6. Kaizen Dissemination Through the Government and Private Sector in Southeast Asia: A Comparative Study of Malaysia, Indonesia, and Myanmar

Malaysia has 31.6 million people (estimated in 2017)⁵ with a GDP of US$ 296 billion (current US$ in 2015). Its GDP per capita is close to US$ 10,000 (current US$ 9768 in 2015). Its industry sector contributes to its economy and accounts for 39.6 percent (estimated in 2017) of gross value added (GVA). The electric and electronics, automobile, and other manufacturing industries emerged during the rapid industrialization process that began in the 1970s. Malaysia also has a strong government initiative toward industrialization, in particular during Prime Minister Mahathir’s first term since the 1980s to early 2000s. Malaysia conducts a unique national car program such as Proton and Perodua, which aggregately have been overwhelming foreign car manufacturers including Japanese, although national car shares have been declining recently (JICA and IDCJ 2017).

Under the leadership of the Malaysian government, the Malaysia Productivity Corporation (MPC) has played a significant leading role in productivity/quality improvement since the setup of its predecessor the National Productivity Centre (NPC) in 1962 as a joint project between the United Nations (UN) and the International Labour Organization (ILO). The NPC became a statutory body in 1966, was transformed into the National Productivity Corporation (NPC) in 1991, and was finally renamed the Malaysia Productivity Corporation (MPC) in 2008. MPC itself has been evolving overtime. Its main focus has shifted from human resource development to productivity awareness, research and development, and competitiveness and innovation. MPC has approximately 200 staff members and it provides training programs, corporate consultation services, research and development, information, publications, system development, and other services (MPC 2018 and NPC 2006).

Kaizen and associated Japanese methodologies were introduced into Malaysia through the Malaysia Productivity Corporation (MPC), particularly through the Look East Policy, a Malaysian government initiative to learn from the nation-building experiences of Japan (and Korea) in 1983. Thousands of Malaysian people from the government, NPC, private sector, and academia were dispatched to Japan as trainees and students to learn from Japan including Kaizen. Once Kaizen was introduced into NPC/MPC, the Kaizen tools were customized to suit the Malaysian way of doing things and MPC’s comprehensive approach. Typical examples are “5S” and the “Quality Control Circle (QCC),” which were customized as “Quality Environment (QE)” and the “Innovation and Competitiveness Circle (ICC)” (MPC 2013).

JICA and IDCJ (2018) suggest that the government-created NPC (now Malaysia Productivity Corporation (MPC)) was given a pioneering role in productivity and quality improvement and produced human resources for industries, together with the following training programs under the Look East Policy. The Association for Overseas Technical Cooperation and Sustainable Partnerships (AOTS) and the Asian Productivity Organization (APO) also provided training programs for industries. These formed the basis for Malaysian industry and multinational companies (MNCs), including Japanese automobile and electronic industries, to introduce their productivity improvement approaches including Kaizen. MNCs also contributed to the dissemination of Kaizen in Malaysia through their supply chain. Maarof and Mahmud (2015) suggested continuous improvement by Kaizen is necessary for Malaysian SMEs for improving their performance.

In Malaysia, Kaizen has been understood in various ways but has generally been integrated as a part of a comprehensive productivity improvement system, together with Total Quality Management (TQM), Lean Management, and Six Sigma, rather than the prevailing Kaizen umbrella concept. That being said, its core concept is well recognized as “continuous improvement” and it is considered as an effective tool to motivate gemba (the factory floor), according to the series of interviews.

This subsection discusses the value of Malaysia Productivity Corporation (MPC) as a contributor to Kaizen dissemination in the Malaysian manufacturing sector. The series of semi-structured interviews⁶ carried out in Malaysia reveals that MPC interviewees strongly agreed—at a 4.82 average on a scale⁷ of 0–5—that the MPC has contributed to productivity and quality improvement in the Malaysian manufacturing sector. Likewise, the MPC interviewees strongly agreed—at a 4.55 average on the same scale—that the MPC has been contributing to dissemination of Kaizen. Meanwhile they agreed at a slightly lower level of 3.27 point on the same scale that productivity/quality improvement approaches have been well disseminated in the Malaysian manufacturing sector because dissemination at SME level has not been fully achieved. Interviewed companies noted at a level of 4.75 that productivity/quality improvement approaches such as Kaizen are useful for their operations. These data are shown in Fig. 6.1.

