Case study:

Case study: transitory JIT at transitory JIT at

Proton Cars, Malaysia Proton cars

Mike Simpson, Geoff Sykes and Adini Abdullah

Sheffield University Management School, Sheffield, UK 121

Introduction
This paper investigates the application and adaptability of just-in-time (JIT) in
the largest Malaysian automobile manufacturing company (Proton). The main
objective of this paper is to develop an understanding of a Malaysian version of
JIT in its automobile industry and to examine the concept of JIT in a Malaysian
manufacturing setting. This is especially interesting and important since
Malaysia has not gone through the usual stages of a craft era (labour intensive,
highly-skilled workers) followed by Fordism (mass production of single
products, semi-skilled workers) and post-Fordism (mass customisation, multi-
skilled workers) (see Wilson, 1992). Although, some might argue that they have
actually gone through these stages but over a very short time, thus giving scope
to manufacturing management for a variety of approaches (Womack et al.,
1990). There are other ways of looking at the development of manufacturing
and operations management (Monks, 1987; Sykes et al., 1997). For example,
Monks (1987) suggests a framework based on US experiences with a Handicraft
era (circa 1700-1800), Industrial Revolution (circa 1800-1890), Scientific
Management era (1890-1940) and Operations Research and Computerised
Systems era (1940-present). However, these ideas seem even less applicable to
developments at Proton.
The secondary objectives of this paper are to:
• Determine the amount of JIT activity in the company.
• Look at the structure of the buyer-supplier relationships that support the
JIT system.
• Draw out the factors that support and hinder the successful
implementation of JIT in the company.
• Identify where the Malaysian version of JIT differs, if indeed it does, from
the conventional Japanese form of JIT.

Background
Industry and company
The automobile industry in Malaysia began in 1962 when Ford Motor Company
of Malaya was incorporated and began operation with 16 employees fitting
wheels, doing body repair and paint touch-up work in a rented shop-house in International Journal of Physical
Distribution & Logistics
Singapore. In 1963 the initial move for local production of automobiles in Management, Vol. 28 No. 2, 1998,
pp. 121-142. © MCB University
Malaysia began. It was realised by various government bodies and politicians Press, 0960-0035
IJPDLM at that time that automobile production might be a worthwhile industry in
28,2 Malaysia. In September 1963, the Federal Government announced its intention
to encourage the establishment of an automobile industry as part of the
industrialisation programme and in May 1964 the government announced its
initial policy on automobile assembly (Abdullah, 1995). The automobile
industry was officially launched in Malaysia in 1967 when six assembly plants
122 were granted approval by the government to start operation.
The Malaysian Government took a very long-term strategic view to create an
automobile industry. Initially, completely built-up (CBU) units were reduced and
replaced by completely knocked-down (CKD) packs. Then in the mid-1970s, a
core leadership group of about six parts manufacturers organised a broader, more
coherent organisation and in 1978, the Malaysian Automotive Components Parts
Manufacturers Association (MACPMA) was established. In 1979, the government
announced its intention to move towards an all-Malaysian car through the
process known as mandatory deletion of parts of completely knocked-down
vehicles. Under this process, foreign assemblers were prohibited from including
certain components in the imported CKD packs, thereby creating opportunities
for local component makers. Government policy was to move from completely
built-up to completely knocked-down to completely made locally (CML).
However, the development of the motor vehicle industry in Malaysia was
confined largely to the assembly of vehicles. It was a giant leap for the Malaysian
automobile industry to manufacture the first Malaysian car, the Saga. This
project was called the Malaysian National Car project and the company
entrusted to undertake this project, Proton, was incorporated on 7 May 1983,
under the name Perusahaan Otomobil Nasional Berhad. From 1985 only one
model was produced: the Saga. Since then, the Saga has been upgraded and
three other models added to the range (i.e. the Wira, the Perdana and the Satria).
Each of these models has a number of variations of door and engine
configuration. The objectives of the Malaysian National Car project were to:
• Rationalise the local automotive industry.
• Spearhead the development of a local component industry and to
enhance greater use of local components.
• Encourage the upgrading of technology, engineering knowledge and
technical skills of the country’s workforce.
• Assist and develop Bumiputera (the indigenous people of Malaysia)
participation in the automotive industry.
Proton had established four subsidiary companies based locally and overseas.
Proton had also established a total of eight associate companies or direct local
and overseas suppliers, which involve components manufacturing to provide
synergy to the company’s operations. These associate companies are similar to
the Japanese keiretsu with interlocking minority shareholdings and mutual
trading, although here Proton was not using this approach to manage their
suppliers in the same way as NEC (Ferguson, 1990; Whittington, 1993).
 After several disputes with Mitsubishi (who owned a 30 percent stake in Case study:
Proton at that time) early on in the project Proton began to work more closely transitory JIT at
with local parts suppliers. The Joint Co-ordination Committee (JCC) on the local Proton cars
content for the national car was established. This interagency group was set up
by the Trade and Industry Ministry to press the Japanese on the use of local
parts manufacturers. Proton soon began fulfilling its obligation in accelerating
local parts content programmes. This started from 18 percent local content by 123
value (or about 14 component parts) in 1983, to 40 percent locally obtained parts
in 1987. By 1992, the target was 80 percent local parts content. This was
achieved through joint venture programmes between local vendors and foreign
vendors from Japan, Taiwan, Korea; the latest venture is with France. The
remaining components are still mainly imported from Japan, with only 1
percent from other countries such as Thailand, Britain and Germany. Given this
background, the progress of Proton towards full (strategic) JIT can be assessed.

