Japanese production methods and profitability Do Japanese production methods improve corporate profitability? This is a question that has long interested European and US managers. Recently, some researchers carried out a study of manufacturing companies in an EU member state to try to answer this question. They found that, for the sample of companies chosen, the profitability of high and low users of Japanese production methods was very similar, fluctuating between 6% and 8% in the period studied (1986–92). According to researchers, there was intense interest in Japanese production methods in Europe in the late 1980s;

many of the EU firms adopting them did so in these years.

The researchers define profitability in the study as the ratio of operating profit to sales. Just-in-time

(JIT) production, JIT delivery of supplies, cellular manufacture and quality circles are examples of Japanese production methods.

Required Comment on the above findings. Is the operating profit to sales ratio the most appropriate measure of profitability in this case? Given the nature of Japanese production methods, what impact do you expect them to have on a firm’s profitability?

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