444 World Review of Entrepreneurship, Management and Sust. Development, Vol. 9, No. 4, 2013
Sustainable manufacturing practices, sustaining lean improvements and sustainable performance in Malaysian automotive industry Nurul Fadly Habidin* Department of Management and Leadership, Faculty of Management and Economics, Universiti Pendidikan Sultan Idris, 35900 Tanjung Malim, Perak, Malaysia E-mail:
[email protected] *Corresponding author
Anis Fadzlin Mohd Zubir, Juriah Conding, Nurzatul Ain Seri Lanang Jaya and Suzaituladwini Hashim Department of Accounting and Finance, Faculty of Management and Economics, Universiti Pendidikan Sultan Idris, 35900 Tanjung Malim, Perak, Malaysia E-mail:
[email protected] E-mail:
[email protected] E-mail:
[email protected] E-mail:
[email protected] Abstract: This exploratory study seeks to determine the interrelationship between sustainable manufacturing practices (SMP), sustaining lean improvements (SLI) and sustainable performance (SP) in Malaysian automotive industry. The specific goals are: 1) to identify the SMP, SLI and SP measures for Malaysian automotive industry; 2) to investigate the impact of SMP and SLI on SP for Malaysian automotive industry; 3) to develop research model of the SMP, SLI and SP measures for Malaysian automotive industry. An attempt has been made in this paper to provide an overview of the available SMP, SLI and SP literature by classifying and then critically reviewing the material to develop a framework for SMP, SLI and SP and suggest future research directions. This also includes model and three performance measures for SMP, SLI and SP measures. A summary of research findings and conclusions are reported at the end of the research view. Keywords: sustainable manufacturing; sustainable performance; automotive industry; lean production. Reference to this paper should be made as follows: Habidin, N.F., Zubir, A.F.M., Conding, J., Jaya, N.A.S.L. and Hashim, S. (2013) ‘Sustainable manufacturing practices, sustaining lean improvements and sustainable performance in Malaysian automotive industry’, World Review of Entrepreneurship, Management and Sustainable Development, Vol. 9, No. 4, pp.444–459. Copyright © 2013 Inderscience Enterprises Ltd.
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Biographical notes: Nurul Fadly Habidin is a Lecturer at Universiti Pendidikan Sultan Idris, where he teaches industrial management, management accounting, and business engineering. His main research interests are lean Six Sigma, quality/business engineering and continuous/performance process improvement. Anis Fadzlin Mohd Zubir is a full Master’s student of Management Accounting at Universiti Pendidikan Sultan Idris. Her main research interest is sustainability in automotive industry. Juriah Conding is a full Master’s student of Management Accounting at Universiti Pendidikan Sultan Idris. Her main research interest is green innovation in automotive industry. Nurzatul Ain Seri Lanang Jaya is a full Master’s student of Management Accounting at Universiti Pendidikan Sultan Idris. Her main research interest is supply chain management in automotive industry. Suzaituladwini Hashim is a full Master’s student of Management Accounting at Universiti Pendidikan Sultan Idris. Her main research interest is kaizen event in automotive industry.
1
Introduction
Recently, the development and the number of quality improvement programmes have increased over the past years. However, during this decade, most organisations decided to move from the existing quality improvement to sustainable manufacturing practices (SMP) and sustaining lean improvements (SLI) initiative as a business strategy. Due to the rise in SMP awareness, it has become the conscientious imperative expected from all manufacturing industries. The survey from Sustainable Development Initiatives in Malaysia (2010) in three multinationals companies namely: Panasonic, General Electric (GE), and Toyota was found their different ways of thinking to achieve their own goals in SMP implementation. As a manufacturer of electronic products, Panasonic have to take the responsibility to preserve the natural environment that sustains life on earth for future generations by doing greater awareness of the cleanliness and green activities (Panasonic Manufacturing Malaysia Berhad, 2010). For GE, they focus on green environment in the areas of aviation, commercial aviation services, traditional, and renewable energy systems, oil and gas, transportation, as well as water, and process technologies. Meanwhile, as a vehicle manufacturer, Toyota has taken many green initiatives to ensure that their products and services are environmental friendly. Lean manufacturing are designed to produce superior quality products at a low cost while increasing the competitiveness of manufacturers using the concepts. The development of this SLI initiative has spread to various industries, which was started by Toyota in the Japanese automotive industry. Malaysian automotive industry itself is moving forward toward preparing high level performance, product quality improvement, lower cost of production, market price, maximise customer satisfaction, elimination of waste and defects, and strengthening relationships with suppliers.
