The starting point for this dissertation is the assumption that implementing lean production in an operation leads to an increase in productivity, enhances quality, shortens lead times, and reduces costs. As a result of these single improvements a superior competitive position is achieved. Based on a literature review that compares several approaches to define lean production, a two staged concept is developed that comprises ten different practices of lean production. These practices are linked with ten performance indicators, which are grouped into three different perspectives: shareholder, cost, and process perspective.
The assumption that the lean production practices have an impact on the performance measures is tested with a questionnaire.
In total 76 respondents delivered the data to test the 100 links between lean production and performance. The results show that lean production implementation has a measurable impact on the performance parameters and a weaker impact on the cost perspective measures. The results are supported by previous findings that show equivocal results regarding the impact on measures, like "Return on Sales".
Table of content
Abstract
Table of content
List of figures
1. Introduction
2. Literature Review
2.1. Lean Production
2.1.1. The philosophic approach towards lean production
2.1.2. The segmented approach along the value chain
2.1.3. The conceptualized approach of single practices
2.2. Lean production and performance
2.2.1. Studies on lean practices and firm performance
2.2.2. Studies on lean production adoption and firm performance
2.3. Performance Measurement
2.4. Implications from literature review
3. Methodology
3.1. Conceptual framework
3.1.1. Conceptualization of lean production
3.1.2. Conceptualization of financial performance
3.1.3. Itemisation of conceptual framework
3.1. Research design
3.2. Data collection
3.2.1. Survey design
3.2.2. Selection of participants
4. Results
4.1. Knowledge about lean production
4.2. Knowledge about financial performance measures
4.3. Links between lean production and performance
5. Analysis of results
5.1. Correlation analysis of knowledge and impact
5.2. Analysis of differences
5.3. Variances in the sample
6. Conclusion and Recommendations
List of abbreviations
Bibliography
Appendix
I Literature Review
II Data
Abstract
The starting point for this dissertation is the assumption implementing lean production in an operation leads to an increase in productivity, enhances quality, shortens lead times, and reduces cost and as a result of these single improvements a superior competitive position is achieved. Based on a literature review that compares several approaches to define lean production, a two staged concept is developed that comprises 10 different practices of lean production. These 10 practices are linked with 10 performance indicators, which are grouped from three different perspectives: shareholder, cost, and process perspective. The assumption that the 10 lean production practices have an impact on the 10 performance measures is tested with a questionnaire. In total 76 respondents delivered the data to test the 100 links between lean production and performance. The results show that lean production implementation has a measurable impact on the performance parameters and a weaker impact on the cost perspective measures. The hypothesis that measures from the shareholder perspective are directly influenced through the implementation of lean production could not be proven. The results are supported by previous findings that show equivocal results regarding the impact on measures like Return on Sales. Further results are that the presented construct of lean production is not known to the full extent to the participants and especially internally related practices of lean production are well-known and widely implemented. The belief that lean production improves financial performance measures differs at different levels of the company.
List of figures
Figure 1: Elements of lean Production
Figure 2: Conceptual and empirical mapping of lean production
Figure 3: Conceptual Framework A
Figure 4: Conceptualization of Lean Production
Figure 5: Conceptualization of Firm Performance
Figure 6: Conceptual Framework B
Figure 7: Conceptual framework C
Figure 8: Segmentation of participants
Figure 9: Knowledge about lean production constructs
Figure 10: Knowledge about single lean production practices
Figure 11: Knowledge about performance measures from different perspectives
Figure 12: Knowledge about performance measures
Figure 13: Average impact per lean practice on performance measures
Figure 14: Average impact of lean production on performance measures
1. Introduction
Lean production1, financial and operational performance measurement have been key topics in the international management literature in the past decades. Lean Production’s origins go back to the year 1937 when the Toyoda (later Toyota) Motor Company was established in Koroma, Japan. The Toyoda cousins Kiichiro and Eiji together with Taiichi Ohno studied the Ford Production System (FPS) and started to perfect the tools and principles constituting the Toyota Production System (Shah & Ward 2007, p.787). In 1978 Ohno published Toyota Production System (TPS) in Japanese which was later translated into several languages (1988: English)2 and became a major success all over the world. However, in that bestseller the term lean production was never used.
