In the second part of his article on how the Japanese approach to product development has evolved since 2006, Chartered Engineer and Fellow of Engineers Ireland Kevin Delaney discusses a changing economy, increasing job uncertainty and reducing supply risk.

Part 1 can can be viewed here.

4.) Changing economy

The Japanese economy has performed poorly for most of the past 30 years despite repeated attempts by the government to kick-start the economy through various stimulus measures.

One of the recent measures, part of a programme referred to as Abenomics, has, among other initiatives, increased the level of consumption tax, essentially VAT, from 5% to 8% in April 2014, and raised it further to 10% in October 2019 for most goods and services.

In the lead-up to the initial increase Japanese consumers purchased many consumer products and the Japanese economy expanded rapidly.

This fuelled sudden expansion in the Japanese economy during Q1 2014 and Japan’s economy grew 1.6% in the January-March period from the previous quarter.

It is noted that this increase happened while salaries remained essentially static; even though the Japanese prime minister has called on companies to increase the salaries of their employees, they appear to have been very reluctant to do so.

Exchange rates have also had a significant influence on Japan's economy; a strong yen has encouraged even more companies to establish manufacturing facilities abroad where they can make sales in foreign currencies (being relatively immune to currency fluctuations) before repatriating profits to Japan.

This has particularly favoured bigger Japanese companies who established manufacturing facilities abroad early in the globalisation process and the retained profits of these companies have continued to increase.

This year the Japanese economy, similar to many others globally, shrunk at its fastest rate on record due to COVID-19. The pandemic caused a severe decrease in domestic consumption and exports also fell sharply, resulting in the worst performance for the economy since 1955.

5.) Increased job uncertainty

In 2008 the concept of lifetime employment with the same company was still quite common, although decreasing slightly due to the influx of foreign companies into Japan.

Since then the move away from lifetime employment is accelerating with employees having less and less certainty regarding their jobs. Changes made to the Japanese labour laws in an effort to help the general economy have accelerated this change and resulted in a huge increase in part-time workers employed under lower conditions than previous generations.

Effectively the government made it easier to hire workers on a temporary basis in the hope that the companies involved would hire the employees and that the positions would become permanent once the employees had proved themselves.

Figure 2: Showing the importance of manufacturing knowledge to train engineers and providing hindsight as they start to design products

Instead the part-time positions have become mainstream and a lot of companies now hire temporary workers instead of recruiting full-time, permanent employees. This has resulted in less stability for employees and in them having less money to spend.

As can be expected some companies are excellent employers and some other companies quite the opposite; these companies have given rise to the term 'black companies' who routinely force their employees to work unpaid overtime, won't allow the employees take their full holiday entitlements, etc.

Another noticeable trend is that several Japanese engineering companies have been hiring increasing numbers of women, which is a trend across a number of sectors in Japan.

One particular company that I spoke to reported that women were specifically targeted by the company, particularly to work on production lines, since they were happy to work more flexible hours to meet tight deadlines. It is disappointing to report that average wages for women in the company were lower than those for men performing the same job.

Due to its demographic situation, with a rapidly ageing population and declining birth rate, Japan needs foreign workers, particularly in healthcare, agriculture and general factory workers.

In response to the pandemic Japan stopped foreign workers, even those with long-term residence permits, from entering or re-entering Japan. These long-term residents were treated differently to how Japanese citizens were treated and Japan received a lot of criticism because of this differential treatment of foreign citizens.

6.) Reducing supply risk

For decades Japanese manufacturing companies have been admired for their minimal inventory and 'just in time' supply chain such as that derived from the 'Toyota production system'.

In March 2011 a large earthquake off the northeastern coast of Japan resulted in a tsunami which destroyed factories and killed and displaced many people.

The devastation of the region resulted in the scarcity of supplies of certain components while the factories were rebuilt and/or the tooling duplicated and moved to other production sites.

This supply chain disruption caused production line stoppages at several car assembly plants globally. This resulted in a re-evaluation of the risk associated with single sourcing by both Japanese and international customers and these customers have now responded by having standardised designs with multiple suppliers to minimise supply risk. Implementation of these policies is demanding increased sharing of IP to the customer and, potentially, to competitors.

Additional concerns have been raised relating to supply chains involving other countries. Issues such as the trade dispute between the US and China has resulted in a lot of uncertainty and the imposition of billions of dollars of tariffs on one another’s goods since 2018.

US President Donald Trump has accused China of intellectual property theft and unfair trading practices while, in China, America is perceived as trying to curb economic development there.

More recently the pandemic resulted in concerns being expressed in many countries regarding the security of supply of certain critical products, such as healthcare goods and personal protective equipment.

Reducing these concerns to make their regional supply chains more resilient to unexpected disruptions such as tsunamis and pandemics will result in changes to manufacturing strategies.

It is likely to result in companies modifying their manufacturing footprint to reduce the risks to their supply chains. The Japanese government, as part of a series of financial measures introduced to counteract the negative financial effects of COVID-19, has made significant funding available to support companies that want to move their manufacturing back to Japan from China, or to move it to other countries in southeast Asia and south Asia.

During summer 2020 about $2.05 billion was allocated for companies shifting production back to Japan and $219.52 million for those planning to move to other countries.

Aligned with this Australia, India and Japan proposed the Resilient Supply Chain Initiative on September 1, 2020. Focused on building resilient supply chains in the Indo-Pacific after COVID-19 this initiative has the potential to reshape cross-border production networks.


In the midst of the COVID-19 pandemic, globally, society has become more accepting of, and comfortable dealing with, technology for all aspects of daily life.

This, together with issues relating to ensuring continuity of supply, will have a significant impact on innovation, technology management and product development and manufacturing into the future.

Engineers’ manufacturing knowledge remains critical to successful and sustainable product development.

When engineers design new products, they study what they did in the past, what lessons were learnt from manufacturing previous products, what best practices from refining and problem solving manufacturing processes can be incorporated into new designs?

Then they start the design process and when the new product is complete they can, in turn, review their experience and retain this knowledge for the future.

If all manufacturing is outsourced the hindsight of manufacturing knowledge will decrease over time even if initially unnoticeable when developing new products.

The knowledge engineers possess will sustain them until the engineers with real manufacturing knowledge are transferred or retire and replaced by new engineers without manufacturing experience. These engineers will be unable to rely on the benefit of hindsight and their designs may be more problematic to manufacture.

The problem is even worse because manufacturing engineers and technicians in the country to which manufacturing is outsourced will increase their technical skills as they debug and resolve teething manufacturing issues on the factory floor. Such knowledge is advantageous when designing future products.

Moving manufacturing from Ireland, and indeed Europe in general, requires urgent attention, not just to ensure we can get goods needed today but to safeguard skills and develop the experience to sustain the design, development and manufacturing of products for future generations.

A sustainable knowledge economy needs a strong manufacturing base to allow innovators to capture the value by generating profits and to refine and hone the skills and knowledge needed to train future generations of innovators.

Part 1 can be viewed here.

Author: Dr Kevin D Delaney lectures and researches in the areas of design, innovation, knowledge management and engineering education within Technological University Dublin, Ireland. He previously spent 10 years in advanced development and design roles in global companies in the automotive and connector industries. He is a Chartered Engineer and Fellow of Engineers Ireland.