ZENTAKU KOGYO COMPANY: LESS IS MORE
CASE STUDY SOLUTION
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pl
SYNOPSIS
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Sa
Contrary to the typical practice of cutting operating expenses by compromising on employees’ benefits, the
chairman of Zentaku Kogyo Company Ltd. (Zentaku), David Wu Chongrang, aimed to improve the
standard of living of his staff by steadily raising their salaries and benefits. In fact, the key performance
indicator David had set for himself was to raise his employees’ salaries regularly to a preset target
n
benchmark. Contrary to conventional approaches, over the past sixteen years (2006–2022) David had
reduced Zentaku’s revenue by 28 per cent and the number of employees by two-thirds, while raising the
tio
annual gross profit per employee to 239 per cent. Zentaku had achieved more with less by transforming
itself through the rigorous implementation of lean production, inspired by the famed Toyota Production
System (TPS), but Zentaku’s future leadership now faced challenges in sustaining the success Zentaku had
lu
achieved. Were the management methods adopted in the past applicable to the younger generation of
workers? How could the current management pass the enterprise to the younger generation while ensuring
So
employees remained fulfilled in the workplace?
OBJECTIVES
The Case Solution Starts From page 6
,• Understand how a small company like Zentaku can embark on a remarkable transformation.
• Appreciate how a purpose-driven organization can create a fulfilling workplace.
• Explain why the rigorous practice of lean production is essential to achieving more with less.
• See how lean production may contribute to ESG (environmental, social, and governance) practices and
sustainability.
• Identify the challenges of sustaining consistently high levels of performance during leadership
succession.
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Sa
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ASSIGNMENT QUESTIONS
1. Why was “less is more” true for Zentaku?
2. What was the core competency that enabled Zentaku to achieve more with less?
3. In what ways might Zentaku’s core competency be compromised? How can such a compromise be
prevented?
4. Was David Wu’s drive towards a lights-out factory consistent with lean principles? Why or why not?
5. How can Zentaku strike a balance between developing new business and deepening lean competence?
6. What challenges might Zentaku face in leadership succession? How can Zentaku overcome these?
The Case Solution Starts From page 6
, e
ANALYSIS
pl
1. Why was “less is more” true for Zentaku?
m
Contrary to typical companies, as in the early years of Zentaku’s own history, David did not subscribe to
the idea of the more revenue the better. To understand why “less is more” is true for Zentaku, it is helpful
Sa
to examine the following aspects, i.e., product, process, people, revenue, and profit.
Product
n
Throughout his career, David had witnessed the transformation from the inefficiencies of working with
tio
hundreds of customers on tens of thousands of product items in the early years, to the efficiencies of just
working with 45 customers on 300 product items today. Experience showed that more revenue did not
necessarily improve employees’ standard of living. Revenue was often attained at the expense of work–life
lu
balance. Over time, the morale of employees was negatively affected, leading to employee turnover.
Employee turnover resulted in an unstable workforce and instability in product quality. Then, customer
complaints and product returns followed. As a result, the profit margins were eroded, and the employees’
So
morale was further weakened. It was a vicious cycle. Zentaku adopted the less-is-more strategy by
streamlining its product offerings. Zentaku resisted the temptation to grow big by declining to produce less
profitable products. By focusing on more profitable products, Zentaku was able to garner higher gross profit
margins, from 25.6 per cent in 2006 to 30.2 per cent in 2022, as shown in case Exhibit 4.
Process
The feat of improved profit margins, however, did not come naturally by streamlining the product offerings.
Identi
The Case Solution Starts From page 6
,5. How can Zentaku strike a balance between developing new business and deepening lean
competence?
For Zentaku, the emphasis on deepening lean competence or developing new business is a strategic decision
that leadership must make. As market conditions change, this decision may need to be reviewed from time
to time. Zentaku has benefited from a sufficient supply of incoming orders for the past couple of decades.
e
David was able to spearhead the lean transformation starting in early 2000. It took about 10 years, until
2011, to produce evident fruits of lean transformation (as shown in case Exhibit 4), for example the revenue
pl
per employee reaching NT$2.14 million in 2011. In those 10 years, David’s efforts had been focused on
deepening Zentaku’s lean competence. He repeatedly emphasized that Zentaku must master the
m
fundamental kaizen capabilities to continuously eliminate waste along the value chain and improve its
competitiveness in SQIP. Recent setbacks due to quality issues prompted David to re-emphasize the priority
Sa
in rebuilding lean competence. To David, lean transformation can never be taken lightly. None of the lean
principles should be considered trivial. It is a never-ending drive. It is essential to be disciplined and to
persevere regardless of how the market changes.
