Who is Bill Gaw?
And why should we
listen to him?

Lean Enterprise Articles

Your 3-Step, World Class, Lean Manufacturing Training Program
WCM Lean Manufacturing

 Increase the effectiveness of your
Lean Manufacturing Initiative

Manufacturing Simulation Game 

Developing Country Productivity
Part 2 of 3

privacy policy

Contact Us

 To review our training 
 packages, click on 
  the links below: 

e-Training Packages:

Lean Manufacturing

Balanced Scorecard

ISO 9000:2000

Supply Chain


Strategic Planning

     Other Options:   

Lean Leadership

Thinking Outside 
the Box Principles 

Lean Enterprise Training

Management Training

Lean Kaizen Event

Lean Manufacturing Implementation

Lean Six Sigma

Supply Chain

Strategic Planning

Total Quality

Lean Manufacturing Coach and Certification

Production Planning and Control

Manufacturing Planning and

The Developing Country's Views on Productivity

My examples in developing countries will stem primarily from my one year of experience in Malaysia and my one and one-half year's experience in Mexico. During this time I worked in factories which were attempting to install West­ern production technologies. The frustrations and experi­ences of these factories has opened our eyes to many mistakes that we have in our own factories at home. I will discuss some of these issues under the following headings:

1. Review the Perspective
2. Develop Mutual Advantages
3. Redefine the Goals
4. Learn the Lessons
5. Consider the Cultures

Review the Perspective

The United States perspective on what we get out of a developing country plant is cheaper labor and new mar­kets . The new markets occur because m any countries block sales in their country unless there is a plant in their country. However, on the issue of cheaper labor, we are still working with a one resource mentality. I worked with a plant that was moved to Mexico to take advantage of the cheaper labor. However, the inventory transfer time back and forth to Mexico was so long that the inventory carrying cost for this transfer more than erased any labor cost savings. However, because the carrying cost was buried in overhead and not in operating cost, the transfer of the plant was deemed a success because operating costs had been reduced.

The US feels that the developing country should be glad to receive the extra jobs and the economic boost of having a new factory. What we don't realize is that countries like Malaysia have negative unemployment. They have to import people from Indonesia and the Philippines to fill all the jobs. They don't need jobs. The US has a much higher unemployment rate than Malaysia. As for the economic boost, countries like Thailand already have a negative trade deficit. The US should be so lucky.

From the developing country perspective, what we get out of the relocation of our plant is cheaper jobs. But what they feel they get is useless, outdated technology. They feel that we are attempting to developmentally keep them 20 years behind by only transferring older technology. The United States often transfers plants to developing countries in an attempt to clear out old equipment, and then bring in new equipment into their plant at home. Japan is a little more open about it's resistance to share technology. They refuse to bring leading edge technology and methodology into developing countries. For example, there are no Just-in-Time installations in Japanese plants in South-East Asia. Japan has more plants in South-East Asia than any other country in the world. However, there are numerous JIT installations in US plants in the same region.
What the developing country would like to have is a chance to achieve fully developed status. They are not interested in outdated handouts. They want to shift from a copy cat strategy to an innovative strategy. They realize that as long as you are playing catch up, the most you can ever get is caught up. They want a chance to develop their own niche in the world economy.

Develop Mutual Advantages

When moving overseas, we need to consider more than just our own profit oriented perspective. Different countries have different agendas. For example, one plant, in one region of Mexico, had trouble getting the employees to show up for work for several days after a paycheck. It turned out that the problem was that we were paying them more than they needed to subsist. And that the employee saw no use for the extra cash. They were more interested in spending the extra time with their families. For someone from the US, money, not family, is king, and we have difficulty relating to this type of goal. Issues like this opened our eyes to the need to look for mutual advantages in plant transfers.

The areas of mutual advantage include the corporate and local office of the new plant. Mutual advantage also needs to be considered in the areas of local government expecta­tions, like infrastructural development, work force expec­tations, like education/training programs, and environ­mental considerations like pollution and local resident effects of the new plant. We need to look closely at what each of these groups is looking for, not solely at the corporate profits.
Redefine the Goals

We need to reevaluate the goals of each of the areas discussed in the previous section. For example, the corpo­rate goals may be financial, like profits, and the factory's goals may be operational, like increase throughput and reduce inventory. New goal orientations that are gaining a lot of attention include employee based and customer based goals. Whatever the goal, we need to focus on a common, simplistic goal that is achievable and measur­able. This goal needs to be operationalized by identifying the critical resource and then developing a measurement / motivation system that focuses the entire organization on the achievement of the goal. The most effective motivator is not always money. For example, in Mexico a prime motivator focuses on things that will help the family, not just the employee.

To Be Continued

For balance of this article, click on the below link:

Lean Manufacturing Articles and go to Series 01


To stay current on manufacturing competitive knowledge, please subscribe to our weekly bulletin, "Manufacturing. Basics and Best Practices (MBBP)."  Simply fill in the below form and click on the " subscribe button." 

We'll also send you our Special Report, "8-Basics of Kaizen Based Lean Manufacturing."  

All at no cost of course. 

First Name:
Your E-Mail:

 Your personal information will never 
be disclosed to any third party.

privacy policy

Here's what one of our subscribers said about the MBBP Bulletin:

"Great articles. Thanks for the insights. I often share portions of your articles with my staff and they too enjoy them and fine aspects where they can integrate points into their individual areas of responsibilities. Thanks again."

               Kerry B. Stephenson. President. KALCO Lighting, LLC

"Back to Basics" Training for anyone ... anywhere ... anytime

Business Basics, LLC
6003 Dassia Way, Oceanside, CA 92056
West Coast: 760-945-5596

© 2001-2007 Business Basics, LLC