This term was finally introduced by Womack, Jones and Ross (1990) with their translation of the Toyota Production System for the western world, naming it Lean Production. Already in the 1980s western companies had started examining about the new production methods and philosophies followed by Toyota, resulting in higher quality and efficiency than that achieved by traditional European or American companies. Consequently, several companies started to adopt Toyota’s principles in order to achieve superior performance and to gain a competitive advantage, meanwhile the academic world started the first attempts to capture, describe and conceptualize this new concept of lean production. Milestones in the description of lean production are The machine that changed the world (Womack et al. 1990) and Lean Thinking: Banish waste and create Wealth in your corporation (Womack & Jones 1996), books that became top seller in many countries. The machine that changed the world, which introduced the term lean production in 1990 has become one of the most widely cited references in operations management over the last decade (Holweg 2007). Nevertheless, these two books and further academic publications never created academic consensus as to what really determined Lean Production (Shah & Ward 2003).
Even though there is still no common understanding about the definition of lean production (Shah & Ward 2003, p.129; Shah & Ward 2007; Karlsson & Åhlström 1996) and sometimes lean production is even reduced to certain principles like just-in-time (JIT) and/or Kanban there is a common belief amongst academics and practitioners that the implementation of these tools and techniques leads to a better operational performance. The idea that the implementation leads to better financial results or even a competitive advantage is a widely held belief, but the evidence in support of this remains equivocal (Mackelprang & Nair 2010; Eroglu & Hofer 2011).
Nevertheless, every executive would expect exactly these benefits when he decides to invest in an initiative like the implementation of lean production. At least he would expect some returns on his investment. However, is this a real business practice? Do companies really track the return on their investment? Do they really track if they become more successful, achieve higher sales and profit or do they just believe that things get better through the implementation of lean production?
Though increased profitability is often assumed as an outcome of lean production, Johnson and Kaplan (1983) note a frequent disparity between improved operations and financial performance (Fullerton et al. 2003). This leads to the decade long discussion about performance measurement and financial accounting. Does increasing operational performance really lead to better financial results? Finally, the question remains as to how the outcome of lean production implementation actually is measured and be measured. Typical approaches include the use of Kaplan’s Balanced Scorecard or the use of non-financial performance measures on the one hand (Fullerton & Wempe 2009) and company-wide performance measures like Return on Assets (ROA) or Return on Sales (ROS) on the other (Maiga & Jacobs 2009; Eroglu & Hofer 2011).
This dissertation will investigate the connection between lean production and financial performance. To achieve this objective in the first step a literature research is conducted to describe and conceptualize the term lean production. In the next step the current status of research on the link between lean production and performance will be presented and evaluated. On the basis of this research a conceptual framework will be developed to describe the links between lean production and financial performance. This framework will be evaluated by using data gathered with a questionnaire administered to lean production practitioners. Finally the results will be presented and analysed. These results will be evaluated and conclusions for managerial problems derived and finally, an outlook on future research presented.
2. Literature Review
2.1. Lean Production
Reviewing the existing literature provides a starting point in defining lean production. This review will also show the confusion in the conceptualization of lean production. Shah and Ward (2007) observed that the early Japanese books (e.g. Monden (1983) and Ohno (1988)) were more precise than research articles in defining the Toyota Production System (TPS) and in identifying its underlying components because the articles focussed on defining and describing specific components of the system rather than the whole. The first definition, provided in literature was presented by Womack et al. (1990), who explained lean production simply as a journey leading to the use of fewer resources. However, Shah and Ward (2007) went on to state that ‘ the distinction between the system and the components was missed by most early observers, (…)’. Generally, according to them, lean production is described from two points of view, either from a philosophical perspective related to guiding principles and overarching goals or from a practical perspective of a set of management practices, tools, or techniques that can be observed directly (Shah & Ward 2003). This difference in orientation does not necessarily imply disagreement, but it definitely undermines conceptual clarity. Demeter and Matyuzs (2011) see four reasons that increase the confusion when defining the term lean production:
- the Toyota production system itself, the starting point for what we today call lean production, has undergone tremendous improvement during its lean journey over the last 40 years
- the fact that several companies consider themselves lean, even if they are at very different stages of development
- the fact that researchers use various definitions for the term, so that there is no common understanding
- the introduction of another book by Womack and Jones (1996) entitled ‘‘Lean thinking’’, which describes the principles of LP and opens new areas for leanness, thus leading to further lack of clarity.
