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Why Is it So Hard to Transplant Lean in Low-Cost Countries?

Posted By Jeff Moad, October 27, 2015 at 12:53 PM, in Category: The Adaptive Organization

150377411_Problem.jpgAfter rushing to offshore production in pursuit of lower-cost labor, many manufacturers have spent the past few years rethinking that decision. They’ve learned that, while offshoring production bound for core markets to lower-cost countries can bring cheaper labor, it can also involve unexpected costs and other risks such as greater spending on transportation, longer lead times, quality trade-offs, and intellectual property exposure.

Now manufacturers are struggling to cope with another offshoring-related challenge: How to transplant lean and other process-focused continuous improvement frameworks in a sustainable way to lower-cost countries where the culture may not take to it naturally.

Recently, several members of a Manufacturing Leadership Council working group said their global companies have struggled to establish effective lean cultures and practices in lower-cost countries. While lean can be difficult to sustain even in the most receptive of cultures, the manufacturing executives said, in low-cost countries they often face more setbacks and longer ramp-up times.

There are a couple of reasons for this, they said. First, when faced with operational challenges, many managers in low-cost countries tend to throw labor at problems rather than asking tough questions about what process changes can be made to best deliver customer value and reduce waste.

At the same time, said these manufacturers, command-and-control work cultures that predominate in some low-cost countries can work against the collaborative, bottom-up structures needed for lean to thrive.

Manufacturers say getting lean to translate in low-cost countries can be particularly difficult where you are dealing with a contract manufacturer. That’s because contractors are often interested only in making changes guaranteed to deliver quick cost savings. Lean change that requires a cultural transformation and a long-term approach is often a tougher sell.

Of course the challenges that manufacturers report in launching lean practices in low-cost countries are ironic since lean evolved earliest in a country (Japan) that was still competing based on lower-cost labor (at least compared to the West.)

The offshore challenges that manufacturers face getting lean to take root in lower-cost countries are problematic because they make it difficult for manufacturers with global operations to implement continuous improvement tools and techniques in a consistent, standard way across their production networks, and to learn from and take advantage of lean practices across their enterprises.

So what can manufacturing leaders do to encourage lean culture to take root and grow in their offshore plants and those of their contractors?

--Encourage supervisors and plant managers in low-cost country operations to visit plants where lean has taken hold so they can experience the culture first-hand. This is often what to takes to make lean come to life;

--Select offshore contractors that seem to have a culture that could more easily embrace lean thinking. Take into account things such as employee morale and plant housekeeping. Is there evidence of teamwork? Is the contractor committed to continuous improvement? Do they already measure and track defects and encourage collaboration?

The difficulty of translating lean to low-cost country cultures, in and of itself, won’t keep manufacturers from continuing to offshore production. Nor should it. But manufacturers should be aware that cultural differences may introduce complexities when it comes to growing and sustaining lean cultures in low-cost countries.

Written by Jeff Moad

Jeff Moad is Research Director and Executive Editor with the Manufacturing Leadership Community. He also directs the Manufacturing Leadership Awards Program. Follow our LinkedIn Groups: Manufacturing Leadership Council and Manufacturing Leadership Summit

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Jeff, I appreciate your insightful article. I am a big fan of lean, in part due to my engineering/manufacturing training, starting at Briggs & Stratton as a project engineer in the 1970's. Yet I have seen the "command-and-control work cultures that predominate in some low-cost countries" challenge, most notably in my work with the Zambian Consolidated Copper Mine, that can thwart lean efforts, as you said. Yet this was readily overcome by sharing the economics of the business with the union workers, enabling them to understand, make better decisions and participate in the increase wealth created through process changes. Treating employees like partners in business is a powerful way to capture their hearts and minds. I have seen this work in a variety of cultures, around the world, from Europe, Australia, US, Mexico, Canada, etc. These articles provide more context:
Often referred to as Open-Book Management, this is the first of a series of bi-weekly Forbes articles. It provides a good overview of what, why and how:
More information and case studies can be found at www.openbookcoaching.com. I hope this input is helpful.
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