Social history
The recent history of Malaysia and the development of the Malaysian
automobile industry should be seen in context. Malaysia has a population of 19
million with over 40 percent of the people aged between 15 and 39. Malaysia is
a unique mix of some of the world’s oldest civilisations, including Malay,
Chinese and Indian. The national language is Bahasa Malaysia but English is
widely used in commerce, industry and institutions of higher education (Proton,
1995). The population is ethnically mixed, with just over 50 percent being ethnic
Malays (or Bumiputera), 30 percent Chinese, 10 percent of Indian origin and
various minorities such as Dayaks. The country also has an established system
of education providing at least 11 years of schooling. In addition, Malaysia has
a comprehensive system of incentives and grants to encourage participation in
research and development. Eight universities, together with several
polytechnics, technical colleges and vocational institutes train and develop the
large numbers of skilled people needed for the different developing industries. A
quarter of the national budget is spent by the Ministry of Education (Proton,
1995). This has resulted in a young, highly educated and productive workforce
able to absorb and adapt to new technologies.
During the colonial era the British developed strategic resources of tin and
rubber, with infrastructure such as railways to support them, but little other
industrial development occurred. A post-war communist insurgency was
finally suppressed just after independence was granted in 1957. At first,
Singapore was incorporated within the Federation (1960) but had broken away
by 1965. The most pressing problem that Malaysia faced (and still faces) was
the perceived imbalance between the economic prospects of the Bumiputera
and the Chinese minority. This tense situation erupted into serious rioting in
1969 with a state of emergency lasting until 1971, with Bumiputera attacks on
Chinese and, to a lesser extent, Indian people and businesses. The eventual
social settlement reached involved a quota system in the allocation of public
sector jobs and a spur to industrial development designed to improve the
IJPDLM economic prospects of the Bumiputera. The development and employment
28,2 policies of Proton and its evident preference towards Bumiputera-owned
suppliers can be explained in this context.

Methodology
One of the authors (Adini Abdullah) is normally resident in Kuala Lumpur,
124 Malaysia, and spent some months researching into the production and
operations management systems at Proton. The methodology chosen for this
work has been called Triangulation (Yin, 1994) and is intended to reduce bias.
With triangulation, multiple sources of evidence are used to essentially provide
multiple measures of the same phenomenon and hence reduce problems of
construct validity and reliability. The case study of Proton is seen as a critical
case in testing a well-formulated theory in an extreme situation (JIT
implementation and the achievement of multiple national and social objectives)
(see Yin, 1994). Hence, in this study semi-structured interviews were used with
four of Proton’s senior managers (two vendor development programme
executives, a production executive and a production officer), focus group
discussions with ten shopfloor workers in the plant and direct observation of
the plant in operation, on four occasions, were used to collect primary data.
Short, semi-structured interviews were also carried out with representatives of
15 companies which supply the Proton plant. It is worth noting that suppliers
were fairly co-operative but there is doubt about some of their views since they
may not have wanted to compromise relations with Proton. The main objective
of the interviews was to provide evidence and information which on analysis
would be capable of comparison with existing theory. Additionally, a check-list
based on work by Hayes (1981) was used to collect data while observing the
plant in operation. This list was adapted from Hayes (1981) since he had used
this method of research to determine whether the practices listed from Hayes’
Japanese experiences were used in factories in the USA (Table I). Secondary
data were obtained from company reports, company newsletters, local
literature and local newspapers.
In order to gather the data needed for this research questions were developed
as follows:
• How does Proton run its manufacturing process?
• What are the elements of JIT (if any) practised in Proton?
• What are the buyer-supplier relationships?
• What are the factors that could support or hinder JIT practices in
Proton?

Theory
Just-in-time
The JIT approach to manufacturing originated in the Japanese Toyota company
in the 1950s. The “oil shock” of 1973 in Japan hastened the rapid development
 Observations of
Case study:
Hayes (1981) transitory JIT at
Japanese owned Our observations Proton cars
Management practices factory Proton factory

A. Practices reported by Hayes to be prime

factors of Japanese success 125
1. Clean orderly workplace Yes Yes
2. Minimised inventory
Little inventory on the shopfloor Yes Yes
Goods delivered JIT in small lots Yes Yes
Rapid set-ups Yes Yes
No buffer stocks Yes Some
Clearly marked inventory Yes Yes
3. Problem prevention
Preventing machine overload Not observed Not observed
Monitoring systems Not observed Not observed
No crisis atmosphere
Long stable master schedule Yes Yes
Capacity based on actual measures Yes Yes
No overload Yes Not applicable
Minimising changeovers Yes Yes
4. “Pursuing the last grain of rice”
All problems considered important Yes Sometimes
Strive for continuous incremental
improvement Yes Yes
5. Thinking quality in
Building quality into design Done in Japan Yes
Training all the workforce Yes Yes
Workforce do inspection (checking) Yes Yes
Feedback to workforce Yes Yes
6. Equipment
Equipment independence Yes Not applicable
Well-maintained standard machinery Yes Not applicable
Excellent material handling Yes Yes
B. Practices considered by Hayes not to be
prime factors of Japanese success
7. Quality circles No Yes
8. Robots No Yes
C. Practices mentioned by other authors
9. Kanban No Yes
10. MRP No Yes
11. Worker ability to stop line No No
12. Attention to detail Yes Yes Table I.
13. “Operations strategy” Not observed No Checklist used during
Source: Adapted from Hayes (1981) Proton factory tour