Nonetheless, the research of available literature to create a more comprehensive picture of lean production has revealed three main approaches describing lean production: First, the philosophic approach based on principles and guidelines. Second, the approach that divides lean production into different steps along the supply/value chain. Finally, the third approach that conceptualizes lean production as a set of different lean practices.
2.1.1. The philosophic approach towards lean production
The starting point for what today is called lean production was the breakthrough change in production management that Toyota established more than 50 years ago. This system was called the Toyota Production System (TPS). According to Ohno (1988, p.4), ‘The basis of the Toyota Production System is the absolute elimination of waste.’ The lean approach to management is to find continually less wasteful ways to create value from the perspective of the end-use customer (Grasso 2005). According to (Womack et al. 1990) the guiding principles on this lean journey are:
- Define value, and identify the value stream for each product (or service)
- Eliminate all unnecessary steps in every value stream
- Make value flow, which requires rethinking the entire work organization
- Pull all activity by the customer, or, in other words, produce to customer demand
- Pursue perfection continuously
The lean approach is a never-ending journey towards perfection through continuous improvement. This actually means constantly seeking and implementing better and less wasteful ways of performing processes than the ways we knew previously. Most important is the differentiation between value-adding activities and non-value-adding activities. The latter can be eliminated or reduced by searching for ‘waste’ in all processes. Ohno (1994) identified seven types of waste:
1. Overproduction: Producing more than the amount currently needed by the next process or customer. This is the worst form of waste because it contributes to the other six
2. Waiting: Operators or machines waiting for a process to finish, for materials, for parts or repairs, for setup for the next product, or for information
3. Transportation: Unnecessary movement of parts or products
4. Processing: Beyond what is necessary to provide the specified or promised value to customers
5. Inventory: Having more than necessary for a precisely controlled pull system
6. Motion: Unnecessary or ‘straining’ motions for the operator or machine
7. Defects: Defective products or services
The different types of waste can be found all along the value stream. The Toyota Production System provides a set of tools and techniques like kanban to identify and eliminate waste. An underlying concept is the empowerment and participation of employees at all levels.
Demeter and Matyusz (2011) describe how this approach of the TPS can be transferred from production (lean production) to management (lean management) as well. At the strategic level, the concept helps one to understand customer value and identify the value stream. At the operational level, it is a bundle of practices and tools that lead to the elimination of waste and force continuous improvement.
2.1.2. The segmented approach along the value chain
The second approach to describe lean production tries to group the different tools and techniques described in the TPS along the value chain. One definition is developed and presented by Karlsson and Åhlström (1996). They state that ‘… the ultimate goal of implementing lean production in an operation is to increase productivity, enhance quality, shorten lead times, reduce cost, etc.’
They developed a model that operationalizes the determinants of a lean production system. Basically, they divide lean production into the sub-aspects:
- Lean Development
- Lean Procurement
- Lean Manufacturing
- Lean Distribution
These all together form the Lean Enterprise. All aspects are supported by the same fundamental principles, multi-functional teams, vertical information systems, no buffers, no indirect resources and networks.
Abbildung in dieser Leseprobe nicht enthalten
Figure 1: Elements of lean Production3
In addition to this concept along the value chain Warnecke and Huser (1995) state that the lean approach should not be limited to production only, but should be vextended throughout the entire company to create the desired ‘competitive state’. They see the following four segments:
- Product development
- Chain of supply
- Shop floor management
- After-sales services
The problem with these definitions is that they are not mutually exclusive and do not conclusively conceptualize the underlying tools, methods or principles. Finally, their approach seems more to be an attempt to break a big picture down into single aspects that can be more easily captured and distinguished from each other, probably to assign responsibilities.
