That's Not Cost Reduction, That's StealingBy Jon Miller | Post Date: September 3, 2006 10:25 PM | Comments: 4 The September 4, 2006 Japan Times reports Toyota allies warned over low pay by Labor authorities in Japan. Twenty three Toyota suppliers in Toyoda, Japan have been caught cheating their Vietnamese workers of pay by paying below minimum wage. Two hundred workers have been underpaid by nearly $500,000 over 5 years. Let's do a little averaging. The 23 Toyota suppliers saved $500,000 so that's just over $21,000 per company over 5 years. This is about $4,000 per year per company. Even over five years, this is hardly significant cost savings. On the other hand $500,000 to the 200 Vietnamese workers is $500 per year. The average per capita income in Viet Nam: $638 according to the US Department of State. That's not cost reduction, that's stealing. It's stupid, and wrong. This is the sort of thing that Darius Mehri experienced and wrote about in Notes from Toyota-land, Japanese managers in supposedly Lean companies behaving badly. If you believe Toyota PR, "kaizen" and "respect for people" are the two pillars of the Toyota philosophy. This philosophy doesn't yet extend too far into their supply base, it seems. Happy Labor Day, ironically. Very astute observation Karl. The problem with the Toyota suppliers in this story may be that they very well do kaizen and pursue Lean but stepped over the line here because pressure to cut costs was too great. I take it to be yet another example of the strains on Toyota and their supply chain as a result of the past 5 years of rapid expansion. Poster: Jon Miller | Post Date: September 4, 2006 7:58 PM We are speaking of Toyota suppliers, not Toyota itself. I have been working for one of these suppliers. They were not underpaying their workers. They were training, in Japan, oversea workers (from Thailand, Philippine, Brazil...) at home country salaries. That was for them the only solution to keep the business in their hand rather than having it done in China. Of course TPS deployment was extensively organised but when carmaker purchasers (not only Toyota's) demand a 30% cost down. You have little choice. Poster: Bertrand Chauveau | Post Date: January 19, 2007 2:35 PM If it was training, they should not have promised their trainees a higher salary than they actually paid. These companies knew what they were doing, and they did pay these Vietnamese later, when the government caught up with them. Yes, Toyota is a tough customer as are all of the auto OEMs. Shame on Toyota if they are driving their suppliers to behave like this. Poster: Jon Miller | Post Date: January 19, 2007 8:59 PM |
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This is one of the perennial problems of Lean - how do you get it down (or UP) the supply chain?
I do a lot of work with the supply chain to our local auto plant, and am constantly amazed at how many companies (even in the first tier . . .) are essentially paying lip-service to even the basics. I think the root of the problem is 'what gets measured is what gets done', so when a powerful customer says 'Thou shalt be Lean', managers do the minimum they can to keep the contract, rather than asking what they could really achieve if they embraced the philosophy whole-heartedly.
How to prevent this happening. . . . I don't know. But what I do know is that I make a living working with firms who've realised that its not about what doing the minimum, but figuring out how to achieve the maximum.
Karl