of the approach in an attempt to reduce any type of waste associated with

manufacturing; not just waste of materials but waste of space and waste of time
too. The approach attracted increasing attention in the West during the 1970s,
although many production engineers in Europe and the USA were already
IJPDLM striving for similar improvements without articulating them in such a coherent
28,2 form. JIT can be regarded as either a set of techniques to be applied in a
piecemeal manner or as an overall approach (even a philosophy) to the running
of an organisation. Although the detail of the techniques is always important,
the overall aspect has been defined as follows (Voss, 1987):
JIT is a disciplined approach to improving overall productivity and eliminating waste. It
126 provides for the cost-effective production and delivery of only the necessary quantity of parts
at the right quality, at the right time and place, while using a minimum amount of facilities,
equipment, materials and human resources. JIT is dependent on the balance between the
supplier’s flexibility and the user’s flexibility. It is accomplished through the application of
elements which require total employee involvement and teamwork. A key philosophy of JIT is
simplification.
This definition brings in some interesting aspects beyond those of pure
production engineering; the emphasis on teamwork and employee involvement,
for example, yet all within a disciplined framework. It also implies that
suppliers should be considered as part of a team and not simply exploited by a
large and powerful user. There is no place in the JIT organisation for those who
fight their own corners without consideration of the effects on others; the overall
effect is paramount. The approach takes in the importance of quality, since any
form of non-conformance is pure waste leading not only to scrap and rework
but to waste of management time. JIT also encompasses the use of teamwork to
effect continuous improvement (“pursuing the last grain of rice” as discussed by
Hayes (Voss, 1987)).
Despite the importance of the overall strategic approach, various authors
have noted the techniques or practices of JIT and stressed the attention to detail
necessary to make them succeed (Im and Lee, 1989; Sohal, 1993). However, it
should be noted that not all researchers and industry observers are totally
convinced that JIT is the answer to the problems of all companies (Goyal and
Deshmukh, 1992; Harber et al., 1990).
The term “transitory JIT” was adopted by Croom-Morgan et al. (1992) to
describe a model of JIT as a temporary management technique that can provide
some fairly immediate inventory or labour cost savings. This is contrasted with
“strategic JIT” which is seen as a concerted and comprehensive programme to
achieve real long-term competitive advantage. The use of transitory JIT might
imply that progress towards strategic JIT is taking place. However, this need
not be the case and the adoption of JIT techniques to achieve certain operational
objectives can be justified even if the intention to implement full or strategic JIT
is lacking.
Recently, JITII has emerged as an extension of the ideas of JIT management.
JITII involves working closely with suppliers, including offering floor and office
space, empowering suppliers to make decisions on behalf of the company and
rapid exchange of information between the supplier and various departments
within the company and customers of the company. Lance Dixon, director of
purchasing and logistics at BOSE Corporation, Framingham, Massachusetts
sees JITII “as a logical extension of the disciplines critical to an agile
manufacturing environment – JIT, partnering and concurrent engineering” Case study:
(Coyle et al., 1996). The concept is similar to partnership sourcing which is transitory JIT at
defined by Partnership Sourcing Limited, UK as “a commitment by both Proton cars
customers and suppliers, regardless of size to a long-term relationship based on
clear, mutually agreed objectives to strive for world-class capability and
competitiveness”.
127
Supply chain management
The role of supply chain management in extending JIT from an internal
approach to an external approach has been well documented. However, Lee and
Billington (1992) offer advice on several common pitfalls in dealing with supply
chain inventory. Similarly, Galt and Dale (1990) examine customer supplier
relationships in the motor industry from the vehicle manufacturer’s perspective.
Galt and Dale (1990) reported the general desire to reduce the number of
suppliers so as to reduce variability and improve product quality. The
reductions in suppliers which were observed in that work were due to changing
from multiple to single source suppliers. Similarly, Galt and Dale (1990)
examined the advantages and disadvantages of supplier development. The
main advantages were found to be better quality, reduced costs and the ability
to produce products which are highly desirable in the marketplace. There was
also the benefit of vertical integration but without actually taking over
companies. The disadvantages were seen as the cost involved, the openness
required by the development process and the need to manage change. There
was also emphasis on long-term strategy associated with developing the
supplier base. Galt and Dale (1990) offer a series of recommendations of things
to do and not to do for organisations considering developing their supplier base.

Results and discussion

Capacity development at Proton
Proton is believed to be the largest and most modern automobile manufacturer
in Southeast Asia, covering 862,000m2 employing 4,400 people (of which 2,400
are direct workers) with a production capacity of 150,000 units per year (two
shift operation) at a production rate of 36 units per hour. Investment in the
production facilities has resulted in a multi-model production system.
Production involves four main processes:
(1) Stamping of body parts.
(2) Assembling (welding) of stamped body parts.
(3) Painting of car body shell.
(4) Trim and final assembly, including fitting the power unit which comes
from a partly-owned subsidiary in Malaysia.
Robots and automation are used throughout the production process. To keep
pace with the growing demand for Proton cars, the company has expanded the
production capacity and continually reviews its production techniques.
IJPDLM Proton has formulated a three-pronged strategy to meet the high demand for
28,2 its cars. The strategy attempts to address shortages in production capacity for
the short, medium and long term. A feasibility study on the plan, however, was
done in 1995. Proton’s immediate plans to meet the short-term demand involves
operating its plant on three shifts so that it could meet the sharp rise in the
domestic demand for its cars. Although this extra shift would not involve the
128 installation of an extra production line and new machinery, Proton’s managing
director, Datuk Mohd Nadzmi Saleh, said in an interview with the company
newsletter on 8 July 1995 (Proton, 1995) that the company may have to increase
its manpower substantially.
In the medium-term, Proton plans to invest RM 160 million (£41.2m) in a
small factory which would boost its production capacity by 50,000 cars per
year. (Note: The Ringgit or Malaysian dollar, RM, was 3.88 per pound sterling in
July 1996 at the time of writing the case). This small plant would also produce
spare parts for Proton and is expected to come on stream in 1997 or 1998. In the
long-term, Proton hopes to overcome the shortage of cars by setting up a second
manufacturing plant in Tanjung Malim, Perak. This is to be developed in stages
into “Proton City”, a 2,000 acre plant which would enable Proton to cope
comfortably with domestic and overseas demand. This sounds rather similar in
strategic concept to Henry Ford’s River Rouge plant in the 1920s (BBC2, 1994;
Womack et al., 1990).

