Gemba Keiei Chapter 12: Agricultural People Like Inventory

Taiichi Ohno makes an interesting connection between the Japanese as historically an agricultural people and the fact that Japanese manufacturers seem to like inventory.
Farmers growing rice are at the mercy of the weather. There are droughts and there are typhoons so it痴 best to grow and harvest as much as possible and store it away for a bad season. Today the world is industrialized and modern science and technology has lessened the impact on crops. Ohno asks why industries still behave as if they were farmers affected by the weather.

Ohno admits that even as he scolds people for overproducing in good times because in bad times machines break down and people don’t show up for work, something of the “agricultural mind” remains in him and he also wants to have some extra just in case.
Hunters eat what they kill. When you are hungry, you kill one pheasant and eat it. Farmers might kill a pig, but they will not be able to finish the whole pig so they will have to figure out how to store it. So they develop storage techniques and inventory management skills, says Ohno.

Next Taiichi Ohno makes what I think is a very insightful comment. In essence he says “Inventory control is much more popular than production control.” Inventory control sells more books than production control. It’s easier, and perhaps more fun to be skilled at managing things that somehow got made, rather than managing the process of making things.

Let’s think about this. Inventory Management is big business. Today there are a lot of major firms in the logistics, warehousing and distribution business. When is the last time you hear of a global Fortune 1000 Production Control business? A lot of companies make material handling and storage equipment. Who makes production control equipment? Inventory control software is dime a dozen but we’re just starting to see usable production control software tools in the last few years.

This might be a topic to delve into deeper at some point in the future, but for now, back to Gemba Keiei.

Taiichi Ohno continues the comparison between farmers and manufacturers with regards to inventory. During Ohno’s childhood the expression “good harvest poor” or “bumper crop poor” meant the prices for crops were pushed down due to an oversupply resulting from a good harvest. Farmers made less money as a result.

Price controls on rice in Japan keeps prices relatively constant regardless of oversupply. It is not purely a market based commodity. Ohno points out that this results in rising prices for rice as the farmers use cost accounting and the “cost + profit = price” equation to set the selling price of rice. Costs don’t exist to be calculated, Ohno reminds us, and points out that this type of thinking seems to have spread beyond rice farmers all across industry in Japan.

---