2.1.3. The conceptualized approach of single practices
This third approach of conceptualizing lean production into a bundle of single practices finds the most supporters in the academic literature. Nevertheless, there is no common agreement as to which principles actually form lean production and where the separation from Just-in-Time production begins.
In their earlier work Shah and Ward (2003) create four main bundles of lean manufacturing practices, each combining a set of single lean practices. In total they combine 22 individual practices into Just-In-Time (JIT), Total Quality Management (TQM), Total Productive Maintenance (TPM), and finally Human Resources Management (HRM). JIT combines all practices related to production flow and the primary goal of continuously reducing and ultimately eliminating all types of waste. TQM bundles all practices with the aim of enforcing continuous improvement and sustainability of quality products and processes. This includes quality management programmes, continuous improvement programmes and process capability management. TPM practices comprise those measures that aim for maximization of equipment effectiveness through preventive and planned predictive maintenance. Finally, the HRM practices focus on employee-centred approaches like job rotation, cross-training, problem solving and employee involvement. Shah and Ward’s approach is also supported by Cua et al. (2001) who differentiate the three bundles, JIT, TPM and TQM and describe human resource factors as the common basis for the three concepts. Nonetheless, they do not call their conceptualization lean production. The common basis mentioned by Cua et al. (2001) in their article is named Employee involvement (EI), which is also mentioned in another milestone paper presented by McKone et al. (2001) about modern production concepts. They reference JIT, TPM, and TQM as the main practices to describe modern production systems, with an additional aspect of human resources. This paper focuses mainly on the impact of TPM on manufacturing performance, but also tries to create a holistic picture of modern production management issues. However, they likewise refused to use the term lean production as the label for these modern production systems. Nevertheless, these four bundles, JIT, TPM, TQM and HRM, and the underlying concepts are used in several articles as well and together describe what lean production consists of.
All of the mentioned articles deal with two aspects. First, they tend to describe and conceptualize production systems; and second, they create the link towards performance. In these articles, performance is conceptualized from different perspectives like firm, financial or just operational performance. This aspect will be further investigated later.
The most recent definition of lean production is presented by Shah and Ward in 2007. They propose the following definition to capture the many facets of lean production:
‘Lean production is an integrated socio-technical system whose main objective is to eliminate waste by concurrently reducing or minimizing supplier, customer, and internal variability’
They believe that this definition meets Wacker’s (2004) requirements that a conceptual definition should show evidence of clarity, communicability, consistency, parsimony, differentiability, inclusivity and exclusivity (Shah & Ward 2007, p.791). With a multi-staged empirical research they identified 48 practices/tools to represent the operational space surrounding lean production. Finally, with a multi-step construct these aspects are distilled into 10 factors that also map well on the conceptual definition. Together, these 10 factors ‘ constitute the operational complement to the philosophy of lean production and characterize 10 distinct dimensions of lean systems ’. As this research has the strongest empirical base of all the reviewed books and articles and is widely accepted to be a comprehensive and complete description of lean production, it will be used in this dissertation as the basis to describe lean production. Additionally, it is based on the other well acknowledged articles of Cua et al. (2001), McKone et al. (2001) and their own later improved concept of 2003; it represents the most recent development of this approach. This piece of work can be described as the next evolutionary step in describing lean production.
