Creating Lean Suppliers: Diffusing Lean Production Through the Supply Chain

Abstract

Honda of America has developed a comprehensive approach to teaching the principles of lean production to its suppliers. The centerpiece of these efforts is a program called BP (for "Best process", "Best Performance", "Bs Practice"), in which a crossfunctional team of personel born Honda and the supplier work intensively for week or even months on narrowly-targeted improvement projects in the supplier's plant. BP has been quite successfid in enhancing supplier performance; suppliers participating in the program in 1994 average productivity gains of 50% on lines reengineered by BP. However, Honda found there was high variation in the extent to which suppliers were able to transfer the lessons taught beyond the line or plant where the BP intervention occurred. We explore the reasons for this variation touching on how the BP process interacts with the broader relationship between customer and supplier, organizational learning, technology transfer, and the transplantation of Japanese management practices to the U.S. The case studies we present of three of Honda's U.S. suppliers illustrate the dynamics of the learning process and the complex relationship that emerged between "teacher" and "student". We found that achieving self sufficiency with the lean production techniques taught by BP is more likely when the supplier has a moderate degree of identification with and dependency on the customer. If these are too high the supplier will be tempted to continue to rely on the customer for assistance; if they are too low, the learning relationship may break down. It appears that Honda has achieved the most supplier self reliance with larger U.S.-owned companies, who have an identity as strong, competent actors, and thus try to reduce dependence on Honda by mastering the new knowledge quickly. Yet these larger suppliers may be less responsive to Honda's needs that small-to-medium suppliers whose capabilities can be boosted through Honda's supplier development activities.