite the importance of the overall strategic approach, various authorshave noted the techniques or practices of JIT and stressed the attention to detailnecessary to make them succeed (Im and Lee, 1989; Sohal, 1993). However, itshould be noted that not all researchers and industry observers are totallyconvinced that JIT is the answer to the problems of all companies (Goyal andDeshmukh, 1992; Harber et al., 1990).

The term “transitory JIT” was adopted by Croom-Morgan et al. (1992) todescribe a model of JIT as a temporary management technique that can providesome fairly immediate inventory or labour cost savings. This is contrasted with“strategic JIT” which is seen as a concerted and comprehensive programme toachieve real long-term competitive advantage. The use of transitory JIT mightimply that progress towards strategic JIT is taking place. However, this neednot be the case and the adoption of JIT techniques to achieve certain operationalobjectives can be justified even if the intention to implement full or strategic JITis lacking.

Recently, JITII has emerged as an extension of the ideas of JIT management.JITII involves working closely with suppliers, including offering floor and officespace, empowering suppliers to make decisions on behalf of the company andrapid exchange of information between the supplier and various departmentswithin the company and customers of the company. Lance Dixon, director ofpurchasing and logistics at BOSE Corporation, Framingham, Massachusettssees JITII “as a logical extension of the disciplines critical to an agile


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manufacturing environment – JIT, partnering and concurrent engineering”(Coyle et al., 1996). The concept is similar to partnership sourcing which isdefined by Partnership Sourcing Limited, UK as “a commitment by bothcustomers and suppliers, regardless of size to a long-term relationship based onclear, mutually agreed objectives to strive for world-class capability andcompetitiveness”.

Supply chain managementThe role of supply chain management in extending JIT from an internalapproach to an external approach has been well documented. However, Lee andBillington (1992) offer advice on several common pitfalls in dealing with supplychain inventory. Similarly, Galt and Dale (1990) examine customer supplierrelationships in the motor industry from the vehicle manufacturer’s perspective.Galt and Dale (1990) reported the general desire to reduce the number ofsuppliers so as to reduce variability and improve product quality. Thereductions in suppliers which were observed in that work were due to changingfrom multiple to single source suppliers. Similarly, Galt and Dale (1990)examined the advantages and disadvantages of supplier development. Themain advantages were found to be better quality, reduced costs and the abilityto produce products which are highly desirable in the marketplace. There wasalso the benefit of vertical integration but without actually taking overcompanies. The disadvantages were seen as the cost involved, the opennessrequired by the development process and the need to manage change. Therewas also emphasis on long-term strategy associated with developing thesupplier base. Galt and Dale (1990) offer a series of recommendations of thingsto do and not to do for organisations considering developing their supplier base.

Results and discussionCapacity development at ProtonProton is believed to be the largest and most modern automobile manufacturerin Southeast Asia, covering 862,000m2 employing 4,400 people (of which 2,400are direct workers) with a production capacity of 150,000 units per year (twoshift operation) at a production rate of 36 units per hour. Investment in theproduction facilities has resulted in a multi-model production system.Production involves four main processes:

(1) Stamping of body parts.(2) Assembling (welding) of stamped body parts.(3) Painting of car body shell.(4) Trim and final assembly, including fitting the power unit which comes

from a partly-owned subsidiary in Malaysia.Robots and automation are used throughout the production process. To keeppace with the growing demand for Proton cars, the company has expanded theproduction capacity and continually reviews its production techniques.

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Proton has formulated a three-pronged strategy to meet the high demand forits cars. The strategy attempts to address shortages in production capacity forthe short, medium and long term. A feasibility study on the plan, however, wasdone in 1995. Proton’s immediate plans to meet the short-term demand involvesoperating its plant on three shifts so that it could meet the sharp rise in thedomestic demand for its cars. Although this extra shift would not involve theinstallation of an extra production line and new machinery, Proton’s managingdirector, Datuk Mohd Nadzmi Saleh, said in an interview with the companynewsletter on 8 July 1995 (Proton, 1995) that the company may have to increaseits manpower substantially.

In the medium-term, Proton plans to invest RM 160 million (£41.2m) in asmall factory which would boost its production capacity by 50,000 cars peryear. (Note: The Ringgit or Malaysian dollar, RM, was 3.88 per pound sterling inJuly 1996 at the time of writing the case). This small plant would also producespare parts for Proton and is expected to come on stream in 1997 or 1998. In thelong-term, Proton hopes to overcome the shortage of cars by setting up a secondmanufacturing plant in Tanjung Malim, Perak. This is to be developed in stagesinto “Proton City”, a 2,000 acre plant which would enable Proton to copecomfortably with domestic and overseas demand. This sounds rather similar instrategic concept to Henry Ford’s River Rouge plant in the 1920s (BBC2, 1994;Womack et al., 1990).