Production executive interview

The production executive emphasised the persistent problem Proton faces with
component parts supply. Quality, even though this is made a first priority at
Proton, is still a struggle to maintain and difficult to achieve for every car. In
coping with uncertainties, he stressed that Proton handles the situation by
improving communication internally and by discussion with the vendors and
suppliers. This is done through daily meetings of all production workers such
as the foremen, assistant foremen, shopfloor workers and supervisors. Proton
uses single-, double- and indeed multiple-sourcing for parts, depending on the
sizes of the parts and whether those parts are imported or not. JIT is definitely
used by Proton but it can only be adopted for certain parts. There was no
mention of working to achieve fully integrated JIT as a strategic approach for
Proton (see Table I). It should be emphasised that this approach resembled the
ideas of transitory JIT (a temporary management technique to provide some
inventory and labour cost savings) rather more than strategic JIT
(acknowledging the impact of JIT practices upon the total business) as outlined
by Croom-Morgan et al. (1992).
The production executive particularly emphasised the other cost reduction
programmes adopted by Proton such as quality, cost, delivery (QCD) targets
and local parts content programme achievements through the vendor
development programme (VDP).
Vendor development programme executive interview Case study:
The VDP executive discussed the supply side of Proton’s manufacturing transitory JIT at
activities. Proton selects suppliers by using the Supplier Selection Diagram Proton cars
(Figure 1). The objectives and importance of vendor development were
emphasised, especially in tying up close relationships between Proton and
those vendors. Proton is focusing efforts on ensuring that its vendors have the
capacity to meet the anticipated increase in output. Proton had, in 1995, 138 129
component suppliers under the VDP. Proton plans to raise the number of local
vendors from time to time, especially to undertake the production of higher
technology components such as electronics, engine system and anti-lock
braking system. This is generally against the advice seen in the literature on
supply chain management (Galt and Dale, 1990; Lambert et al., 1996). For
example Lambert et al. (1996) say it is important to ensure scarce resources are
dedicated only to those relationships which will truly benefit from a
partnership.
In the areas where these vendors lack technology, they will be introduced to
those companies which do have the technology through a joint venture or a
technical aid agreement. This match-making activity has been very successful
and the results are shown in Table II.
Strategic alliances with foreign companies are made to acquire new machine
or process technology, as well as seconding Proton’s staff into the overseas
vendors. Quality agreements are also made between Proton and the suppliers. It
would appear that Proton tend to view relationships with suppliers over a
spectrum from an arm’s length approach through collaboration to Strategic
alliances. Although Proton do not have a model of supply chain management, it
would appear that certain customs and practices have evolved.
Other supporting mechanisms such as the Quality, Cost, Delivery (QCD)
targets and the “3M” and “2S” improvement programmes are used to
complement the use of the JIT system in Proton. The “3M” (Mura, Muri and
Muda) approach is an improvement programme which focuses on the
elimination of these “3Ms”. These are, according to Proton:
(1) Irregularities (Mura): often caused by uneven performance, lack of co-
ordination in operations and the repair of rejected parts. This might
contrast with the definition by Imai (1986) where Mura is regarded as a
“discrepancy”.
(2) Excessiveness (Muri): can be the result of over-provision in Proton’s
operations. Again Imai (1986) uses a different word, taking Muri as
“strain”.
(3) Wastefulness (Muda): results from unnecessary work and operational
waste which has occurred in the factory. Imai (1986) uses the word
“waste” for Muda but the meaning is essentially the same.
In addition to the “3M” improvement programme Proton uses the “2S” approach
to achieve its objectives. The “2S” requires tidying up (Seiri) and ensuring that
 28,2

130

Figure 1.
IJPDLM

Proton vendor
development system
IDENTIFICATION IDENTIFICATION SELECTION OF ONGOING LONG TERM
OF PARTS OF VENDORS VENDORS ASSISTANCE OBJECTIVES
(SECURED MARKET)