This result represents a limited number of views and is biased because it is Malaysia Productivity Corporation (MPC’s) self-evaluation and interviews on Kaizen by Japanese interviewers. However, it is significant that it shows relatively strong recognition by ex-MPC high-level officers and interviewed companies of the MPC’s contribution to productivity and quality improvement in the manufacturing sector in Malaysia, as well as that of Kaizen. At the same time, the usefulness of productivity/quality improvement approaches such as Kaizen is also well recognized.

From a series of interviews, Malaysia Productivity Corporation (MPC’s) strengths can be summarized as follows: (a) strong mandate to lead productivity improvement in Malaysia, (b) appropriate and timely adaptation/shift of MPC’s function along with necessities, (c) customization of foreign practices such as Kaizen to the Malaysian culture, and (d) a wide variety of services to deliver such services efficiently.

In summary, Malaysia Productivity Corporation (MPC) has played a significant role in Kaizen dissemination in Malaysia’s manufacturing sector reflecting strong government initiative in productivity improvement and it has triggered the private sector’s own contributions to Kaizen dissemination in Malaysia.

Indonesia has the largest population in Southeast Asia and the fourth largest in the world, at 264.0 million (estimated in 2017)⁸ with a GDP of US$861 billion (current US$ in 2015). Hence its domestic market potential is huge. Indonesia’s GDP per capita is US$3347 (current US$ in 2015), which is just above the commonly considered threshold (US$3000 per capita) to begin rapid motorization. Its industry sector counts at 41.3 percent (estimated in 2017) of GVA. Indonesia is the second largest automobile producer and has the largest market in Southeast Asia at around 1.2 million per year. After the 1970s, almost all major Japanese automobile assemblers settled their factories under joint venture with local capital and they count much more than 90 percent of automobile domestic production share⁹ in Indonesia. They have established firm supply chain networks involving several hundreds of local suppliers from tier-1 (those that produce parts and components and supply them directly to the assemblers) and tier-2 (those that produce parts and components and supply them to tier-1 companies), and further subcontracting local smaller parts and component manufacturers.

In Indonesia, the private sector played a significant role in introducing Kaizen, in particular, the factory operations of Japanese manufacturers and their supply chain transactions with local suppliers. They act as the vehicles for disseminating Kaizen in Indonesia. For example, an automobile manufacturing company identifies several local suppliers every year and provides an intensive program for them to acquire practical quality and productivity improvement methodologies including Kaizen. Compared to Malaysia’s, Indonesia’s private sector played a more significant role in disseminating Kaizen in its manufacturing sector.

Figure 6.2 shows that the JICA-LPEM survey¹⁰ reveals that 77.5 percent of the surveyed companies (n = 262) conduct Kaizen¹¹ and 84.4 percent of them do 5S.¹² The surveyed companies obtain information/services/support from around 40 percent of their customer companies,¹³ while they also receive information/services/support from 25 to 30 percent of their suppliers.¹⁴ With an average of 207.7 employees, the surveyed companies are relatively large-scale companies,¹⁵ capable¹⁶ enough to systematically learn and implement Kaizen.

While many surveyed companies rely on Kaizen-related information/services/support from their customer companies and suppliers, fewer surveyed companies also obtain such information/services/support from other companies (domestic/foreign/SOE¹⁷) within their supply chain (customers/suppliers), government, or NGO/CSO¹⁸ as shown in Fig. 6.2(b). This implies¹⁹ that some surveyed companies obtain Kaizen-related information/services/support from multiple sources, including non-supply chain companies, governments, and others, but less frequently than from their supply chain companies (customers/suppliers).

The JICA-LPEM Survey provides some clues on the effectiveness of Kaizen at least among the surveyed companies (n = 262) in major cities²⁰ in Indonesia, disseminated mainly through their supply chain relationship. The Kaizen Engagement Index (KEI), created in this chapter and calculated using Eq. (6.1) below, is designed to show whether Kaizen and 5S are implemented in a surveyed company and whether information/services/support for Kaizen/5S are provided by its customer companies. KEI’s score is calculated on a 0–10 scale.where ck is a yes/no variable showing whether a surveyed company conducts Kaizen for its production process improvement and cf is a yes/no variable showing whether the surveyed company conducts 5S. The variable kc_i is the variable that shows whether the top-five customers provide information/services/support for Kaizen to the surveyed company, and fc_i shows whether the top-five customers provide information/services/supports for 5S. As the maximum value of the KEI should be 25, it is divided by 2.5 to be on a 0–10 scale.