Production executive interviewThe production executive emphasised the persistent problem Proton faces withcomponent parts supply. Quality, even though this is made a first priority atProton, is still a struggle to maintain and difficult to achieve for every car. Incoping with uncertainties, he stressed that Proton handles the situation byimproving communication internally and by discussion with the vendors andsuppliers. This is done through daily meetings of all production workers suchas the foremen, assistant foremen, shopfloor workers and supervisors. Protonuses single-, double- and indeed multiple-sourcing for parts, depending on thesizes of the parts and whether those parts are imported or not. JIT is definitelyused by Proton but it can only be adopted for certain parts. There was nomention of working to achieve fully integrated JIT as a strategic approach forProton (see Table I). It should be emphasised that this approach resembled theideas of transitory JIT (a temporary management technique to provide someinventory and labour cost savings) rather more than strategic JIT(acknowledging the impact of JIT practices upon the total business) as outlinedby Croom-Morgan et al. (1992).

The production executive particularly emphasised the other cost reductionprogrammes adopted by Proton such as quality, cost, delivery (QCD) targetsand local parts content programme achievements through the vendordevelopment programme (VDP).


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Vendor development programme executive interviewThe VDP executive discussed the supply side of Proton’s manufacturingactivities. Proton selects suppliers by using the Supplier Selection Diagram(Figure 1). The objectives and importance of vendor development wereemphasised, especially in tying up close relationships between Proton andthose vendors. Proton is focusing efforts on ensuring that its vendors have thecapacity to meet the anticipated increase in output. Proton had, in 1995, 138component suppliers under the VDP. Proton plans to raise the number of localvendors from time to time, especially to undertake the production of highertechnology components such as electronics, engine system and anti-lockbraking system. This is generally against the advice seen in the literature onsupply chain management (Galt and Dale, 1990; Lambert et al., 1996). Forexample Lambert et al. (1996) say it is important to ensure scarce resources arededicated only to those relationships which will truly benefit from apartnership.

In the areas where these vendors lack technology, they will be introduced tothose companies which do have the technology through a joint venture or atechnical aid agreement. This match-making activity has been very successfuland the results are shown in Table II.

Strategic alliances with foreign companies are made to acquire new machineor process technology, as well as seconding Proton’s staff into the overseasvendors. Quality agreements are also made between Proton and the suppliers. Itwould appear that Proton tend to view relationships with suppliers over aspectrum from an arm’s length approach through collaboration to Strategicalliances. Although Proton do not have a model of supply chain management, itwould 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 tocomplement the use of the JIT system in Proton. The “3M” (Mura, Muri andMuda) approach is an improvement programme which focuses on theelimination 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 mightcontrast with the definition by Imai (1986) where Mura is regarded as a“discrepancy”.

(2) Excessiveness (Muri): can be the result of over-provision in Proton’soperations. Again Imai (1986) uses a different word, taking Muri as“strain”.

(3) Wastefulness (Muda): results from unnecessary work and operationalwaste 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” approachto achieve its objectives. The “2S” requires tidying up (Seiri) and ensuring that

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achievement and match-making

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things are put in place (Seiton). This “2S” approach is only a part of the “5S”kaizen movement, of which the other three are: Seiso (clean up), Seiketsu(personal cleanliness) and Shitsuke (discipline) (Imai, 1986). Undoubtedly, theseconcepts are Japanese imports. To implement these programmes, ten teamscomprising five people each from various departments and supplierrepresentatives were formed at Proton, specifically working to eliminate wasteand achieve the QCD targets.

About 124 companies were involved in components and partsmanufacturing for Proton in 1993 and from these, 19 were recipients of financialand technical assistance grants under the VDP. Vendors in this programmeproduce more than 900 different parts for Proton. Their total contribution toProton’s value-added is about 52 percent. Together with in-house production ofparts, Proton was able to achieve a local content of over 70 percent.