• AMP • 4M Assessment • PROTON POLICY • QC Audit • QCD

(Annual Master Plan) – Man – Single Sourcing
• Close Monitoring • MANAGEMENT
• LRPP – Machine – No Displacement of
(Long Range Product – Material Investment • Advance Information • TECHNICAL
Plan) – Harnessing/Optimizing To Vendors On LRPP
– Method
Available Facilities • Offshore Market
• Engineering Cost • Vendor Evaluation
Estimates – Bumiputra Vendors Penetration
– S.W.O.T Preferred
• Cost Estimates Review S – Strength • Special Programme
Based on Cost Table • APPOINTMENT OF – QCD (Quality, Cost
W – Weakness VENDORS and Delivery)
O – Opportunity – Feasibility Stage – Persatuan Pembekal
T – Threat – Price Evaluation Proton (PPP)
• Match Making – Development Stage – Match Making
Programme – Mass Production Stage Programme
– Government (Introduction Until
• P.D.C.A Implementation Stage)
Technical Assistance
P – Plan Scheme (GRANT) – Government
D – Do Technical Assistance
C – Check Scheme) (GRANT)
A – Action

COMPANY WIDE ACCEPTANCE, COMMITMENT AND READINESS TO

TAKE CHARGE IN ANY EVENTUALITIES
 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 Total

Component
In-house 176 47 14 108 174 5 4 (269)* 135 – 394
Local 52 50 59 19 190 110 159 131 + 2 1,439 532 3,010
69
Sourced – – – – 12 (2) 0 8 9 13 40
Total 228 97 73 127 376 113 163 139 1,583 545 3,444

Number of
vendors 17 16 7 6 21 11 21 7 19 9 134

Match-making
companies
Source Joint Technical Purchase
country venture assistance agreement
Japan 15 35 4
Germany 3 – _
Taiwan 5 1 _
Korea 5 – _
Australia 2 1 _
Others 3 3 _
Total 33 40 4

Note:
* Stamped parts transferred to local vendor

Source: Proton Corporate Profile (1995)

companies
match-making
transitory JIT at

achievement and
Proton localisation
131
Case study:

Table II.
Proton cars
IJPDLM things are put in place (Seiton). This “2S” approach is only a part of the “5S”
28,2 kaizen movement, of which the other three are: Seiso (clean up), Seiketsu
(personal cleanliness) and Shitsuke (discipline) (Imai, 1986). Undoubtedly, these
concepts are Japanese imports. To implement these programmes, ten teams
comprising five people each from various departments and supplier
representatives were formed at Proton, specifically working to eliminate waste
132 and achieve the QCD targets.
About 124 companies were involved in components and parts
manufacturing for Proton in 1993 and from these, 19 were recipients of financial
and technical assistance grants under the VDP. Vendors in this programme
produce more than 900 different parts for Proton. Their total contribution to
Proton’s value-added is about 52 percent. Together with in-house production of
parts, Proton was able to achieve a local content of over 70 percent.
When Proton first started operations, finding suitable vendors was a difficult
task and it was even more difficult to encourage Bumiputera to become vendors
despite the Malaysian national employment policy. Automotive parts require
greater precision and sophistication than simply making items for general
public consumption and they also have to meet international standards. In
addition to the lack of technical expertise, vendors have found that finance is
hard to obtain despite having letters of appointment from Proton. Financial
institutions, at the time, did not foresee the potential in supporting the vendors
in an industry which was then very new and undeveloped. Nevertheless,
Proton’s VDP adapted to the situation by recommending vendors to financial
institutions for financial support. Match-makings of vendors with foreign
companies and expertise were viewed as strategic alliances. Proton’s
continuous emphasis on acquiring technology has also seen a number of
foreign technology suppliers investing in Malaysia through joint ventures
either with Proton or its vendors. A total of 87 such collaborations with
overseas companies have been developed with Proton’s vendors.
Proton considers technology transfer to be urgent because, in the automobile
business, it is competing globally. In order to achieve global competitiveness, it
must be able to control its development and therefore, its costs. Proton’s
approach is to collaborate with other technology owners as well as component
manufacturers to acquire technology. Proton’s vendor development programme
has assisted vendors by providing technical expertise through joint ventures,
match-making and seconding staff during critical production periods.
Cost reduction initiatives such as target cost achievement (TCA) and value
analysis/value engineering (VA/VE) programmes were introduced as
supporting mechanisms. To complement these programmes, vendors are asked
to monitor their manpower (i.e. staff), method, material and machines (another
type of “4Ms” and again a kaizen approach (Imai, 1986)) to keep costs down.
Except for some high investment, high-technology engine and transmission
components, most parts are produced locally.
Initially, the objectives of the local component sourcing activities were to
develop the local automotive component industry and to encourage
participation of local entrepreneurs. Now the emphasis is moving towards cost Case study:
reduction activities and this includes: transitory JIT at
• Identification of world component manufacturers and technology Proton cars
suppliers for parts sourcing and supply.
• Multi-sourcing to enhance competitiveness.
• Development of vendors to be world competitive. 133
• Developing Malaysia into a production base for automotive components
for the region which will spread costs and make Proton itself more
globally competitive.

Discussions with shopfloor workers

The shopfloor workers talked about the level of inventory that is held at the
factory, despite implementing JIT supply. The high inventory levels were due to
factors such as traffic congestion, transport problems, machine breakdowns
and the like. Traffic congestion is becoming a well known difficulty for JIT
supply even in Japan (Dunn, 1992) where criticism of the JIT approach has
included criticism from an environmental point of view.
The shopfloor workers were comfortable with the kanban system adopted in
Proton. The production problems they faced were late deliveries from suppliers
and receiving parts of low quality (not inspected thoroughly at the suppliers).
Hence, there was still incoming inspection done at Proton. The delivery of parts
arriving at Proton use the synchronised supply method and in a mixed model
fashion. Autonomation (the equivalent of a line-stop where any shopfloor
operative can stop the line if a quality problem is found) was not seen as
possible in Proton due to quality levels being insufficient. Autonomation is
usually implemented only when an organisation feels confident of the
preventative maintenance and quality control procedures (Im and Lee, 1989).
The shopfloor workers also talked about the training and workshops they
attend. Proton places special emphasis on the development of the workforce.