The utilized concept is visualized in Figure 2 and consists of the following components, according to Shah and Ward (2007):
1. Supplier feedback: provide regular feedback to suppliers about their performance
2. JIT deliveries by suppliers: ensures that suppliers deliver the right quantity at the right time in the right place
3. Supplier development: develop suppliers so they can be more involved in the production process of the focal firm
4. Customer involvement: focus on a firm’s customers and their needs.
5. Pull: facilitate JIT production including kanban cards which serves as a signal to start or stop production
6. Continuous flow: establish mechanisms that enable and ease the continuous flow of products
7. Set up time reduction: reduce process downtime between product changeovers
8. Total productive/preventive maintenance: address equipment downtime through total productive maintenance and thus achieve a high level of equipment availability
9. Controlled processes and Total quality management: ensure each process will supply defect free units to subsequent process
10. Employee involvement: promote employees’ role in problem solving, and their cross-functional character
Abbildung in dieser Leseprobe nicht enthalten
Figure 2: Conceptual and empirical mapping of lean production4
The work of Shah and Ward (2007) has been chosen for this dissertation because it delivers the most comprehensive and holistic view on lean production compared to other publications. This work also delivers the best conceptualization of the different lean measures that together build lean production. Other studies deliver comparable pictures but lack completeness. Noteworthy are the already mentioned publications by Cua et al. (2001), McKone et al. (2001), Shah and Ward (2003), however, these focus on single aspects only and do not present the big picture. Good conceptualizations of JIT, which were used synonymously with lean production for a long time, are presented by Huson and Nanda (1995), Balakrishnan and Linsmeier. (1996), Callen et al. (2000) and Fullerton and McWaters (2001). Shah and Ward’s concept is superior to Karlsson and Åhlström’s (1996) concept as the latter is only divided into different segments of the supply chain and lacks in terms of mutual exclusivity. The fact that the single practices can be evaluated and described distinguishes this concept from the philosophical concept presented in chapter 2.1.1 as it makes lean production measureable. This fact is critical to measure the impact of lean production on performance.
The full list of reviewed literature can be found in table I in the appendix.
2.2. Lean production and performance
While only a few articles try to create a holistic and well-conceptualized definition of lean production and link it with performance, the majority of articles focus on the relationship between implementation of single practices like JIT and performance. For this dissertation several scholarly journals have been investigated and different articles have been selected and reviewed for their link between lean production, lean production practices and different performance aspects. The results are summarized in table I in the appendix.
Generally, there is mixed evidence about the impact of lean production on (financial) performance. The effects of lean production implementation on performance have been studied since the 1980s when U.S. manufactures first started adopting lean practices. While the first evidence was mostly anecdotal, starting in the 1990s, researches have explored this relationship more rigorously and three research streams have emerged (Eroglu & Hofer 2011, p.357). The first stream explores the relationship between lean production, lean practice bundles or practices and is mostly survey based. In the second stream researchers conceptualize lean production as a dichotomous variable and link this with firm performance, mainly focusing on Return on Sales, Return on Investment, Profitability and Inventory turn-over. The third stream investigates the relationship between inventory leanness, a presumed outcome of lean production, and firm performance (Eroglu & Hofer 2011, p.357). This third stream will not be further investigated in this dissertation as it focuses on the inventory aspect of performance only.
In more recently published articles two further approaches are presented. The first one to mention is presented by Mackelprang and Nair (2010) who perform a meta-analytic investigation on the relationship between just-in-time practices and performance. In the first step, they identify single practices of lean production from different published articles and link them with different performance outcomes taken as well from different articles. They come to the conclusion that not all lean production practices are linked with all types of performance outcomes. The second approach that links lean production with firm performance is presented by Eroglu and Hofer (2011). They base their research on existing articles and studies as well and focus especially on the inventory aspect of lean manufacturing adoption and its effect on performance. The difference from the other presented approaches is that this research is only based on secondary data and does not use actual company or survey data.
In summarizing the different approaches linking lean production with performance, it becomes very obvious that several attempts have been made. On the one hand, there is literature that links single or multiple practices of lean manufacturing with performance outcomes, and on the other hand, there is literature that does not distinguish between the different measures and sees lean production adoption from a more remote standpoint.