When Proton first started operations, finding suitable vendors was a difficulttask and it was even more difficult to encourage Bumiputera to become vendorsdespite the Malaysian national employment policy. Automotive parts requiregreater precision and sophistication than simply making items for generalpublic consumption and they also have to meet international standards. Inaddition to the lack of technical expertise, vendors have found that finance ishard to obtain despite having letters of appointment from Proton. Financialinstitutions, at the time, did not foresee the potential in supporting the vendorsin an industry which was then very new and undeveloped. Nevertheless,Proton’s VDP adapted to the situation by recommending vendors to financialinstitutions for financial support. Match-makings of vendors with foreigncompanies and expertise were viewed as strategic alliances. Proton’scontinuous emphasis on acquiring technology has also seen a number offoreign technology suppliers investing in Malaysia through joint ventureseither with Proton or its vendors. A total of 87 such collaborations withoverseas companies have been developed with Proton’s vendors.

Proton considers technology transfer to be urgent because, in the automobilebusiness, it is competing globally. In order to achieve global competitiveness, itmust be able to control its development and therefore, its costs. Proton’sapproach is to collaborate with other technology owners as well as componentmanufacturers to acquire technology. Proton’s vendor development programmehas assisted vendors by providing technical expertise through joint ventures,match-making and seconding staff during critical production periods.

Cost reduction initiatives such as target cost achievement (TCA) and valueanalysis/value engineering (VA/VE) programmes were introduced assupporting mechanisms. To complement these programmes, vendors are askedto monitor their manpower (i.e. staff), method, material and machines (anothertype of “4Ms” and again a kaizen approach (Imai, 1986)) to keep costs down.Except for some high investment, high-technology engine and transmissioncomponents, most parts are produced locally.

Initially, the objectives of the local component sourcing activities were todevelop the local automotive component industry and to encourage


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participation of local entrepreneurs. Now the emphasis is moving towards costreduction activities and this includes:

• Identification of world component manufacturers and technologysuppliers for parts sourcing and supply.

• Multi-sourcing to enhance competitiveness.

• Development of vendors to be world competitive.

• Developing Malaysia into a production base for automotive componentsfor the region which will spread costs and make Proton itself moreglobally competitive.

Discussions with shopfloor workersThe shopfloor workers talked about the level of inventory that is held at thefactory, despite implementing JIT supply. The high inventory levels were due tofactors such as traffic congestion, transport problems, machine breakdownsand the like. Traffic congestion is becoming a well known difficulty for JITsupply even in Japan (Dunn, 1992) where criticism of the JIT approach hasincluded criticism from an environmental point of view.

The shopfloor workers were comfortable with the kanban system adopted inProton. The production problems they faced were late deliveries from suppliersand receiving parts of low quality (not inspected thoroughly at the suppliers).Hence, there was still incoming inspection done at Proton. The delivery of partsarriving at Proton use the synchronised supply method and in a mixed modelfashion. Autonomation (the equivalent of a line-stop where any shopflooroperative can stop the line if a quality problem is found) was not seen aspossible in Proton due to quality levels being insufficient. Autonomation isusually implemented only when an organisation feels confident of thepreventative maintenance and quality control procedures (Im and Lee, 1989).The shopfloor workers also talked about the training and workshops theyattend. Proton places special emphasis on the development of the workforce.

Internal JIT at ProtonThe results of the triangulation technique adopted have been analysed invarious ways (see Tables I, III and IV). In order to evaluate the amount of JITactivity in Proton, the checklist of Hayes (1981) assisted observation of theProton factory and resulted in Table I. The work of Im and Lee (1989) was usedto analyse the interviews and resulted in Table III. The work of Sykes (1988)was used to analyse the interviews and observations and resulted in Table IV.Im and Lee (1989) surveyed 33 organisations using the JIT approach in order toassess the relative popularity of the 13 major JIT practices commonly used. Wehave compared Proton’s JIT practices with those given by Im and Lee (1989) andillustrated the ease of implementation and tangibility of benefits gained byProton.

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Proton uses several practices that correspond well with the results of Im andLee (1989). At Proton, rather than the normal kanban system, a moregeneralised signal system is employed where short daily meetings of shopfloorworkers and their supervisors are held to make sure that lot movements aresynchronised. As a result, there will be no making and pushing lots forwardunless the next stage is ready to process them.

Out of the 13 major practices, a few do not exist in Proton. There has been nocompression of the Proton plant since it was set up in 1985 as this was notdeemed possible. On the other hand, there have been active expansion planswhere new plants were set up to cope with increased car demand. The plantstudied in this case has a product-orientated, U-shaped layout. The U-shapedline minimises the operators’ walking time and distance and also prevents otherdisruptions such as unnecessary handling of materials. There was no evidenceof cellular manufacturing being practised in Proton partly because of the not-so-flexible workforce. However, Proton is providing constant training andworkshops, so increased workforce flexibility might be attained in the future.

