The 11th Asia Pacific Industrial Engineering and Management Systems Conference The 14th Asia Pacific Regional Meeting of International Foundation for Production Research Melaka, 7 – 10 December 2010
Development of framework for lean manufacturing implementation in SMEs Rose, A.M.N. 1, Deros, B.Md. 2 & Rahman, M.N.Ab. 3 Department of Mechanical and Materials Engineering Faculty of Engineering & Built Environment Universiti Kebangsaan Malaysia Email:
[email protected] 1
[email protected] 2
[email protected] 3
Abstract - The last two decades had witnessed explosion of researches into the area of manufacturing improvement such as lean manufacturing, total quality management, total productive maintenance and their applications within automotives, electronics, and plastics manufacturing companies. It was proven that lean manufacturing as the best manufacturing system in the 21st century.
The first part of review is focused on SME definitions and characteristics.
This is followed by reviewing the lean practices and discusses them based on SMEs’ strengths and weaknesses. aim of this paper is to present a conceptual framework for lean implementation in SMEs.
The
The framework comprised
of top management commitment, lean practices, external support and process evaluation. The reviews show that lean practices such as 5S, quality circle, quality control, visual display and standardization are least investment cost and feasible to implement in SMEs provided the great support from top management.
Keywords: Lean, manufacturing, practices, small, medium, enterprises, framework.
1. INTRODUCTION The global industry in 21st century has forced most of the leaders in several sectors to implement more competitive manufacturing system. The suitable answer as found in the journals is lean manufacturing (LM). Initially it’s started at Toyota plant, Japan, which is known Toyota Production System (TPS) (Holweg 2007; Taj 2005). It has been widely known and implemented since 1960. According to (Rineheart et al. 1997) LM will be the standard manufacturing mode of the 21st century. There is no alternative to LM (Dankbaar 1997). Papadopoulu & Ozbayrak (2005) agreed that LM could be a cost reduction mechanism and if well implemented it will be a guideline to be world class organization. Theoretically, LM can be applied to all industries (Billesbach 1991, Womack et al 1990).
________________________________________ † : Corresponding Author, email:
[email protected]
This system comprised of universal management principles which could be implemented anywhere and in any company, it doesn’t mean in Japan only (Womack & Jones 1990). Therefore, SMEs have been encouraged to apply it (Achanga et al 2006; Womack et al 1990; Womack et al. 1996). It is now widely recognized that organizations that have mastered LM methods have substantial cost and quality advantages over those who still practicing traditional mass production (Pavnaskar et al. 2003). LM combines the best features of both mass production and craft production, the ability to reduce costs per unit and dramatically improve quality while at the same time providing an ever wider range of products and more challenging work (Womack et al. 1990). The goal of LM is to reduce the waste in human effort, inventory, time to market and manufacturing space to become
The 11th Asia Pacific Industrial Engineering and Management Systems Conference The 14th Asia Pacific Regional Meeting of International Foundation for Production Research Melaka, 7 – 10 December 2010 highly responsive to customer demand while producing world-class quality products in the most efficient and economical manner (Pavnaskar et al. 2003). The Lean Enterprise Research Centre (LERC 2004) at Cardiff Business School highlighted that for most production operations, the added value and non added value are as follows 5% of activities add value 35% are necessary non value added activities 60% add no value at all
Table 1: SME’s strengths and weaknesses SME’s strengths
SME’s weaknesses Structure
Fast decision making
Low specialisation
High level of innovativeness
Need outside assistance
Very few interest groups
Owner controls everything
Breeding ground for new business
Lack of capital
ventures and entrepreneurs System, processes and procedures
It shows that the organization no matter the sizes, large or small is crucial to eliminate waste, in order to increase the profit or return on investment (ROI).
Simple system encourage innovation,
Lack of proper system
allows
Lack of proper/effective time and
In an attempt to assists LM implementation in SMEs, this paper proposes a framework which is believed to be suitable and useful for them. The paper consisted of few sections which discuss the review on SME characteristic, implementation framework in general and the need for SMEs to be involved in LM. This is followed by a description and a discussion of the authors’ proposed framework with suggested future research directions.
