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Lean Manufacturing May Be One Path To Improving Working Conditions In Developing Countries

FLI Transform ManufacturingIntroducing modern ‘lean’ processes to mass manufacturers in developing countries can have the effect of improving working conditions, according to a study by academics from Oxford, Stanford, and Brown universities.

In a recent Harvard Business Review article, Can Lean Manufacturing Put an End to Sweatshops?, Greg Distelhorst, Associate Professor of International Business at Saïd Business School, University of Oxford, describes the impact of a programme by Nike Inc. to introduce lean manufacturing to its clothing suppliers in the developing world.

‘We found that factories that adopted lean manufacturing improved compliance with labour standards.  On average, serious violations of labour standards fell by fifteen percentage points, from 40% of factories to 25%. These labour compliance ratings primarily reflect factory wages, benefits, and rest days,’ he said.

Nike started introducing lean manufacturing to its suppliers in the developing world in the mid-2000s. Traditional mass-market manufacturing involves simple, highly routinised operations, which workers are incentivised to complete as quickly as possible. With lean manufacturing – which Nike introduced in order to improve manufacturing operations – 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.

The research focused on the impact of lean production on the workplace. It used factory audits of wages, work hours, disciplinary practices, health and safety, and environmental measures to assess the impact of these new techniques on factory compliance with the standards of decent employment.

The study showed a reduction in violations of labour standards among the factories that adopted lean practices. The authors think this is because the lean production system requires more worker skill and effort. Employers therefore have incentives to retain these valuable workers through improved working conditions.

‘The usual means by which multinational companies attempt to improve social performance in their supply chain is to introduce compliance programmes.  These programmes are important, but research has repeatedly shown that they yield only limited improvements in social performance,’ said Distelhorst. ‘Capability improvement, such as the introduction of lean manufacturing, attempts to create value for both the buyer and supplier, so that both sides have an incentive to cultivate and sustain these new management practices. If global buyers, supplier management, and the production workforce simultaneously derive benefit from this approach to manufacturing, lean capability building may represent a form of self-enforcing institutional change that supports improved working conditions in emerging markets.’

FLI Greg DistelhorstGreg Distelhorst
Greg Distelhorst is Associate Professor of International Business. His research examines how multinational enterprises can play a constructive role in labour and environmental conditions in emerging markets, with a particular focus on business and politics in mainland China.


Source: University of Oxford, Saïd Business School

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