A fully-integrated JIT system operates on the basis that only those itemsrequired are produced which in turn means that there should be no, or a verylow level of, inventory. Even though the relevant parts are transferred to the

No. of Tangibility Ease ofJIT practice organisations* % Proton of benefits implementation

Small lot Highly visible Very easysizing 26 78.8 Yes

Kanban 23 69.7 YesFlexible workforce 23 69.7 Some

JIT purchasing 22 66.7 YesDedicated lines 21 63.6 NoPlant compression 20 60.6 No

Quality circle 20 60.6 YesPreventative 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

Autonomation 8 24.2 No Hidden Very hard

Note:* 33 organisations in totalSource: Adapted from Im and Lee (1989)

Table III.Relative popularity of the 13 major JIT practices

↓

↓


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assembly line only when needed, Proton still maintains an average stock of oneor 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 dueto insufficient or delayed arrival of parts. This happened to Proton in 1995 whenthe earthquake in Kobe, Japan, resulted in Proton’s production line stopping fortwo days. Hence, the use of buffer stocks and safety stocks. Proton also tries tocope with internal uncertainties as much as possible through measures likepreventative maintenance. This is helped by daily briefings where a closeworking relationship among operators, maintenance crews and supervisors hasdeveloped.

Fluctuations in product variety and volume resulting from increased worldcompetition and diverse customer needs can be difficult to cope with. Hence,mixed model production is practised by Proton, where different models of carsare 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 managedwell. In order to cope with the mixed model production Proton has levelled total

Aspect of Traditionalpurchasing practice JIT Proton

Lot size Economic order As required, perhaps Variesquantity (EOQ) no more than one

day’s supplyFrequency of delivery To suit EOQ Very frequent Ranging from

three times a day to twice a week to once a month

Contract with supplier(s) Short term Long term One-year contract

Sources Multi-source Single source Single and dual source

Locations of supplier(s) Immaterial Nearby Mostly nearby (except overseassuppliers)

Evaluation of suppliers Price, quality, Quality, delivery Quality, cost, delivery price delivery

Negotiation Lowest price, Fair price, Fair price, quantity long-term conformancediscount performance

Transport Bulk Small scale, Both bulk andreliable small scale

Incoming inspection and Strict Eliminated Continuously counting reducing

Source: Adapted from Sykes (1988)

Table IV.A comparison of

traditional purchasing practice and JIT

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production volume. Levelled production keeps volume constant for a certainperiod of time and this results in less confusion on the shopfloor. It is then easierto expose and deal with problems should they occur.

In general, at the level of detailed application of techniques, there are moresimilarities to Toyota than there are differences with Proton’s internaloperations and JIT practices.

JIT supply – external JIT practices at ProtonThe work of Sykes (1988) was used to analyse and compare the purchasingpractices at Proton with accepted JIT practices (Table IV). Proton only awardssuppliers a one-year contract which is not considered long-term. The length ofcontract differs for Proton’s suppliers according to the amount of capital Protonhas invested in each supplier. This criterion is also used in determining whetherto use single or dual source suppliers.

Traditional purchasing practice and JIT purchasing practice can besummarised in Table IV (after Sykes, 1988). Proton’s purchasing practices arecompared and contrasted. They show clear resemblance with JIT practices,although they are not exactly similar. A cause for concern here is Proton’ssingle- and dual-sourcing. A single-sourcing policy is usually stressed in a JITsystem as it creates confidence in suppliers and helps to retain high-qualitylevels. The reasons for having both single- and dual-sourcing policies in Protonis due to the lack of trust and communication between Proton and its suppliers.Parts are dual-sourced in order to encourage competition among the suppliersespecially when keeping costs down (a western adversarial approach ratherthan a Japanese collaborative one). In addition, Proton is encouraging theformation and growth of the Malaysian components industry (really a nationalas much as a company objective).

The situation is very different for Japanese car assemblers. They rely oncloser, longer term relationships with a small number of first-tier suppliers, whowill then take the responsibility for the second-tier suppliers (Carr andTruesdale, 1992). In Japan’s 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 10percent of Toyota’s suppliers are within the keiretsu network.