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In this paper, there have four domain constructs in SMP namely: 1
manufacturing processes (MP)
2
supply chain management (SCM)
3
social responsibility (SR)
4
environment management (EM).
SLI initiatives namely: 1
standards work (SW)
2
employee involvement (EI)
3
continuous improvement (CI).
And SP measures namely: 1
environmental sustainability
2
economic sustainability
3
corporate social responsibility (CSR) sustainability.
In the next section, this paper review the literature on SMP, SLI and SP measures as well as the relationship between SMP, SLI and SP, and impact of SMP and SLI on SP. Next in Section 3, the researcher are more focus on hypothesis, methodology, and proposed conceptual model and as a conclusion for this section are to discuss the future agenda for research and practice.
2
Literature review
2.1 Sustainable manufacturing practices SMP which is balancing social, environmental, and economic factors for short and long-term performance is a critical issue for the world and for business (Jafartayari, 2010; Gunasekaran and Spalanzani, 2011; Millar and Russell, 2011; Vinodh and Joy, 2012; Rosen and Kishawy, 2012). According to Jafartayari (2010), the level of awareness on sustainable manufacturing has direct relationship with the SMP. Also, the sustainable awareness and practices related to most of the 6Rs namely: 1
reduce
2
reuse
3
recycle
4
recover
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redesign
6
remanufacture
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are at a satisfactory level. Understanding the importance of SMP, an attempt has been made to review selected literature on SMP. Research by Savitz and Weber (2006), Blackburn (2007), Sustainable Development Initiatives in Malaysia (2010), and Fairfield et al. (2011) proved that the implementation of SLI positively results in spurring innovation and growth. Moreover, Basu and Palazzo (2008) stated that competitive advantage and legitimating with less impact from SR motivation toward the success of SMP initiatives implementation. The positive impact of SMP implementation is also supported by Nagel and Tomiyama (2004), Jayal et al. (2010), Sustainable Development Initiatives in Malaysia (2010), and Rosen and Kishawy (2012), who proved that implementation of SMP would improved the environmental performance. In this paper, research on SMP has focused on the relationship between implementation of SMP with multiple constructs namely: 1
MP
2
SCM
3
SR
4
EM.
A summary of this SMP constructs used in this research is given in Table 1. Table 1
The summary research finding on SMP constructs
SMP constructs
Literature/ authors
Findings
MP
Karim et al. (2008)
• Australian manufacturers are marginally ahead of their Malaysian counterparts namely USA, Europe, Japan, and Korea. • Malaysian manufacturers came out ahead on most dimensions of advanced quality and manufacturing practices, particularly in the adoption of product data management, effective supply chains and relationships with suppliers and customers.
SCM
Fairfield et al. (2011)
• Respondents perceived competitive disadvantage as a deterrent to sustainability management or that their company’s inclination to move toward sustainability was muted by a lack of pressure from stakeholders.
Agus (2011)
• Manufacturing companies should emphasise greater attention to the waste elimination programme through lean production as well as the technological aspects of SCM. • A greater degree of management support for SCM implementation initiatives.
Zailani et al. (2012)
• Environmental purchasing has a positive effect on three categories of outcomes (economic, social and operational). • Sustainable packaging has a positive effect on environmental, economic and social outcomes. • The results have empirically proven that SCM practices have a positive effect on sustainable SCM performance, particularly from the economic and social perspective.
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Table 1 SMP constructs SR
The summary research finding on SMP constructs (continued) Literature/ authors
Findings
Prado-Lorenzo • There has been a significant increase in practices favouring the et al. (2008) reduction of environmental impact, as well as the creation of comfortable workplaces, especially promoting workers’ rights. • Several of these corporate practices associated with SR in Spanish firms show a positive and significant impact on the rate of sales growth but there is a lack of impact on productivity or market value. • Other responsible practices are not related to short-run improvements in companies’ performance.