2. SMALL AND MEDIUM ENTERPRISES
flexibility and
speed of
response to customer needs/demands
cash flow management
Act as training ground for new
“Gut feeling” approach may result
entrepreneurs and workers
in wrong decisions Lack of technology Inadequate infrastructure Culture and behavior
Looking for new change initiatives
Lack of managerial and technical
High staff loyalty and hard work
expertise
As a seed-bed from which large
Dictatorial owner/manager ethos
companies grow
can damage new initiatives
As a group provides significant
Danger
economic output and savings in
emotional ties are place above
foreign exchange
competence and performance
when
loyalties
and
Human resources
SMEs have played tremendous role in manufacturing sector all over the world. In the year 2007, Malaysia has 96% of establishments of SMEs which contributed 30.7% of total manufacturing output and 26.3% of total value added (SME Annual Report, 2007). In addition more than 400,000 or 31% of total Malaysian workforce were employed by SMEs. SME in Malaysia was defined as a company with full time employees between 5 to 150 and annual sales turnover between RM251k to RM25 million (SMECORP). In the competitive environment, with the penetration of China and India products into the Malaysian market, it is the best interest of all SME stakeholders, whether employees, customers or suppliers, to adopt the best management practice in order to compete in today’s global marketplace. It was predicted that the China manufacturer will be biggest rival to any company in five years time (Zhen & Williamson 2003). The best management practice in 21st century was suggested by researchers is LM (Dankbaar 1997; Papadopoulu & Ozbayrak 2005). The strengths and weaknesses of SME to adopt LM are as listed in Table 1.
High authority, commitment and
Lack of financial support, e.g. no
responsibility
training budget, ad hoc, and small-
Innovative environment
scale
Relationship like in one family
improvement efforts
Provides employment opportunities
Shortage of skilled workers
approach
can
stifle
Market, customers and suppliers Faster feedback from customers
Marketing
Quicker respond
knowledge
constraints
and
Understand customer needs.
International marketing expensive,
Stimulate market competition
after sales support not as extensive
Small lot delivery
as large businesses Pressured and dictated by large companies. Lack of negotiation power
Source: (Yusof & Aspinwall 2000; Wong & Aspinwall 2004; Deros et al.2006; Finch 1986)
It shows that, the SMEs still have the potential to success in lean although the barriers are there. SMEs have strengths and advantages to obtain operational and financial benefits, through lean philosophy compared to large company (Inman and Mehra 1990).
The 11th Asia Pacific Industrial Engineering and Management Systems Conference The 14th Asia Pacific Regional Meeting of International Foundation for Production Research Melaka, 7 – 10 December 2010
3. A REVIEW OF THE EXISTING LM FRAMEWORKS Deros et al. (2006) described a framework as a guide for an organization to follow systematically, comprehensively within their control. A framework should have criteria which could assist the organisation to follow efficiently such as systematic, easily to understand, simple, clearly steps outline, able to answer “how to? & what is?” and implementable (Yusof & Aspinwall 2000). Based on literature review carried out, the authors noticed that there is still lack of framework which considered for applicability in SME. Womack and Jones (1996) presented a descriptive framework for LM in the form of critical elements which includes the specifying value, identifying the value stream, creating a flow, pull and perfection. However, it can be argued that this framework provide quite general on lean implementation. Thus, it’s quite tough for SMEs to follow it without specifying the specific steps to be taken. Most of the organization including SMEs faced difficulties on LM implementation and misapplication of lean practices due to (Panavskar et al. 2003; Herron & Braiden 2007); i) use the wrong tool to solve a problem ii) use one tool to solve problem iii) use the same set of tools to solve problems iv) lack of understanding Sanchez & Perez (2001) developed a generic framework comprised of lean principles multifunctional teams, elimination of waste, continuous improvement, JIT and supplier integration towards competitiveness. Each principle in the framework was breakdown to relevant indicators which show the measurement of changes (i.e. increase and decrease) needed to apply in LM. The framework was simple with minimum number of check list indicator which might give opportunity to SMEs to use it as a guide to develop LM. However, it can be argued that this framework only describe the specific steps on how to increase or decrease the level of implementation practices but it did not provide the guidelines for new companies to follow in installation LM system. Anand & Kodali (2009) presented a comprehensive framework which consisted of 65 lean practices. These practices were divided into concepts, principles, practices, competitive priorities, stakeholders and functions of an operations department. This framework is considered quite complicated to implement in SME environment since the SMEs’ structure are very simple, lack of resources and time constraint. As example, the decision levels were divided into internal stakeholders comprised of CEO, managers, executives and shop floor manpower which is rarely had in SME environment. Another point is that
SMEs are always want to see fast result on lean benefits, therefore any new framework should have feasible practices which could be applied in shorter time and get a result as quick as possible.