In contrast, Proton imports metal panels and plates which are pressed tomake car doors, bumpers and so on. The order for these panels is made sevenmonths before and a safety stock of one month is used. The pressed metal platesare in various sizes and a stock of half a day’s production is sent to the assemblyline. Similarly, locally made parts can be divided into two types: big parts andsmall parts. One day’s stock is needed for the big parts and up to two or threedays needed for the small parts. These parts will only be sent to the assemblyline for half a day’s production.

The situation is different for car seats. Proton uses synchronised supply inassembling car seats. This means car seats are arranged in the supplier’s lorryaccording to the need of the assembly line. Therefore, Proton has to inform the


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suppliers every 2 hours about requirements. Proton uses a materialsrequirements planning (MRP) system which is fully computerised. Materialsneeded for Proton are determined, based on the number of cars the lineproduces each day. This type of hybrid MRP/JIT system is becoming wellknown (Sillince and Sykes, 1993).

The distance between the manufacturer and its suppliers is an importantelement in JIT supply. A short distance between manufacturer and supplier willhelp the suppliers to fulfil the frequent delivery demands and to achieve the JITobjectives. Some of Proton’s suppliers that are located quite far away had to setup their own “distribution centre” near the car factory, so that frequentdeliveries could be made without too many problems (see also Dunn, 1992). Thevarious categories of items Proton has to deal with explains both the bulk andsmall scale transport arriving at Proton’s factory. The forms of transport usedby the suppliers are lorries, vans or even cars, with not more than one or twoworkers handling each delivery. These suppliers are not dedicated to Proton;they have other clients to serve and most of these clients are in the assemblingbusiness.

The suppliers’ views on JIT at ProtonThe suppliers or vendors were aware of the JIT system being implemented inProton. Although there is constant contact with Proton either deliberately(through VDP) or as a routine (through the deliveries), there is not muchdiscussion about their supply chain management systems. An interesting studythat discussed the suppliers’ views on JIT implementation in Proton wasconducted by Abd.Hamid et al. (1988). Fifteen of the organisations supplyingparts to Proton were interviewed and asked to list the characteristic andsupporting factors they thought were important to JIT implementation.According to these suppliers, the most important characteristics (not in anyparticular order) were as follows:

• Close relationship between the manufacturers and their suppliers.• More frequent and precise order of parts and components.• Manufacturers should have more trust in the suppliers.• Machine set up and break down time should be short (at the supplier).• Better machine layout (at the supplier).• Frequent deliveries.• Raw materials and work in process are of high quality.• Good control of raw materials and work in process.

These suppliers saw JIT not so much as an approach to gaining competitiveadvantage, but as a means of cutting costs. The most important aspects were(Abd.Hamid et al., 1988) low raw materials and work in process inventory, lessinventory space, greater financial benefits as a result of a decrease in inventoryinvestments and lower level of inventory will induce further cuts in labour costs.

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Answering the question whether there were good prospects for theimplementation of JIT in Malaysia, 58 percent of the suppliers had a positiveoutlook. Others still have their doubts. Among the reasons they put forward asto why they think JIT would not fully work in Malaysia were:

• Not enough trust between buyers and suppliers.

• Orders from manufacturers are not constant.

• Workers are not committed enough.

• Lack of understanding about JIT.

This case is similar to the findings of Lamming (1994) where the main findingsof the review of the relationship between UK vehicle manufacturers andsuppliers were:

• Lack of trust preventing the development of lean supply practices.

• Communications which were not sufficiently developed to supportelectronic data interchange (EDI).

• Development of supplier associations aimed at improving logisticsthrough collaboration.

• Proliferation of supplier assessment methods leading to confusion andfrustration 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 havea substantial amount of knowledge regarding JIT and how it affects them. Thisis a positive sign in a JIT environment. In addition to the training organised byProton, the Proton Vendors’ Association (PPP) also handles extensive trainingof Proton workers as well as the suppliers’ workforces. PPP is organised tofacilitate and enhance smoother and closer communication between Proton andits vendors. The objectives of PPP perhaps reveal a wider appreciation of theoverall approach to strategic JIT than that of many individual vendors, whowere 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 aspectslike quality improvement, productivity improvement, productdevelopment and management.

• To organise educational tours, local and overseas, to enhance members’capabilities further.

• To promote organised export programmes and channels of request fortechnical assistance arrangements with overseas manufacturers.

• To promote good relationships within the auto component industry andthe government agencies.


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• To organise any functional activities which are considered beneficial tothe members and Proton.