But how could Zentaku overlook the potential loss of customers and their orders as hinted by the recent
n
tio
lu
So
The Case Solution Starts From page 6
, EXHIBIT -1: DEVELOPMENT PROGRESSION OF THE DEDICATED LINE FOR LINE 9683
Year 2014 2015 2017 2020
Stage 1 2 3 4 5 6
Improvement 1W2M + NR 1W3M + NR 1W3M + NR + 1W4M + 1W4M + 1W4M (Autonomation
Measures AFM 2AFM 2AFM Line) + 2AFM
Number of Molds 20 20 20 25 28 28
Hours/Shift 8.4 8.4 8.4 8.4 11 11
Cycles/Shift
e
pl
m
Sa
n
tio
lu
So
The Case Solution Starts From page 6
CASE STUDY SOLUTION
e
pl
SYNOPSIS
m
Sa
Contrary to the typical practice of cutting operating expenses by compromising on employees’ benefits, the
chairman of Zentaku Kogyo Company Ltd. (Zentaku), David Wu Chongrang, aimed to improve the
standard of living of his staff by steadily raising their salaries and benefits. In fact, the key performance
indicator David had set for himself was to raise his employees’ salaries regularly to a preset target
n
benchmark. Contrary to conventional approaches, over the past sixteen years (2006–2022) David had
reduced Zentaku’s revenue by 28 per cent and the number of employees by two-thirds, while raising the
tio
annual gross profit per employee to 239 per cent. Zentaku had achieved more with less by transforming
itself through the rigorous implementation of lean production, inspired by the famed Toyota Production
System (TPS), but Zentaku’s future leadership now faced challenges in sustaining the success Zentaku had
lu
achieved. Were the management methods adopted in the past applicable to the younger generation of
workers? How could the current management pass the enterprise to the younger generation while ensuring
So
employees remained fulfilled in the workplace?
OBJECTIVES
The Case Solution Starts From page 6
,• Understand how a small company like Zentaku can embark on a remarkable transformation.
• Appreciate how a purpose-driven organization can create a fulfilling workplace.
• Explain why the rigorous practice of lean production is essential to achieving more with less.
• See how lean production may contribute to ESG (environmental, social, and governance) practices and
sustainability.
• Identify the challenges of sustaining consistently high levels of performance during leadership
succession.
e
pl
m
Sa
n
tio
lu
So
ASSIGNMENT QUESTIONS
1. Why was “less is more” true for Zentaku?
2. What was the core competency that enabled Zentaku to achieve more with less?
3. In what ways might Zentaku’s core competency be compromised? How can such a compromise be
prevented?
4. Was David Wu’s drive towards a lights-out factory consistent with lean principles? Why or why not?
5. How can Zentaku strike a balance between developing new business and deepening lean competence?
6. What challenges might Zentaku face in leadership succession? How can Zentaku overcome these?
The Case Solution Starts From page 6
, e
ANALYSIS
pl
1. Why was “less is more” true for Zentaku?
m
Contrary to typical companies, as in the early years of Zentaku’s own history, David did not subscribe to
the idea of the more revenue the better. To understand why “less is more” is true for Zentaku, it is helpful
Sa
to examine the following aspects, i.e., product, process, people, revenue, and profit.
Product
n
Throughout his career, David had witnessed the transformation from the inefficiencies of working with
tio
hundreds of customers on tens of thousands of product items in the early years, to the efficiencies of just
working with 45 customers on 300 product items today. Experience showed that more revenue did not
necessarily improve employees’ standard of living. Revenue was often attained at the expense of work–life
lu
balance. Over time, the morale of employees was negatively affected, leading to employee turnover.
Employee turnover resulted in an unstable workforce and instability in product quality. Then, customer
complaints and product returns followed. As a result, the profit margins were eroded, and the employees’
So
morale was further weakened. It was a vicious cycle. Zentaku adopted the less-is-more strategy by
streamlining its product offerings. Zentaku resisted the temptation to grow big by declining to produce less
profitable products. By focusing on more profitable products, Zentaku was able to garner higher gross profit
margins, from 25.6 per cent in 2006 to 30.2 per cent in 2022, as shown in case Exhibit 4.
Process
The feat of improved profit margins, however, did not come naturally by streamlining the product offerings.
Identi
The Case Solution Starts From page 6
,5. How can Zentaku strike a balance between developing new business and deepening lean
competence?
For Zentaku, the emphasis on deepening lean competence or developing new business is a strategic decision
that leadership must make. As market conditions change, this decision may need to be reviewed from time
to time. Zentaku has benefited from a sufficient supply of incoming orders for the past couple of decades.
e
David was able to spearhead the lean transformation starting in early 2000. It took about 10 years, until
2011, to produce evident fruits of lean transformation (as shown in case Exhibit 4), for example the revenue
pl
per employee reaching NT$2.14 million in 2011. In those 10 years, David’s efforts had been focused on
deepening Zentaku’s lean competence. He repeatedly emphasized that Zentaku must master the
m
fundamental kaizen capabilities to continuously eliminate waste along the value chain and improve its
competitiveness in SQIP. Recent setbacks due to quality issues prompted David to re-emphasize the priority
Sa
in rebuilding lean competence. To David, lean transformation can never be taken lightly. None of the lean
principles should be considered trivial. It is a never-ending drive. It is essential to be disciplined and to
persevere regardless of how the market changes.
But how could Zentaku overlook the potential loss of customers and their orders as hinted by the recent
n
tio
lu
So
The Case Solution Starts From page 6
, EXHIBIT -1: DEVELOPMENT PROGRESSION OF THE DEDICATED LINE FOR LINE 9683
Year 2014 2015 2017 2020
Stage 1 2 3 4 5 6
Improvement 1W2M + NR 1W3M + NR 1W3M + NR + 1W4M + 1W4M + 1W4M (Autonomation
Measures AFM 2AFM 2AFM Line) + 2AFM
Number of Molds 20 20 20 25 28 28
Hours/Shift 8.4 8.4 8.4 8.4 11 11
Cycles/Shift
e
pl
m
Sa
n
tio
lu
So
The Case Solution Starts From page 6
