Sportsway Ltd is a major motor vehicle producer, locatedin Western Australia. The company has experienced declining salesand increasing costs over the last few years. At the beginning ofthis year, Sportsway was taken over by a Japanese multinationalcompany that has car manufacturing interests in most Westerneconomies. An audit team from the Japanese parent company has justcompleted its evaluation of Sportsway and recommended sweepingchanges to the company’s inventory, production and qualitymanagement. The major recommendations include thefollowing:

1. Inventories of raw materials, work in process andfinished goods are to be halved during the next year and thenreduced by a further 10 per cent per year over the following threeyears.

2. Defect rates in work in process and finished vehiclesare to be reduced by 20 per cent per annum. The company’s goal iszero defects in five years time.

3. The number of raw material suppliers is to be reduced tojust one or two suppliers for each major raw material.

4. Shopfloor employees are to be trained to stop theproduction line the moment they identify a quality problem and tostart it again once they have corrected the problem.

5. Shifts in each area are to start 15 minutes early toallow for a quality meeting, which is to be attended by allmanagers and line employees.

6. Vehicle manufacturing times are to be reduced by 25 percent over the next two years.

7. Employees are to focus on processes and on the needs ofcustomers, both internal and external.

John Waynson has been the managing director of Sportswayfor the past 20 years. He is stunned by the report from Japan anddiscusses it with his plant manager, Ian Angus, who also has yearsof experience at Sportsway.

Waynson:

This is a recipe for disaster! If we cut ourinventories, the unions will have a field day. Every time they calla stop-work meeting, we’ll run out of cars for our customers.There’ll be no stockpile to tide us over. Our suppliers will alsobe able to hold us to ransom. A stoppage in their plant will shutus down, especially if we confine ourselves to only one or twosuppliers for each of our major materials.

Angus:

You’re right. And imagine if the shopfloor people canstop the line whenever they feel like it. With virtually noinventories, every delay will mean a delay in meeting customerorders. Even if we could cut defects by 20 per cent per year, we’dhave a lot of stoppages, especially in the first year ortwo.

Waynson:

That’s another point. How are we supposed to cut defectsby that amount each year? The Japanese don’t understand theAustralian culture. We need to spend big money on qualityinspections so that we can find defects.

Angus:

It’s not just their lack of local knowledge; theseJapanese blokes aren’t logical. How could we cut vehiclemanufacture time by 25 per cent and shut down the production lineevery time we have a quality problem? We would just be encouragingour people to work more slowly. Don’t they see, we’re going to getslower, not faster! Anyway, they don’t understand our problems withfactory layout. As we’ve grown, our layout has become chaotic. Wehave material and work in process that has to be moved all over theplant. Shorter manufacturing times will require a huge capitalinvestment.

Waynson:

And what about these meetings every morning? What ajoke. Most of the shopfloor people won’t make the meeting, althoughI bet they’ll collect the extra pay. Even if they did come, they’renot going to open up to you and me about the problems on the shopfloor. They’re into hiding problems, not talking about them. As ifthey’re going to confess to all their mistakes! Anyhow, why talk toshopfloor people when we can talk to their managers? What a wasteof time and managerial talent!

Angus:

The Japanese don’t seem to understand the basicprinciples of management. We know that the best way to run thisplace is to hold the managers responsible for the performance oftheir department. Look at Fred’s paint department. He is evaluatedon the number of cars that are painted each day and he pushes themthrough to reach his targets. Sometimes there’s a bit of overspraybut Fred gets his numbers. Not like poor Jack in the trimdepartment, who never keeps up with the cars transferred from thepaint department. Cars are lined up everywhere and he’s alwaysmaking excuses, like complaining about paint overspray that has tobe cleaned off; but basically, Jack is just a lousymanager.

Waynson:

If we start adopting a customer focus, Jack will makeFred’s life miserable, always carrying on about overspray. In thisplace, managers know that they have to make their own departmentwork, not the department next door. It’s obvious that if everydepartment does its best, then the company will be doing its besttoo.

Angus:

John, I think the Japanese just don’t understand theAustralian manufacturing culture. You’ll have to go to Japan andsort this out. If we implemented these recommendations, Sportswaywould go broke within two years. Then where would you and Ibe?

Based on this scenario make a report of 750 words whichanswers the following:

Before going to Japan, Waynson consults you, Sportsway’smanagement accountant. Prepare a report for Waynsonthat:

(a) explains the rationale behind each of the sevenrecommendations

(b) suggests any accompanying changes that will beneeded to achieve the goals set by the parent company.