Internal JIT at Proton

The results of the triangulation technique adopted have been analysed in
various ways (see Tables I, III and IV). In order to evaluate the amount of JIT
activity in Proton, the checklist of Hayes (1981) assisted observation of the
Proton factory and resulted in Table I. The work of Im and Lee (1989) was used
to analyse the interviews and resulted in Table III. The work of Sykes (1988)
was used to analyse the interviews and observations and resulted in Table IV.
Im and Lee (1989) surveyed 33 organisations using the JIT approach in order to
assess the relative popularity of the 13 major JIT practices commonly used. We
have compared Proton’s JIT practices with those given by Im and Lee (1989) and
illustrated the ease of implementation and tangibility of benefits gained by
Proton.
IJPDLM No. of Tangibility Ease of
28,2 JIT practice organisations* % Proton of benefits implementation

Small lot Highly visible Very easy

 
sizing 26 78.8 Yes
Kanban 23 69.7 Yes
134

 
Flexible
workforce 23 69.7 Some

 
JIT purchasing 22 66.7 Yes
Dedicated lines 21 63.6 No

 
Plant
compression 20 60.6 No

 
Quality circle 20 60.6 Yes
Preventative

 
maintenance 20 60.6 Yes
Mixed model

↓ ↓
production 19 57.6 Yes
Level
production 18 54.5 Yes
U-shaped
layout 17 51.5 Yes
Cellular
manufacturing 17 51.5 No
Table III. Autonomation 8 24.2 No Hidden Very hard
Relative popularity Note:
of the 13 major * 33 organisations in total
JIT practices Source: Adapted from Im and Lee (1989)

Proton uses several practices that correspond well with the results of Im and
Lee (1989). At Proton, rather than the normal kanban system, a more
generalised signal system is employed where short daily meetings of shopfloor
workers and their supervisors are held to make sure that lot movements are
synchronised. As a result, there will be no making and pushing lots forward
unless the next stage is ready to process them.
Out of the 13 major practices, a few do not exist in Proton. There has been no
compression of the Proton plant since it was set up in 1985 as this was not
deemed possible. On the other hand, there have been active expansion plans
where new plants were set up to cope with increased car demand. The plant
studied in this case has a product-orientated, U-shaped layout. The U-shaped
line minimises the operators’ walking time and distance and also prevents other
disruptions such as unnecessary handling of materials. There was no evidence
of cellular manufacturing being practised in Proton partly because of the not-
so-flexible workforce. However, Proton is providing constant training and
workshops, so increased workforce flexibility might be attained in the future.
A fully-integrated JIT system operates on the basis that only those items
required are produced which in turn means that there should be no, or a very
low level of, inventory. Even though the relevant parts are transferred to the
Aspect of Traditional
Case study:
purchasing practice JIT Proton transitory JIT at
Proton cars
Lot size Economic order As required, perhaps Varies
quantity (EOQ) no more than one
day’s supply
Frequency of delivery To suit EOQ Very frequent Ranging from 135
three times a
day to twice a
week to once a
month
Contract with supplier(s) Short term Long term One-year
contract
Sources Multi-source Single source Single and dual
source
Locations of supplier(s) Immaterial Nearby Mostly nearby
(except
overseas
suppliers)
Evaluation of suppliers Price, quality, Quality, delivery Quality, cost,
delivery price delivery
Negotiation Lowest price, Fair price, Fair price,
quantity long-term conformance
discount performance
Transport Bulk Small scale, Both bulk and
reliable small scale
Incoming inspection and Strict Eliminated Continuously Table IV.
counting reducing A comparison of
traditional purchasing
Source: Adapted from Sykes (1988) practice and JIT