EM
Loureiro et al. (2012)
• Positive link between social and financial performance would legitimise corporate social performance on economic grounds.
Yang et al. (2011)
• Prior lean manufacturing experiences are positively related to EM practices. • EM practices alone are negatively related to market and financial performance. • However, improved environmental performance substantially reduces the negative impact of EM practices on market and financial performance.
2.2 Sustaining lean improvements In recent years, academics and practitioners have started seriously focusing on SLI implementation. There has been a flurry of articles in both academic journals and trade magazines discussing the conceptual frameworks, strategies, tactics, tools, models, and techniques for SLI implementation. The aim of this paper is to review the concepts of SLI implementation, review the available literature on SLI implementation, identify the gap between theory and practices and then suggest the framework for SLI. In this paper, SLI depends on three elements namely SW, EI, and CI which have adopted the conceptual proposed by Schlichting (2009). However, some amendments constructs have been made based on this paper proposed.
2.2.1 Standard work Researchers around the world have shown interest to study SW initiatives as one of the SLI elements. For example, Fantuzzi et al. (2004) investigated the implementation of standard consists of: 1
The International Organization for Standardization (ISO) Standard
2
The International Electrotechnical Commission (IEC) Standard
3
The International Atomic Energy Agency (IAEA) Standard for individual monitoring in Europe.
Result showed that implementation of standards can foster harmonisation in individual monitoring. Moreover, standards are unique documents that give detailed information and
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examples on how to perform quality, routine and type tests to validate dosimetric systems and dosemeters. This also coincides with another author that the SW is a detailed, documented and visual system by which associates develop and follow a series of predefined process steps (Krichbaum, 2008). Based on qualitative observations from Glover et al. (2011), the CI with the highest and lowest work area attitude and commitment values suggest that managers may find it beneficial to periodically hold SW events. Without it, the gains made from organising work cells, creating flow production, and starting continuous improvement teams will only be temporary. Conversely, in USA, a study by Murphy (2001) found that the companies using budget based and other internally determined performance standards have less-variable bonus payouts and are more likely to smooth earnings, than companies using externally determined standards.
2.2.2 Employee involvement One of the most important tools of SLI implementation is EI. A recent review of literature on EI initiatives showed that almost manufacturing companies have made serious attempts to implement EI initiatives in previous study (Apostolou, 2000; Cabrera et al., 2003; Jones and Kato, 2005; Lin, 2006; Maurer et al., 2008; Travis et al., 2011; Groen et al., 2012). Apostolou (2000) pointed out that EI is treated as a unique human being, not just a part in a machine and each employee is involved in helping the organisation meet its goals. Other authors have analysed the positive impact of EI initiatives (e.g., Groen et al., 2012; Travis et al., 2011). Cabrera et al. (2003) found that a highly significant positive relationship between competition and EI. Organisations will be able to improve their customer service, if the employees are involved in the decision making process. On the other, Groen et al. (2012) found that the participatory development process increased employees’ attitude, perceived social pressure and perceived capability to take initiative. Also, a recent paper by Travis et al. (2011) found the unique finding and the role that both employee voice and job neglect play as workers attempt to manage dissatisfying work conditions or promote positive organisational change. Significantly, Wilkinson et al. (2007) employees were not overwhelmingly dissatisfied with their work experiences or management approaches. Indeed, in the worst organisational-type they survey had several positive results, despite the fact that some employees earned only the national minimum wage and EI meant being coerced to participate in out of hours meetings.
2.2.3 Continuous improvement CI initiatives can be said as one of the important countermeasures in order to improve quality conformance, increase productivity, to reduce costs and improvement in delivery reliability (Terziovski and Sohal, 2000), to adopt a culture of sustained improvement (Bhuiyan and Baghel, 2005; Bhuiyan et al., 2006), better understanding and improve existing systems (Azadeh et al., 2007), goal of regaining profitability, reducing transportation, eliminate the waste of waiting, and decrease the utilisation (Schlichting, 2009), to reduce risks and facilitate work-related activities (Caroly et al., 2010), hold standard work events and address quality issues (Glover et al., 2011), and improve production quality (Villeta et al. 2012). However, evidence showed that numerous organisations that have deployed CI initiatives have not been successful in getting what they set out to achieve because there are certain barriers and challenges to implement the
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CI initiatives. For example, Bessant et al. (2001) pointed out that lack of understanding of the behavioural dimension. Next, Pay (2008) identified four major factors that can hinder the success of CI initiatives namely: 1
lack of understanding of lean
2
unwilling to accept that cultural change
3
lack the right people in the right positions
4
chosen lean as their process improvement methodology when a different process improvement programme.