2.2.1. Studies on lean practices and firm performance
Surveys are the basis for the first stream of studies that investigate the link between lean production and performance. In these studies, lean production is typically conceptualized as a multi-dimensional construct composed of multiple lean practices like the concept already presented in chapter 2.1 of this dissertation, but mostly with different scopes and focus points like TPM or JIT. Further differences can be found in geography and industries. While Callen et al. (2000) focus on Canadian manufacturing plants, most researchers like Inman and Mehra (1993), Fullerton and McWaters (2001), Fullerton et al. (2003) and Shah and Ward (2003) investigate U.S. manufacturing firms. Yang et al. (2011) research the link between lean practices, performance and environmental management as well as investigate a world-wide sample of manufacturing firms. While most of the reviewed studies present at least some evidence of a positive impact of lean production on firm performance, Jayaram et al. (2008) find no significant effects on firm performance which they conceptualize as profitability and return on assets.
Generally, the performance aspect is conceptualized in different ways in the presented studies. Typical measures range from small scale investigations like downtime reduction (Inman & Mehra 1993; Fullerton & McWatters 2001) and the four typical aspects of performance in manufacturing contexts , that is cost, quality, delivery performance and flexibility (Cua et al. 2001; McKone et al. 1999; McKone et al. 2001) to big-scale measures like profitability (Fullerton et al. 2003; Seth & Tripathi 2006; Jayaram et al. 2008) and return on assets and investments (Jayaram et al. 2008; Fullerton et al. 2003). It is noteworthy that in this stream of survey-based research, the majority focuses on smaller aspects of performance. Inventory aspects (Capkun et al. 2009) are the most frequent mentioned measures. Nevertheless, financial measures are the second most important measure but there is no common agreement on how to evaluate financial performance when measuring the impact of lean production.
Even though there seems to be evidence that lean production practices have a positive impact on firm performance Eroglu and Hofer (2011) point out that there are several common weaknesses among these studies. First, nearly all of them rely on subjective assessments of firm performance in addition to subjective evaluations of lean production. Second, they state that none of these studies takes into account the endogeneity in their data sets, which means that respondents who implement and benefit from lean production may be more likely to respond to the surveys. An additional weakness that Eroglu and Hofer (2011) mention is the lack of control of inter-industry heterogeneity. It is conceivable that certain industries may be more amenable to lean production due to inherent characteristics of manufacturing, markets and other environmental factors. Actually, there is evidence that Eroglu’s and Hofer’s criticism is right. It was stated by Balakrishnan et al. (1996) and Kinney and Wempe (2002) that firm size and industry have an impact on the success of lean production adoption.
2.2.2. Studies on lean production adoption and firm performance
In contrast to the surveys in the first stream secondary financial data and econometric methods to identify the performance effects of lean production adoption are used in the second stream as the basis of research (Eroglu & Hofer 2011). Three frequently cited articles will be reviewed to explain this approach and point out the impact of lean production on firm performance. The biggest difference compared to the first stream is that lean production is not conceptualized and no multi-dimensional construct is built. Instead, a set of firms that adopted lean production is identified and the change in performance over time analysed. This actually means that the studies assume that the longer firms adopt lean production, the higher their level of excellence will be and that there is no difference between adopting single practices and implementing the holistic approach presented in chapter 3.2. Additional the studies do not distinguish between the effects of the different measures of lean production.
The first article using this approach was presented by Huson and Nanda (1995) who identified 55 firms that adopted lean production between 1980 and 1990. The result suggests that, in periods following lean production adoption, performance measures changed. Especially, they mention that labour requirements and operating margins decrease while inventory turnover, earnings per share and unit manufacturing costs increase. These obviously contradictory results are explained with the trade-off between expected cost savings from lean implementation and costs that may increase as a result of lean production implementation. Finally, they conclude that JIT5 adoption did indeed generate firm value in terms of increased earnings.
The other two articles presented by Balakrishnan et al. (1996) and Kinney and Wempe (2002) compare the financial performance of a group of firms that adopted lean production with an equal number of firms that had not. Balakrishnan et al. state that on average they did not observe a significant ROA response to JIT adoption, while the inventory turnover improved significantly. Nevertheless, they go on to summarize that this result is not generalizable due to the small sample size (n=46) and that firms which did not see big impacts had mostly significant problems for different reasons like strong competition, or weak market position. In contrast to these findings, Kinney and Wempe (2002) detect an improvement in profitability (ROA) for firms that adopt lean principles in contrast to those companies that do not. They conclude that the primary source for these improvements is profit margin rather than asset turnover.
