Comparative analysis of work force management techniques between Lean and traditional manufacturing companies: A quantitative decision tool for choosing between layoffs and continual improvement

The Toyota Production System (TPS) has long touted the workforce management technique of continual improvement in the face of economic downturns. This is counter to a more general approach of short-term and long-term layoffs in manufacturing, associated with more traditionally managed companies. This paper builds a quantitative decision tool for choosing between layoffs and continual process-based improvement associated with a TPS or Lean manufacturing strategy. The model is then used with typical automotive manufacturing data to determine key productivity variables and their effect on net present value of the management decisions associated with either strategy. The main economic drivers of the model focus on the productivity of the employees and the duration of the shutdown, or revenue gap, associated with the company. The model quickly demonstrates crossover points that identify clear management horizons for planed and unplanned shutdowns, and at which point the two strategies cross value, thus defining the timeframe in which they are the winning strategy.