Although perfection will never be achieved, the goal is to continue reaching for it through small improvements (Zubir et al., 2012).
2.3 Sustainable performance Existing performance measurement is used to improve organisational performance such as help an organisation measure progress towards its goals, understand its current situation, address the key issues, and the options available (Searcy et al., 2008). Moreover, according to Isik (2009), effective performance measurement can let us know about a way of doing something, achieve the goals, customers’ satisfaction, work under control, and improvements are necessary. Hence, performance measurement is the process to identify how successful organisations or individuals have been in attaining their objectives and strategies. Schoenherr (2011) hypothesise the impact of environmental management on plant performance. Environmental initiatives considered include ISO 14000 certification, pollution prevention, recycling of materials, and waste reduction; plant performance is assessed with the dimensions of the four competitive capabilities of quality, delivery, flexibility, and cost. Yang et al. (2011) are investigated the relationships between lean manufacturing practices, environmental and business performance outcomes. The findings suggest that prior lean manufacturing experiences are positively related to environmental management practices. Environmental management practices alone are negatively related to market and financial performance. However, improved environmental performance substantially reduces the negative impact of environmental management practices on market and financial performance. Whereas, economic sustainability is the criteria by how a pound of profit is made is a building block in the creation of a just capitalism; progressive profitability must replace simple financial profitability as the sole yardstick of business success (Doane and MacGillivray (2001). A study by Rennings et al. (2006) investigated the effects of different characteristics of EU environmental management and auditing scheme (EMAS) on technical environmental innovations and economic performance. As a result, they found that increasing number in employee, turnover and export. They conclude that a careful design of EMAS is important for both the environmental and economic performance of a facility. Hutchins and Sutherland (2008) who makes an evaluation of social sustainability for supply chains have identified the positive impact of social change and also establish a comprehensive social footprint. According to Parast and Adams (2011), CSR and
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benchmarking can effectively improve the organisational performance. The findings showed that top management support for quality is the main driver of practices associated with CSR. CSR appears to have a significant impact on internal quality results (operational performance) but it does not have a significant effect on external quality results (firm performance). Therefore, a set of performance measures are critical for successful implementation of sustainability programmes and actions both for the short and long terms. No doubt the available literature investigates possible performance measures, but in this paper, we attempt to develop measures that include environmental sustainability, economic sustainability, and CSR sustainability issues as an integrated strategy for sustainability in automotive industry. It should be noted that this study is an initial exercise in the new direction of sustainability and its practical implementation along with appropriate strategies, model, and techniques. We hope this paper will chart a new course of plans and actions towards achieving sustainability in automotive industry.
3
A proposed conceptual model
The study is going to use quantitative survey in the Malaysian automotive industry. Automotive industry was chosen because the use of quality initiative and performance measurement in this industry is very important (Zakuan et al., 2009). Population of this study comprised on automotive industry in Malaysia so that samples were selected from the list of PROTON and PERODUA. A set of survey questionnaire was carefully designed to ensure most of the issues concerning SMP, SLI and SP were included. For this purpose, the final draft of the questionnaire was sent to the experts involving international university academicians, consultant, as well as automotive practitioners. Comment and feedback given were then used in the rectification and improvement of the instrument to gain content validity. To identify the causal interrelationship between the different constructs of the suggested model of the research, structural equation modelling (SEM) technique was adopted. In the face of the other statistical techniques available, SEM is advantageous because: 1
it permits researchers to test more complex conceptual frameworks, guaranteeing a more robust and holistic statistical analysis (Ismail et al., 2012)
2
it permits the simultaneous analysis of the relationships between a broad range of variables (Hair et al., 2011).