2.3. Performance Measurement
Increased profitability is often assumed to be the outcome of lean production implementation, yet Johnson and Kaplan (1989) note a frequent disparity between improved operations and financial performance (Fullerton et al. 2003). Kaplan and Norton (1992) go on to state that financial performance measures indicate whether the company’s strategy, implementation, and execution are contributing to bottom-line improvement. Typical financial goals have to do with profitability, growth, and shareholder value (Kaplan and Norton 1992, p.178). Nevertheless, it is not easy to find the right measures, the right amount of measures, and the right accounting systems. Mia (2000) comes to the conclusion that, in general, companies (JIT-adopters) with high provision of data in terms of performance measures perform better in terms of financials. In a study performed by Gomes et al. (2011), a total set of 63 different performance measures for manufacturing operations and its surrounding is identified. The usage and knowledge of the measures varies strongly within the group of researched companies.
Several studies researched the link between lean production, JIT production systems, or single elements of modern production systems. Outcomes at all levels and in all directions have been reported. Meanwhile, early publications like Womack at al. (1990) create mostly the link towards process improvements like downtime reduction, increased lead time, shorter cycle times and productivity, and complete other measures such as floor usage as well. Other studies link lean production with shareholder measures like ROI, ROA and market share (Jayaram & Vickery 1998). While the impact on process measures is normally positive, the results on measures from the shareholder perspective are mixed. In the 24 reviewed articles for this dissertation on the link between lean production and performance, the two most frequently used measures for performance are Return on Sales (ROA) and Return on Investment (ROI), both of which both are part of conceptual frameworks and measured in six articles as well as referenced in a total of eight reviewed articles. These two measures are mainly generated through databases like Compustat (Fullerton et al. 2003) or through questionnaires amongst executives (Jayaram et al. 2008). The second most frequently mentioned measures are cost, quality, and Return on Sales (ROS). The term cost is not clearly defined, but mostly unit cost of manufacturing is meant (Huson & Nanda 1995; Balakrishnan et al. 1996; Callen et al. 2000; Cua et al. 2001; Shah & Ward 2003; Seth & Tripathi 2006; Matsui 2007). Quality also is not clearly defined. Attributed meanings can range from product quality in terms of percentage of defective parts, cost for these parts or single process parameters. Profit, and, respectively profitability, is used to the same extent. A common measure to describe profitability is earning before taxes (Claycomb et al. 1999). Finally, several non-financial performance measures are used like flexibility (Matsui 2007; Mackelprang & Nair 2010), cycle time (Shah & Ward 2003; Matsui 2007; Mackelprang & Nair 2010) and on-time delivery (Fullerton & Wempe 2009). Fullerton and Wempe (2009) come to the conclusion that lean production not only increases profit directly, but non-financial performance measurement mediates the relationship between lean production and financial performance.
Summarizing these findings, it becomes obvious that there is no common way to measure the performance outcomes of lean production. In total, almost 60 different measures have been identified to describe the performance impact that includes financial and non-financial measures.
[...]
1 In this dissertation the terms lean production and lean manufacturing will be used interchangeably, as there is no valid definition or distinction to separate the terms from each other and the literature treats them as synonyms. A better insight into the definition of lean production is provided in chapter 2.1. Generally, lean production describes a broader perspective than lean manufacturing and comprises mostly logistic processes as well.
2 (Ohno 1988)
3 Karlsson and Åhlström (1996)
4 Adopted from Shah & Ward 2007, p.799
5 In this specific article the term lean production is not used. Instead multiple just-in-time (JIT) practices are mentioned that to some extend overlap with the definition of lean manufacturing used in this dissertation
- Citation du texte
- Tobias Oden (Auteur), 2012, Lean Production. Impact on the Financials of a Firm, Munich, GRIN Verlag, https://www.grin.com/document/1331675
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