2016 - 05 - Can Lean Manufacturing Put An End To Sweatshops

Digital
Article
Economic Development
Can Lean
Manufacturing Put
an End to
Sweatshops?
by Greg Distelhorst
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HBR / Digital Article / Can Lean Manufacturing Put an End to Sweatshops?
Can Lean Manufacturing Put

an End to Sweatshops?
by Greg Distelhorst
Published on HBR.org / May 26, 2016 / Reprint H02WXS
While no one advocates for labor abuses, poor working conditions are
often seen as an inevitable consequence of global trade. Producers in less-
developed countries compete by keeping costs low. Conventional wisdom
holds that improving working conditions (which typically costs money)
would undermine the competitive advantage these firms enjoy.
Our research suggests an alternative to this race to the bottom. It involves

replacing traditional mass manufacturing with “lean manufacturing”
principles. Over the last thirty years, the lean approach — developed by
Japanese automakers — has permeated the manufacturing sector in
Copyright © 2016 Harvard Business School Publishing Corporation. All rights reserved. 1
developed countries, but is much less commonly used in the developing

world.
Here’s a simplified description of the difference between the two

approaches. Traditional mass manufacturing is based on principles of
“Scientific Management” that date back to the 19th century.
Workers specialize in simple, highly routinized operations. They are
incentivized to complete operations as quickly as possible. Managers hold
virtually all decision-making authority.
In the lean-manufacturing context, in contrast, assembly line workers

learn to execute a variety of production tasks, take responsibility for
product quality, and are encouraged to find ways to improve the
production process. In addition to improved product quality and delivery
times, the lean approach has been linked to improved terms of
employment. Workers tend to earn more and report higher engagement
with their jobs.
Could lean manufacturing have a similar positive impact on jobs in the

developing world? The conventional wisdom has ranged from skepticism
that lean could be successfully applied in places like Vietnam and India, to
the hypothesis that lean actually exposes workers to greater risk of
exploitation and injury than mass manufacturing. However, until recently
there was little evidence on this question in the countries that dominate
global markets in low-cost manufacturing.
To examine this possibility, I conducted research on recent developments

in Nike Inc’s apparel supply chain with Jens Hainmueller of Stanford
University and Richard M. Locke of Brown University. In the mid-2000s,
Nike embarked on a program to introduce lean manufacturing to its
apparel suppliers in the developing world. It secured support from
suppliers, offered extensive training to factory management, and inspected
production lines for adoption of the new management practices. The
initiative sought to improve manufacturing operations — to deliver high-
quality products in relatively small batches and on shorter production

deadlines.
Our research focused not on the success of this initiative, per se, but on the
impact of lean production on the workplace. Using factory audits of
wages, work hours, disciplinary practices, health and safety, and
environmental compliance, we looked at whether the transition from
traditional mass manufacturing to lean manufacturing had any impact on
factory compliance with the standards of decent employment.
Examining lean’s impact across eleven developing countries, we found that

factories that adopted lean manufacturing improved compliance with labor
standards. On average, serious violations of labor standards fell by fifteen
percentage points, from 40% of factories to 25%. These labor compliance
ratings primarily reflect factory wages, benefits, and rest days — important
issues that shape workers’ take-home pay and work-life balance.
We think that the key to these performance improvements is the new role
that workers play in lean manufacturing. While the production system
requires more worker skill and effort, employers have incentives to retain
these valuable workers through improved working conditions.
Crucially, neither economic underdevelopment, anemic regulation, nor

government corruption prevent manufacturers from reorganizing
manufacturing in these ways. However, a lack of managerial know-how
and the risks of changing established ways of doing business may still pose
formidable barriers.
These findings suggest that a shift in managerial approach may have a

constructive role to play in alleviating sweatshop labor conditions.
Nike and other multinationals are not the only ones promoting this view.
The International Labor Organization promotes upgraded human resource
management practices through its Better Work program, a partnership
with the International Finance Corporation that now reaches factories in

eight developing countries. Specialized consultancies like Impactt also
provide management training that emphasizes the economic returns of
reorganizing the workplace in ways that also support better working
conditions for laborers.
Nike is in many ways a special case; more work must be done before we
can understand how and when modern manufacturing techniques drive
improved working conditions. For example, we found improved
compliance in India, Malaysia, Thailand, and Vietnam, but no effects in
China, the world’s largest exporter of apparel.
However, our research suggests that outsourcing production is not

inexorably tied to poor workplace conditions. When facing tension
between competitive and ethical sourcing, multinationals should consider
a “high road” approach to the supply chain: investing in new managerial
practices and worker skills.
Greg Distelhorst is an associate professor of international business at

GD Said Business School, University of Oxford. In July 2016, he will join
the faculty of the MIT Sloan School of Management.

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Digital

Can Lean Manufacturing Put

Our research suggests an alternative to this race to the bottom. It involves

developed countries, but is much less commonly used in the developing

Here’s a simplified description of the difference between the two

In the lean-manufacturing context, in contrast, assembly line workers

Could lean manufacturing have a similar positive impact on jobs in the

To examine this possibility, I conducted research on recent developments

quality products in relatively small batches and on shorter production

Examining lean’s impact across eleven developing countries, we found that

Crucially, neither economic underdevelopment, anemic regulation, nor

These findings suggest that a shift in managerial approach may have a

with the International Finance Corporation that now reaches factories in

However, our research suggests that outsourcing production is not

Greg Distelhorst is an associate professor of international business at

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