Due to the increased emphasis on SEM technique that perform the require statistical analysis of the data from the survey, this paper employed the SEM technique to investigate the interrelationship between SMP, SLI and SP measures as shown in Figure 1. This proposed model has adopted the conceptual proposed by Millar and Russell (2011) and Fairfield et al. (2011). However, some amendments especially on SMP, SLI and SP measures have been made. Statistical Package for the Social Sciences (SPSS) version 17 was used to analyse the preliminary data and provide descriptive analyses about thesis sample such as means, standard deviations and frequencies. Also, SEM using AMOS 6.0 will be use to test the measurement model.
452 Figure 1
N.F. Habidin et al. SEM framework
Notes: SMP = sustainable manufacturing practices, SLI = sustaining lean improvements, SP = sustainable performance, MP = manufacturing process, SCM = supply chain management, SR = social responsibility, EM = environmental management, CSR = corporate social responsibility.
3.1 Research hypotheses To understand the relationship of each SMP constructs and SLI constructs on SP in Malaysian automotive industry, the following hypotheses were set up to be tested. These hypotheses will be stated based on a numbering system from H1 to H4. This style of hypotheses statement is chosen due to the nature of answering hypotheses using SME methods. Most of the popular articles show the relationship between SMP and environmental SP measurements. Rusinko (2007) has presented an exploratory study of the relationship between specific environmentally SMP and specific competitive outcomes in USA. Findings suggest that environmentally SMP may be positively associated with competitive outcomes. In particular, different types of environmentally SMP are associated with different competitive outcomes. Improving environmental stewardship and sustainability, while maintaining profitability and productivity, are increasingly viewed as strategic goals of manufacturing organisations (Rosen and Kishawary, 2012). Kaebernick et al. (2003) reported the concept of an approach to product development, based on SMP implementation which is pictured in a new way of thinking, new application tools and methodologies in every single step of product development. In fact, an industry case study showed that the implementation of the new paradigm can lead to new market opportunities for a company. Millar and Russell (2011) point out the same opinion. By applying the sustainable development agenda, the companies embracing sustainability will gain a competitive advantages and new market
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share. In relation to the triple bottom line measures, environmental and economic sustainability performance measures are more emphasised than social measures. This is not surprising, since according to Foot and Ross (2004), of the three components CSR performance is the least familiar and therefore the most poorly defined and least consistency adopted by business. The majority of the SMP currently adopted involved recycling initiatives, reducing waste and by-product reuse. However, Szekely and Knirsch (2005), the companies who is integrated their environmental, economic, social performance into their business strategies, need to optimise the balance between these three dimensions. In this study, the impact of SMP implementation on the SP will be investigated. A hypothesis regarding the relationship between SMP and SP is formulated as follow: H1 There is a positive and direct significant relationship between SMP implementation and SP in Malaysian automotive industry. Integration between SLI and SP become more valuable with the help of organisation that drives towards performance excellence. Through the environmental sustainability performance, research by Jayaram et al. (2008) found the positive relationships between lean design and firm performance in automotive supplier industry. Similarly, Schoenherr (2011) tested of hypothesis revealed ISO 14000 certification, pollution prevention and waste reduction as having a significant and positive effect on quality, delivery, flexibility, and cost performance measures meanwhile the initiative of recycling of materials failed to exhibit a significant influence in all four instances. Finding from Yang et al. (2011), lean manufacturing experiences are positively related to environmental management practice. From the aspect of economic performance, Hofer et al. (2012) explored the relationship between lean production implementation and financial performance. The effect of lean production on financial performance is found to be partially mediated by inventory leanness. In addition, there is strong evidence that the concurrent implementation of internally-focused and externally-focused lean practices yields greater performance benefits than selective lean production implementation. Supported by Demeter and Matyusz (2011) who have concentrate on how companies can improve their inventory turnover performance through the use of lean practices. Firms that widely apply lean practices have higher inventory turnover than those that do not rely on lean manufacturing. CSR sustainability performance is presented by Groen et al. (2012) has showed the performance can improve via attitude, social pressure, and capability. These variables in turn positively influenced employee initiative. The finding results show that attitude, social pressure, and capability are significantly correlated with employee initiative. Another study by Brammer et al. (2005) found that external CSR is positively related to organisational commitment and that the contribution of CSR to organisational commitment is at least as great as job satisfaction. Otherwise, Murti (2009) reported that lean improvements were not sustained across New Zealand manufacturing organisations causes of erroneous understanding of lean (Bhasin and Burcher, 2006; Worley and Doolen, 2006; Wilson et al., 2008), poor change strategy (Emiliani and Stec, 2005; Kallage, 2006), high staff resistance (Emiliani and Stec, 2005; Sim and Roger, 2009) and failure to develop the lean champion’s capabilities (Venkateswarlu and Nilakant, 2005; Lasa et al., 2008). Therefore, the relationship between SLI and SP in Malaysian