assembly line only when needed, Proton still maintains an average stock of one
or half a day near the assembly line. Having to cope with high demand for cars,
Proton refuses to take too high a risk of the production line being stopped due
to insufficient or delayed arrival of parts. This happened to Proton in 1995 when
the earthquake in Kobe, Japan, resulted in Proton’s production line stopping for
two days. Hence, the use of buffer stocks and safety stocks. Proton also tries to
cope with internal uncertainties as much as possible through measures like
preventative maintenance. This is helped by daily briefings where a close
working relationship among operators, maintenance crews and supervisors has
developed.
Fluctuations in product variety and volume resulting from increased world
competition and diverse customer needs can be difficult to cope with. Hence,
mixed model production is practised by Proton, where different models of cars
are produced on the same line in a mixed fashion. According to Suzaki (1987),
while the mixed production will make the total production operation smoother,
a sudden production volume change will have a negative effect if not managed
well. In order to cope with the mixed model production Proton has levelled total
IJPDLM production volume. Levelled production keeps volume constant for a certain
28,2 period of time and this results in less confusion on the shopfloor. It is then easier
to expose and deal with problems should they occur.
In general, at the level of detailed application of techniques, there are more
similarities to Toyota than there are differences with Proton’s internal
operations and JIT practices.
136
JIT supply – external JIT practices at Proton
The work of Sykes (1988) was used to analyse and compare the purchasing
practices at Proton with accepted JIT practices (Table IV). Proton only awards
suppliers a one-year contract which is not considered long-term. The length of
contract differs for Proton’s suppliers according to the amount of capital Proton
has invested in each supplier. This criterion is also used in determining whether
to use single or dual source suppliers.
Traditional purchasing practice and JIT purchasing practice can be
summarised in Table IV (after Sykes, 1988). Proton’s purchasing practices are
compared and contrasted. They show clear resemblance with JIT practices,
although they are not exactly similar. A cause for concern here is Proton’s
single- and dual-sourcing. A single-sourcing policy is usually stressed in a JIT
system as it creates confidence in suppliers and helps to retain high-quality
levels. The reasons for having both single- and dual-sourcing policies in Proton
is due to the lack of trust and communication between Proton and its suppliers.
Parts are dual-sourced in order to encourage competition among the suppliers
especially when keeping costs down (a western adversarial approach rather
than a Japanese collaborative one). In addition, Proton is encouraging the
formation and growth of the Malaysian components industry (really a national
as much as a company objective).
The situation is very different for Japanese car assemblers. They rely on
closer, longer term relationships with a small number of first-tier suppliers, who
will then take the responsibility for the second-tier suppliers (Carr and
Truesdale, 1992). In Japan’s case this is achieved through the keiretsu network
(Ferguson, 1990; Miyashita and Russell, 1994; Whittington, 1993). Although,
even in Japan, this approach is becoming less common and only about 10
percent of Toyota’s suppliers are within the keiretsu network.
In contrast, Proton imports metal panels and plates which are pressed to
make car doors, bumpers and so on. The order for these panels is made seven
months before and a safety stock of one month is used. The pressed metal plates
are in various sizes and a stock of half a day’s production is sent to the assembly
line. Similarly, locally made parts can be divided into two types: big parts and
small parts. One day’s stock is needed for the big parts and up to two or three
days needed for the small parts. These parts will only be sent to the assembly
line for half a day’s production.
The situation is different for car seats. Proton uses synchronised supply in
assembling car seats. This means car seats are arranged in the supplier’s lorry
according to the need of the assembly line. Therefore, Proton has to inform the
suppliers every 2 hours about requirements. Proton uses a materials Case study:
requirements planning (MRP) system which is fully computerised. Materials transitory JIT at
needed for Proton are determined, based on the number of cars the line Proton cars
produces each day. This type of hybrid MRP/JIT system is becoming well
known (Sillince and Sykes, 1993).
The distance between the manufacturer and its suppliers is an important
element in JIT supply. A short distance between manufacturer and supplier will 137
help the suppliers to fulfil the frequent delivery demands and to achieve the JIT
objectives. Some of Proton’s suppliers that are located quite far away had to set
up their own “distribution centre” near the car factory, so that frequent
deliveries could be made without too many problems (see also Dunn, 1992). The
various categories of items Proton has to deal with explains both the bulk and
small scale transport arriving at Proton’s factory. The forms of transport used
by the suppliers are lorries, vans or even cars, with not more than one or two
workers handling each delivery. These suppliers are not dedicated to Proton;
they have other clients to serve and most of these clients are in the assembling
business.

The suppliers’ views on JIT at Proton

The suppliers or vendors were aware of the JIT system being implemented in
Proton. Although there is constant contact with Proton either deliberately
(through VDP) or as a routine (through the deliveries), there is not much
discussion about their supply chain management systems. An interesting study
that discussed the suppliers’ views on JIT implementation in Proton was
conducted by Abd.Hamid et al. (1988). Fifteen of the organisations supplying
parts to Proton were interviewed and asked to list the characteristic and
supporting factors they thought were important to JIT implementation.
According to these suppliers, the most important characteristics (not in any
particular order) were as follows:
• Close relationship between the manufacturers and their suppliers.
• More frequent and precise order of parts and components.
• Manufacturers should have more trust in the suppliers.
• Machine set up and break down time should be short (at the supplier).
• Better machine layout (at the supplier).
• Frequent deliveries.
• Raw materials and work in process are of high quality.
• Good control of raw materials and work in process.
These suppliers saw JIT not so much as an approach to gaining competitive
advantage, but as a means of cutting costs. The most important aspects were
(Abd.Hamid et al., 1988) low raw materials and work in process inventory, less
inventory space, greater financial benefits as a result of a decrease in inventory
investments and lower level of inventory will induce further cuts in labour costs.
IJPDLM Answering the question whether there were good prospects for the
28,2 implementation of JIT in Malaysia, 58 percent of the suppliers had a positive
outlook. Others still have their doubts. Among the reasons they put forward as
to why they think JIT would not fully work in Malaysia were:
• Not enough trust between buyers and suppliers.
138 • Orders from manufacturers are not constant.
• Workers are not committed enough.
• Lack of understanding about JIT.
This case is similar to the findings of Lamming (1994) where the main findings
of the review of the relationship between UK vehicle manufacturers and
suppliers were:
• Lack of trust preventing the development of lean supply practices.
• Communications which were not sufficiently developed to support
electronic data interchange (EDI).
• Development of supplier associations aimed at improving logistics
through collaboration.
• Proliferation of supplier assessment methods leading to confusion and
frustration for component suppliers.
• Raw material suppliers were unwilling to adopt lean supply practices.
From the research of Abd. Hamid et al. (1988) the suppliers were found to have
a substantial amount of knowledge regarding JIT and how it affects them. This
is a positive sign in a JIT environment. In addition to the training organised by
Proton, the Proton Vendors’ Association (PPP) also handles extensive training
of Proton workers as well as the suppliers’ workforces. PPP is organised to
facilitate and enhance smoother and closer communication between Proton and
its vendors. The objectives of PPP perhaps reveal a wider appreciation of the
overall approach to strategic JIT than that of many individual vendors, who
were more oriented towards transitory JIT. The objectives of PPP are:
• To foster closer relationship amongst the members and Proton.
• To organise seminars and workshops to upgrade members on aspects
like quality improvement, productivity improvement, product
development and management.
• To organise educational tours, local and overseas, to enhance members’
capabilities further.
• To promote organised export programmes and channels of request for
technical assistance arrangements with overseas manufacturers.
• To promote good relationships within the auto component industry and
the government agencies.
 • To organise any functional activities which are considered beneficial to Case study:
the members and Proton. transitory JIT at
Proton cars
Proton’s social policy in a Malaysian context
Proton has responded to Malaysia’s call for corporate participation in the
development of a caring society by contributing RM 10 million (£2.6m) to the
Low Cost Housing Fund in May 1994 and launching a scholarship programme 139
where the company sponsors the tertiary education of deserving students at
local or overseas universities. In 1994 the company was granted the “Most
Caring Employer Award” by the Malaysian Human Resource Ministry (Proton,
1994). This ministry has also recognised Proton’s social responsibility to its
employees by commending the remuneration package that is intended to retain
trained personnel.
The issue of Bumiputera employment and rights has been raised. From the
outset of the venture on 7 May 1983 the government had three objectives based
on the policy of promoting unbalanced growth of the economy by identifying
specific sectors of industry for special help and promotion. These objectives
were (Ismail and Berma, 1994):
• Developing a local automotive industry.
• Increasing the level and depth of local engineering and technological
expertise.
• Increasing Bumiputera participation in industry.
The government has allocated RM 13 million (£3.35m) as a subsidy to Proton
with the specific purpose of increasing Bumiputera participation. In 1991
Proton awarded RM 7.5 million (£1.93m) to 16 Bumiputera vendors who were
producing 87 different components (Ismail and Berma, 1994). So far 18
Bumiputera vendors have received a total of RM 11.3 million (£2.91m) and these
produce 135 components for Proton. Similarly, selected Bumiputera vendors
have been given opportunities to participate in supporting industries. Grants
are only awarded to firms which have at least 70 percent Bumiputera equity and
Proton will not award any contract for supplies to a firm with less than 50
percent Bumiputera equity (Ismail and Berma, 1994). This approach is certainly
racial and some would call it racist. Nevertheless, it is claimed that Malaysia is
an outstanding example of a harmonious, multi-religious, multi-racial society
(Proton, 1995).

