A brief take on what the Eastern Just-In-Time methodology and the Western Mass-Production methodology have to do with the fundamental pillars of marketing in these regions:
The Japanese use something called the Just-In-Time (JIT) methodology, where an item is created at the time the order is placed. This keeps inventory overheads low and each item is the product of the latest production technique available for that item.
In the US, the Mass-Production (MP) methodology is in vogue, where a large quantity of items are created in a batch, and inventory movement is paramount to keep costs low.
The MP process requires a strong marketing and sales force that can market and sell these pre-produced large inventories. A significant portion of capital is pumped into getting the product out to as many people as possible, instead of just improving the product’s value. The marketing and sales strategies are geared towards creating the perception of exclusivity and desire-to-own. Case in point: GM and its line of large gas-guzzling defect-ridden cars.
The JIT process requires extremely high per-product production efficiency. Capital is poured into creating a high-quality product rather that a high-quantity one, and on reducing inefficiencies at a fine-grained level. Due to the tight integration between perceived demand and production, inventory levels are kept low. Since capital is more focused on product quality rather than sales, the sales arm is under pressure to sell the product to potential lifelong customers who will consistently satisfy their needs from the same brand, rather than to an fickle population pushed here and there based on what they perceive their wants to be. Marketing strategies are geared towards creating the perception of value, consistent with the production ethics and the consumer mind-frame. Case in point: Toyota and its line of compact high-efficiency high-quality cars.
Looking further into implications - stay tuned ;)
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5 comments:
Interesting post, Abhishek.
It goes ahead to explain, why the Japanese economy is export based and the US economy is consumption based.
Whereas I agree that Japanese goods are better in terms of engineering and overall quality, I don't see a correlation with production.
Production is largely dependent on price and demand/supply. As can be seen, both the Japanese and American cars cater to different customer markets. People looking for value prefer the Japanese cars v/s people looking for lower price & style prefer the american fleet of cars.
I think MP is good
when market for a certain product is evolving ... JIT is better when
market has evolved and people have become more mature about their
tastes and can differentiate between good and bad and of course have
the buying power as JIT products will always be more expensive than MP
ones.
I don't think I see the correlation between the different marketing strategies and the production methodologies. I think JIT is pretty much always superior to MP, since JIT reduces cost, allows for quicker reaction to market demand and produces higher quality. The only advantage for MP is the dubious ability for companies to withstand unexpected logistic issue such as longshoremen strike with its excess parts.
vinit bhai:
Your point regarding export-based vs consumption-based in right-on!
The correlation with production is that in JIT, the room for error is much less because if one item is defective, there is no excess inventory to fall back on (unlike with MP). So production techniques have to be fundamentally different. Its not just about the production, but production and distribution infrastructure that is put in place.
vcd:
I see your point about the evolving vs mature market comparison. However, the reverse case can also be made: use JIT when the market is evolving and you don't know the demand/supply situation, and use MP when the demand/supply has stabilized.
JIT products need not be more expensive just because they are of better quality - its about which part of the overall production and distribution process the resources have been invested in. In MP, the focus is on producing large quantities cheaply, with scale covering for lack of guarantee of individual quality. That may not work anymore, as these impacted "individuals" can voice their dissatisfaction much better in today's internet age than ever before. So, even if production is cheaper, the overall ROI may not be, from a sales and branding perspective.
howard:
Ideally, marketing would be the same in both cases, but increased inventory levels and the potential of wasted production capacity in MP is a huge driver for sales reps to do whatever it takes to sell more. In JIT, those manufactured pressures don't exist, so marketing can evolve at a healthier pace. I'm afraid this is an intuitive statement for now.
MP seems to be better for markets where needs are well-understood and don't evolve much (eg: milk production) than for specialized goods (eg: high-end cars). Whether low-end cars should be MP or JIT - I'm not yet sure.
I'll caveat all this by saying that I haven't read much on this topic :). However, this is an interesting article comparing the two. I don't agree with one or two points, but the rest make logical sense.
GM in trouble for too much inventory: http://money.cnn.com/2009/04/23/autos/gm_unwind/?postversion=2009042315
Would this ever happen in a JIT model?
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