In other words, the Kaizen Engagement Index (KEI) values how a company is engaged in Kaizen/5S activities from the following two (2) aspects, which is also presented in Fig. 6.2(a):

Figure 6.3 shows a mild correlation between the Kaizen Engagement Index (KEI) and labor productivity for the surveyed companies (n = 179, where labor productivity value is available) in Indonesia (t value = 3.912, p < 0.05, Pearson’s correlation coefficient: r = 0.28211). This implies the possibility that companies engaged in Kaizen/5S by themselves and/or support from their customers through their supply chain may achieve higher labor productivity, or in other words, Kaizen/5S by themselves and their customers’ support may contribute to improved productivity.

The Indonesian field survey also reveals a mild correlation between Kaizen implementation and process innovation implementation (t value = 3.564, p < 0.05, Pearson’s correlation coefficient: r = 0.21585, n = 262). This implies that engagement in Kaizen in the supply chain may enhance process innovation.²¹

Apart from the survey results in the previous Subsects. 4.1 and 4.2, there are some more missing Kaizen players.²² Among them are various private sector organizations that have contributed to this process in Indonesia. There are two (2) major types. One works as a facilitator, including private associations dealing with QC Circle conventions on a large scale, such as the Indonesian Quality Management Association (IQMA) and the Indonesian Quality and Productivity Management Association (IQPMA). Both IQMA and IQPMA actively and separately organize annual QC Circle conventions involving several hundreds to thousands of participants mainly from private manufacturing companies, including domestic and foreign companies. The associations provide these companies with opportunities to improve their productivity and quality through Kaizen, 5S, and other quality control or productivity improvement approaches. At the same time, their annual conventions contribute to strengthening networks and disseminating Kaizen in Indonesian manufacturing industries. IQMA and IQPMA are also gateways to the international quality and productivity community; IQMA is a member of the International Convention on Quality Control Circles (ICQCC) and participates in annual conventions²³ held in 13 member countries with some private companies. IQMA also hosted two ICQCC annual conventions in the past. IQPMA is a member of Asia Pacific Quality Organization (APQO).

Practical training institutes are another type of private sector organization. An automobile industry conglomerate’s foundation that provides several training programs for SMEs, including Kaizen, is a typical case. This foundation utilizes Indonesian engineers in the group of automobile companies as trainers, and frequently delivers various training programs including Kaizen/5S among group companies as well as for SMEs outside the group as a part of the industry conglomerate’s corporate social responsibility (CSR) activities.

In summary, the private sector has actively disseminated Kaizen mainly through two channels: (a) Japanese manufacturers and their local supply chains involving local suppliers through their supply chain management systems (Subsects. 4.1 and 4.2 in this chapter) and (b) private sector organizations to organize productivity/quality-related programs including conventions and training (Subsect. 4.3 in this chapter).

Meanwhile, the Directorate General of Training and Productivity Development under the Ministry of Manpower and Transmigration acts as Indonesia’s National Productivity Organization against APO. Indonesia became a member of the APO in 1968 and the Ministry’s approach for productivity improvement started at that time. The Ministry classifies past experiences with productivity improvement since then into three phases: (a) the awareness phase, (b) the improvement phase, and (c) the maintenance phase. It has accumulated experience and provides a kind of standard approach for productivity improvement in Indonesia.

As discussed throughout Sect. 4, the private sector supply chain flow (customer companies and supplier relationships) in Indonesia effectively disseminates Kaizen through the provision of information/services/support, rather than other sources (Subsect. 4.1). Analysis of the Kaizen Engagement Index (KEI) implies that a company’s engagement in Kaizen either on its own or with information/services/support from its customers through its supply improves labor productivity (Subsect. 4.2). The organization of productivity/quality-related programs, including conventions and training, is another means by which the private sector disseminates Kaizen in Indonesia (Subsect. 4.3). On the whole, the private sector seems to have a more central role to disseminate Kaizen in Indonesia.