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automotive industry will be investigated deeply via this paper propose. This discussion leads to the following hypotheses: H2 There is a positive and direct significant relationship between SLI implementation and SP in Malaysian automotive industry. The topics of relationship between SMP and SLI have received increased attention in the academic research-oriented literature. For example, Light (2004) showed that there is a significant relationship between the level of information received by an employee and the level of EI. Laosirihongthong and Dangayach (2005) agreed that by adopting an appropriate manufacturing strategy, the companies would achieve world-class manufacturing status and compete effectively in global markets. To accomplish its strategic goals and objectives in manufacturing strategy, a company needs to select and implement a range of CI activities, based on technological, organisational, or people. A study in Malaysian manufacturers, Karim et al. (2008) explained that all the manufacturers continually improve their product quality, although there have lower product yields and higher customer return rates. In fact, their adoption of advanced quality and manufacturing practices helped them to manage CI. Other than that, Herron and Braiden (2006) who developed a model to described a direct and generate productivity improvement in a group of manufacturing companies under Nissan Motor Manufacturing UK Ltd (NMUK). The finding shows that a good correlation between the problems identified and their solution using lean manufacturing tools and measures for all companies. In addition, companies in the automotive sector demonstrated a good understanding of the basic shop floor management techniques with 5S, standard operations, skill control, kaizen event, and visual management. In this paper, the relationships between SMP and SLI measures are presented in order to assess the effectiveness of the practices within automotive industry. Therefore, this discussion leads to the following hypothesis: H3 There is a positive and direct significant relationship between SMP implementation and SLI in Malaysian automotive industry. Several previous studies of SMP and SLI focused on a number of mediating variable which include environmental management system, ISO 14001, and environmental performance improvement (Comoglio and Botta, 2012), supply management and quality management implementation (Yeung, 2008), and manufacturing strategy and improvement activities (Laosirihongthong and Dangayach, 2005). Yeung (2008) was study the organisational impacts of strategic supply management and the contexts of company size, process type, ISO 9000 certification, and quality management implementation that facilitate such an endeavour. He found that strategic supply management improves on-time shipments, reduces operational costs, and leads to customer satisfaction and improved business performance. Therefore, in the case of automotive industry, SP is significant and intermediate between SMP and SLI relationship. Given the availability of evidence supporting the relationship between SMP, SLI and SP measures, the author hypothesises that: H4 There is a positive and direct significant interrelationship between SMP, SLI and SP measures in Malaysian automotive industry.
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Conclusions
Due to lack of studies on above addressed problem in this country, attempts were made to investigate the CSFs of SMP, SLI and SP measures in Malaysian automotive industry. This study theoretically reviewed prior literatures on same problem in our country. The aim was to shed some light on the research problem. In relation to that, the purposes of future study are: 1
to identify the SMP, SLI and SP measures for Malaysian automotive industry
2
to investigate the impact of SMP and SLI on SP for Malaysian automotive industry
3
to develop research model of the SMP, SLI and SP measures for Malaysian automotive industry.
Hence, based on future agenda, a survey is designed in order to conduct an empirical research for examining survey’s hypotheses. It is hoped that the important facts addressed in this paper will be a means whereby managers and researchers will be able to investigate the SMP, SLI and SP problem in Malaysian automotive industry with better awareness.
Acknowledgements The researchers would like to acknowledge the Ministry of Higher Education (MOHE) for the financial funding of this research thought Fundamental Research Grant Scheme (FRGS), and Research Management Centre (RMC), UPSI for Research University Grant (RUG).
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