Proton’s social policy in a Malaysian contextProton has responded to Malaysia’s call for corporate participation in thedevelopment of a caring society by contributing RM 10 million (£2.6m) to theLow Cost Housing Fund in May 1994 and launching a scholarship programmewhere the company sponsors the tertiary education of deserving students atlocal or overseas universities. In 1994 the company was granted the “MostCaring Employer Award” by the Malaysian Human Resource Ministry (Proton,1994). This ministry has also recognised Proton’s social responsibility to itsemployees by commending the remuneration package that is intended to retaintrained personnel.

The issue of Bumiputera employment and rights has been raised. From theoutset of the venture on 7 May 1983 the government had three objectives basedon the policy of promoting unbalanced growth of the economy by identifyingspecific sectors of industry for special help and promotion. These objectiveswere (Ismail and Berma, 1994):

• Developing a local automotive industry.

• Increasing the level and depth of local engineering and technologicalexpertise.

• Increasing Bumiputera participation in industry.

The government has allocated RM 13 million (£3.35m) as a subsidy to Protonwith the specific purpose of increasing Bumiputera participation. In 1991Proton awarded RM 7.5 million (£1.93m) to 16 Bumiputera vendors who wereproducing 87 different components (Ismail and Berma, 1994). So far 18Bumiputera vendors have received a total of RM 11.3 million (£2.91m) and theseproduce 135 components for Proton. Similarly, selected Bumiputera vendorshave been given opportunities to participate in supporting industries. Grantsare only awarded to firms which have at least 70 percent Bumiputera equity andProton will not award any contract for supplies to a firm with less than 50percent Bumiputera equity (Ismail and Berma, 1994). This approach is certainlyracial and some would call it racist. Nevertheless, it is claimed that Malaysia isan outstanding example of a harmonious, multi-religious, multi-racial society(Proton, 1995).

ConclusionsSo far, Proton has been a successful venture in that it has met the objectives setfor it when it was conceived. It is clear that the National Car Project has been asuccess. However, Proton needs a period of development at least as demandingin the next few years if it is to continue to succeed in the global market it intendsto enter with the construction of its new factory. From the JIT frameworks notedhere it is clear that JIT (more particularly transitory JIT) is practised at Proton

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and that certain technical improvements will be possible internally (and onlights and the like). However, these are easy things to achieve. More difficult willbe the integration of suppliers into an overall chain to achieve strategic JIT andgain competitive advantage. Nevertheless, the use of transitory JIT as a meansof national strategy is impressive. Perhaps the point is that Proton has theflexibility to use transitory JIT to achieve the desired national policy – be thatincreasing the number of component manufacturers and suppliers, increasingBumiputera participation, reducing costs, carrying out technology transfer,competing globally and so on. It is clear from this case study that these multipleobjectives have been met and it is debatable whether they would have beenachieved using strategic JIT.

There are several important factors that support JIT in Proton such as thecompany-wide obsession with quality and the work culture already has aJapanese “feel” with the kaizen approach (e.g. “2S” and “3M” and “4M”programmes). However, there are some hindering factors to full JIT such as lackof trust and communication with some suppliers, that JIT is perceived as atactical manufacturing method and also there are some common externalproblems (e.g. traffic congestion, machine breakdowns at suppliers and poorquality parts supplied on occasions). The dependence on imported parts createsproblems because of the delivery time and the risks involved. These problemsare also reasons for Proton to continue having a certain level of inventory,taking into consideration an order’s lead time, including safety stocks. However,even Nissan in the UK experiences these types of problem with overseassuppliers 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 sizeof the parts and the “synchronised supply” method used. Another importantfactor is the multi- and dual-sourcing concept practised in Proton. This type ofsourcing seems to be the only solution arrived at by Proton to abolishcomplacency among the suppliers, while maintaining high levels of Bumiputerainvolvement. This involvement has still not eradicated the lack of trust andcommunication between buyer and suppliers. This is the main reason why fullstrategic 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 thebenefits of the various JIT practices it uses. With the constraints imposed by thesocial policies of ethnic quotas in component suppliers, staff development andthe multiple objectives of both increasing the proportion of indigenoussuppliers whilst attempting to adopt JIT practices, full strategic JIT in theJapanese sense seems to be beyond Proton’s reach in the foreseeable future.Although transitory JIT is ultimately unsatisfactory from the point of view ofworld-class manufacturing, it has served Proton well so far and has beeninstrumental in furthering Malaysian social policy and industrial developmentstrategy (Simpson et al., 1997).


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