Conclusions
So far, Proton has been a successful venture in that it has met the objectives set
for it when it was conceived. It is clear that the National Car Project has been a
success. However, Proton needs a period of development at least as demanding
in the next few years if it is to continue to succeed in the global market it intends
to enter with the construction of its new factory. From the JIT frameworks noted
here it is clear that JIT (more particularly transitory JIT) is practised at Proton
IJPDLM and that certain technical improvements will be possible internally (and on
28,2 lights and the like). However, these are easy things to achieve. More difficult will
be the integration of suppliers into an overall chain to achieve strategic JIT and
gain competitive advantage. Nevertheless, the use of transitory JIT as a means
of national strategy is impressive. Perhaps the point is that Proton has the
flexibility to use transitory JIT to achieve the desired national policy – be that
140 increasing the number of component manufacturers and suppliers, increasing
Bumiputera participation, reducing costs, carrying out technology transfer,
competing globally and so on. It is clear from this case study that these multiple
objectives have been met and it is debatable whether they would have been
achieved using strategic JIT.
There are several important factors that support JIT in Proton such as the
company-wide obsession with quality and the work culture already has a
Japanese “feel” with the kaizen approach (e.g. “2S” and “3M” and “4M”
programmes). However, there are some hindering factors to full JIT such as lack
of trust and communication with some suppliers, that JIT is perceived as a
tactical manufacturing method and also there are some common external
problems (e.g. traffic congestion, machine breakdowns at suppliers and poor
quality parts supplied on occasions). The dependence on imported parts creates
problems because of the delivery time and the risks involved. These problems
are also reasons for Proton to continue having a certain level of inventory,
taking into consideration an order’s lead time, including safety stocks. However,
even Nissan in the UK experiences these types of problem with overseas
suppliers and has developed the vicarious supply system to deal with it
(Matsunami, 1992).
As for locally made parts, the amount of inventory held depends on the size
of the parts and the “synchronised supply” method used. Another important
factor is the multi- and dual-sourcing concept practised in Proton. This type of
sourcing seems to be the only solution arrived at by Proton to abolish
complacency among the suppliers, while maintaining high levels of Bumiputera
involvement. This involvement has still not eradicated the lack of trust and
communication between buyer and suppliers. This is the main reason why full
strategic JIT in the supply chain cannot be achieved.
The Proton plant is one of the better laid-out materials handling-oriented,
serial production plants in operation (Sims, 1991). Proton is clearly enjoying the
benefits of the various JIT practices it uses. With the constraints imposed by the
social policies of ethnic quotas in component suppliers, staff development and
the multiple objectives of both increasing the proportion of indigenous
suppliers whilst attempting to adopt JIT practices, full strategic JIT in the
Japanese sense seems to be beyond Proton’s reach in the foreseeable future.
Although transitory JIT is ultimately unsatisfactory from the point of view of
world-class manufacturing, it has served Proton well so far and has been
instrumental in furthering Malaysian social policy and industrial development
strategy (Simpson et al., 1997).
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