4. THE PROPOSED CONCEPTUAL FRAMEWORK FOR SMEs LM is considered as a manufacturing philosophy which is needed to apply in the whole organization (Bhasin 2006). The proposed framework comprised of SMEs’ commitment, feasible lean practices, external support and performance as in Figure 1. SME commitment Management leadership & commitment Quality management Employee empowerment Employee involvement Training and education Continuous improvement Teamwork Effective communication Evaluation and measurement Organisational and culture change
External support
Government Supplier Customer
Feasible lean practices
Consultant
implementation Basic
Intermediate
Advanced
Multifunction
Cell layout
Small lot sizes
employees
Preventive
Kanban
5S
maintenance
Visual control and
Reduce
display
time
Uniform
Continuous
workload
Standardization
of
operation
set
Continuous up
improvement
Quality control- SPC Quality circles Teamwork
Performance Inventory Cycle time Delivery time Product quality
flow
The 11th Asia Pacific Industrial Engineering and Management Systems Conference The 14th Asia Pacific Regional Meeting of International Foundation for Production Research Melaka, 7 – 10 December 2010 Figure 1: A proposed conceptual framework for lean implementation in SME The critical elements on SME commitment are management leadership & commitment, employee empowerment & involvement, training & education, continuous improvement, teamwork, effective communication, evaluation & measurement and organizational & culture change. These elements are considered as prerequisites for LM (Ferdousi 2009; Kumar & Anthony 2008; Real et al. 2007; Achanga et al. 2006). As example top management is considered as a recipe to success in any new management system (Achanga et al. 2006; Bamber & Dale, 2000). In addition, the transition from traditional to LM implementation should be driven by the top management team (Boyer & Sovilla, 2003). Apart from that, SMEs should implement the feasible lean practices which are within their control. The reviews on past literature show 15 practices are feasible to be implemented in SME as shown in the proposed framework (Schonberger 1982; Lee & Ebrahimpour 1984; Ohno 1988; Womack et al. 1990; Crawford & Cox 1991; Mehra & Inman, 1992; Sakakibara et al. 1993; Zhu & Meredith 1995; Lee 1997; Panizzolo 1998; Matsui, Y. 2007; Fullerton & Mcwatters 2001 and Shah & Ward 2007). These practices are divided into three categories; basic, intermediate and advanced. SMEs can choose the suitable practices which suit to their environment. As example, the SMEs can start with basic practices on multifunction employees, 5S, visual control and followed by other practices from intermediate practices. The effectiveness of lean practices implementation can be measured through performance measurement such as inventory, cycle time, product quality, delivery time as highlighted in the performance box. SMEs are not advised to start with advanced practices without considering implementing basic and intermediate practices (Lee & Ebrahimpour 1984). As an example, small lot size can’t be implemented in the environment of poor quality, unstable machine condition, and poor housekeeping. The basic practices in the proposed framework are considered necessary to all SMEs and it’s feasible to implement in SME environment. The external support is also considered very important in the implementation of LM. The literature review shows four elements could enhance the successful of LM implementation. There are government, supplier and customer involvement and outside consultant (Real 2007; Herron & Hick 2007; Flinchbaugh 2002). The advantages of this framework to SMEs believed to be are as follows;
i) ii) iii) iv)
a simple framework very easy to follow structurally design based on SME characteristic implementable with feasible lean practices
5. DISCUSSIONS AND CONCLUSIONS In order to validate this framework, the future study will be carried out by developing a questionnaire and distributing to SMEs for getting the data. The questionnaire will be developed and adapted based on previous study. Then, the questionnaire will be distributed to lean experts for validation and modification, if necessary. The target group for this study is SMEs in the car components industry. It’s hoped that the collected data could enhance the developed framework and provide new information towards developing the efficient framework for lean implementation in SMEs. Large organization is always been in advanced in adopting new management system including LM implementation. Small organization is always left behind due to lack of resources including employees, financial and skills. However, the effort made by large organization on lean implementation will be affected if the small organization still using the traditional method. Therefore, in order to support and sustain large organization efforts on lean implementation, small organization have to look into LM as well. This effort will make large organisation become more confident on SMEs and as a result the relationship between them can be prolonged. This paper has attempted to fill the gap through the proposed conceptual framework for lean implementation in SMEs as well as to enhance the body of knowledge for the successful implementation of lean. This framework could assist SMEs to implement lean successfully by focusing on feasible lean practices provided with fully committed on SME success factors commitment. The development of this framework was based on SMEs’ structure and characteristic which is totally differed from large organisation especially on the resources. It is anticipated that this study is able to provide a guideline for LM implementation in SMEs, mainly for those involved in automotive industry. Finally, it is hoped that this paper has provided some insights into the need for LM in other sectors as well.
6. REFERENCES
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AUTHOR BIOGRAPHIES First Author is a Lecturer at the Department of Industrial Engineering, Faculty of Mechanical Engineering, University Malaysia Pahang (UMP). Currently, he is pursuing his study in Doctoral Degree at University Kebangsaan Malaysia (UKM). His research is focusing on lean implementation at Malaysian Automotive industry. He can be reached at
[email protected] or
[email protected] .