Myanmar is considered the last promising investment destination in Southeast Asia, thanks to its rapid open-up reform since 2011 under the transition period toward democratization. Its untapped domestic market of 53.4 million people (estimated in 2017)²⁴ attracts investors to this emerging market. Its GDP is US$ 62.6 billion (current US$ in 2015) and its GDP per capita is rapidly growing from US$ 239 in 2005 to US$ 1162 in 2015 (current US$). The industry sector’s share in Myanmar’s economy amounts to only 14.6 percent (estimated in 2017) of GVA. Its economy including the manufacturing sector is growing rapidly, but the sector is concentrated in the labor-intensive garment sector and it is still in its infancy, without a firm industrial structure with established supply chain, such as the manufacturing of automobiles and their parts and components. Some companies have introduced Kaizen by chance on their own with limited external support. There may be room to learn from the Malaysian and Indonesian experiences.

The Myanmar Productivity Center (MPC) was created in 2016 as a small unit within the Union of Myanmar Federation of Chambers of Commerce and Industry (UMFCCI) with the support of the Japan Productivity Center (JPC). In the two years of activities since then, three MPC Kaizen consultants were certified and another three were nominated as candidate MPC Kaizen consultants. MPC identified nine Myanmar manufacturing companies as model companies in the last two years and JPC provided each of them with three consultations at their factories. The establishment of the MPC was endorsed in the Industrial Policy issued in 2016 by the Ministry of Industry of Myanmar.

As another Japanese collaboration with the UMFCCI, the Myanmar-Japan Center for Human Resource Development (MJC) is supported by the Japan International Cooperation Agency (JICA) as its technical cooperation project with the Ministry of Commerce of Myanmar. Approximately 400 training courses and seminars have been provided for close to 15,000 participants in total, mainly from Myanmar SMEs, in the five years since its establishment in 2013. Around 20 percent of these were in relation to Japanese-style management and continuous improvement (Kaizen), according to the MJC. JICA also assisted the Ministry of Industry to conduct 5S seminars in Myanmar in 2018 through a technical cooperation project.

The Association for Overseas Technical Cooperation and Sustainable Partnerships (AOTS) of Japan also provides training for industrial human resource development. Since 1959, some of around 2000 trainees have been dispatched from Myanmar to Japan for training programs, while around 6000 trainees have been trained in Myanmar in the same period. A major part of these training programs in Japan and Myanmar are management training programs that focus on Kaizen and 5S. Other training courses have many flavors of the basics of Japanese-style management approaches.

One of the leading electric and electronic manufacturing companies in Myanmar (Company A, located in Yangon, with approximately 300 employees) provides good practice in Myanmar. Its long journey on productivity improvement started in 1997 when the current owner participated in a Malaysian Training Cooperation Program organized by the Malaysia Productivity Corporation (MPC) in Malaysia. Immediately after he came back from this training, he introduced a series of Kaizen approaches, starting with 5S in his factory. He produced a 5S pocket handbook in the Myanmar language and set up 5S Day. Second, he introduced QC Circle in his factory. He also participated in a training course organized by AOTS and held in Yokohama in 2003. He continuously followed what he learnt from the training and through his own process. He then introduced Total Productive Maintenance (TPM) and finally reached ISO 9001, and Company A was certified in 2004 within only eight months. He has not just introduced Kaizen as he learned, but always considered the importance of “adopt, adapt, and adjust” according to the actual situation. For example, he skipped Total Quality Management (TQM) as he thought it was too early to introduce it into his factory.

His effort has been gradually disseminated outside his factory as an interesting approach. Company A was awarded by the Yangon City Mayor for his effort and invited to introduce the 5S concept to the Yangon township administration. He then became a Joint Secretary General of the UMFCCI, in charge of the establishment of the Myanmar Productivity Center (MPC). He is now one of the most influential business people. Still he continuously learns Kaizen and implements “continuous improvement” day by day, which is the most essential meaning of “Kaizen.” In 2016, his company was accepted as a model company of the MPC training course and received consultations from Japanese experts dispatched by JPC.

Thus far Kaizen dissemination in Myanmar is still limited, but voluntary sporadic initiatives have been popping up, especially in the private sector. It is expected that such initiatives will be streamlined along with rapid economic growth and industrial development.

