firms, mass production in the American auto industry is volume driven. It is based on high-volume production on dedicated equipment of interchangeable parts that are assembled on an equipment-paced line by low-skilled workers with very narrowly defined tasks. Costs are minimized through economies of scale, so the need to maximize volume dictates a number of design, engineering, sourcing, and investment practices. For instance, to maximize the output of expensive stamping dies, stamping is typically performed in central locations and parts are shipped to distributed assembly plants, common parts are used in as many models as possible, purchasing decisions are based on the lowest bidder, and investments are driven by the desire to eliminate labor.

This traditional mass production system relies on dedicated equipment and equipment-paced assembly lines to keep production high, which is inherently inflexible. Imposing product differentiation on the system, as the market now demands, tends to increase the difficulty of maintaining control of the system. Some disruptions are equipment based: equipment breaks down, defects may be found only after large numbers of bad parts have been produced, and different machines produce parts at different rates, causing production bottlenecks. The system has evolved to accommodate such disruptions: high work-in-process inventories minimize bottlenecks that could stop production, long product life cycles minimize the need for die changes and other costly and time-consuming disruptions, and high scrap and rework are accepted as inevitable costs of maximizing equipment output and the pace of assembly. The costs of such solutions are overwhelmed by the economies of scale gained by maintaining output.

Traditional mass production is extraordinarily good at low-cost production of undifferentiated items. It is inherently weak, however, in many of the attributes consumers now demand, particularly consistently high quality and product differentiation. To meet these demands—attributes of their market for many years—several (not all) Japanese auto manufacturers have refined a different form of mass production, embodied in the term "lean production."³

Developed initially at Toyota and now spreading through the auto industry and others, lean production integrates the