First, there are various stakeholders, organizations, and institutions disseminating Kaizen in Southeast Asia, both in the government (such as ministries in charge and public productivity organizations like Malaysia Productivity Corporation (MPC) in Malaysia) and in the private sector (local suppliers and assemblers). There are also some active private or semi-private organizations such as quality control organizations and training institutes that provide services on a fee basis. Some of them are relatively common across the countries, while there are some country-specific private entities engaged in Kaizen dissemination, for example, Indonesia’s IQMA and IPQMA. Contributions from various Japanese and Japan-based organizations to each stakeholder can be seen in the three countries, developing managerial and technical capability, training programs, expert dispatch programs, model consultation programs, policy/planning support, and financial assistance. They mainly support Kaizen dissemination through their counterpart organizations in the recipient countries. In general, standard stakeholders for Kaizen dissemination in Southeast Asia (at least in the three countries studied in this chapter) can be summarized as indicated in Fig. 6.4. The figure illustrates the supply chain network (in the shaded and rounded rectangular shape) that mobilizes Kaizen dissemination toward local manufacturers as local suppliers, while there are various public and private organizations that provide Kaizen services directly to local manufacturers and thereby contribute to Kaizen dissemination in the local industries.

Second, however, as set out in the hypothesis at the beginning of this chapter, the Malaysian government (or more precisely Malaysia Productivity Corporation (MPC) as the public organization in Fig. 6.4) took the initiative disseminating Kaizen in Malaysia. On the other hand, Kaizen dissemination in Indonesia has been led by the private sector, particularly through supply chain mechanism and contributions by private organizations, as shown in a series of interviews and some results from the field survey.

What is the cause for this difference between the two countries? Are there any factors determining whether the process is led by the government or the private sector?

The first factor is how firmly established the supply chain within the country led by Japanese assemblers is. As mentioned in Sect. 4, Indonesia is the second largest automobile producer in Southeast Asia and after the 1970s, almost all major Japanese automobile assemblers settled their factories under joint venture with local capitals contributing more than 99 percent of its domestic production share. It is this deep, long-lasting supply chain structure in Indonesia that nurtures Kaizen dissemination through the private sector supply chain path. Meanwhile, although Japanese car manufacturers also contributed a lot to Kaizen dissemination in Malaysia, their presence there is not as strong as that in Indonesia partially due to the national car program. Myanmar’s car manufacturing industry is still too premature to build up automobile production supply chain.

The second factor is the government’s strength and willingness to disseminate productivity improvement such as Kaizen. Malaysia has already established an exclusive and professional governmental body Malaysia Productivity Corporation (MPC) to disseminate productivity improvement more than half century ago and has been acting as a leading organization.

Third, there are stages or phases of Kaizen dissemination. As we can see from the cases of each country presented in this chapter and others, Kaizen cannot be disseminated overnight. At the beginning, an introduction is necessary for those unfamiliar with Kaizen. Then it will be diffused through certain channels with practical activities. During this introduction and diffusion, some may notice the need to customize the approach to Kaizen according to their ecosystem. These movements finally produce the need for standardization within a country, as illustrated in Fig. 6.5(a): the “Kaizen Dissemination Path Model.”

The five stages in the Kaizen Dissemination Path Model above can be described as follows:

Fourth, each government/public organization, private organization, and private company have their roles and all of them may contribute to the dissemination of Kaizen. Although these roles may differ somewhat by country, Fig. 6.5(b) summarizes each party’s possible major roles along with the dissemination stage designated in Fig. 6.5(a). It shows that each party (government/public organization, private organization, and private company) can contribute to each stage. However, their targets and directions often differ as indicated in brackets in each cell in Fig. 6.5(b). In this sense, close collaborations to complement each other in terms of mandates, capacity, financial resource, geographical coverage, access/reach, and so on may work. The bottom of Fig. 6.5(b) illustrates the relative strength of each party in each country.

Fifth, government and public organizations can work proactively to disseminate Kaizen. Malaysia shows strong government/Malaysia Productivity Corporation (MPC) leadership and has already discussed proactive roles for Kaizen dissemination. Indonesia’s case shows strong contributions from the private companies’ supply chain management and various private organizations, but the government also raises awareness, standardizes the Kaizen methodology/philosophy, and acts as the country window for APO. In Myanmar government dissemination of Kaizen seems so far to be weak, but there may be room to support the private organization’s initiative and private sector’s sporadic movements.