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International Journal of Lean Thinking Volume 3, Issue 2 (December 2012)
Lean Thinkingjournal homepage: www.thinkinglean.com/ijlt
THE DEVELOPMENT OF 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]
Anis Fadzlin Mohd Zubir Department of Accounting
and Finance, Faculty of Management and
Economics, Universiti Pendidikan Sultan
Idris,35900 Tanjung Malim, Perak, Malaysia
A B S T R A C T K E Y W O R D S
A R T I C L E I N F O
Lean Manufacturing,
Sustainable Performance,
Standards work, Employee Involvement,
Continuous Improvement,
Received 11 July 2012
Accepted 07 September 2012
Available online 01 October 2012
This paper shows a relationship between sustaining lean
improvements and sustainable performance is at the roots of
environmental sustainability, economic sustainability and corporate
social responsibility (CSR) sustainability via proposed model to
carry out an empirical research in Malaysian automotive industry.
For this decade, automotive manufacturing companies are dealing
with the sustainability problems in input materials, manufacturing
processes, and waste disposal, among others. Hence, this paper
attempts to gain a picture of the current theme of emphasis on
sustaining lean improvements indicators among the automotive
manufacturing companies in Malaysia and also on sustainable
performance. In brief, more extensive research and collaboration is
needed to increase understanding of sustaining lean improvements
in manufacturing area and applications of sustainable.
________________________________
* Corresponding Author
1. Introduction and literature survey
Malaysia which is located in the centre of ASEAN region with a population of more than 28
million people offers vast opportunities for global automotive and component manufacturers
to set up manufacturing and distribution operations in this country. External environment of
business namely: (i) economic stability; (ii) culture of the country; (iii) research and
development of technology; (iv) politic and law stability; and (v) global participation have
attracted major international automotive and component manufacturers to invest in Malaysia.
Currently, according to Malaysia’s Automotive Industry (MAI, 2010), there are 28
manufacturing and assembly plants producing passenger and commercial vehicles, composite
body sports cars as well as motorcycles and scooters. These plants have a total installed capacity
of approximately 963,300 passenger and commercial vehicles and about 1 million motorcycles
per year, with production catering primarily for the domestic market. Moving forward into
2012, Malaysia Automotive Institute (2012) foresees a brighter automotive sales and production
despite the uncertain economic environment. While sales in the US are set to continue a
Juriah Conding
Department of Accounting and Finance, Faculty of
Management and Economics, Universiti Pendidikan Sultan
Idris,35900 Tanjung Malim, Perak, Malaysia
Suzaituladwini Hashim Department of Accounting and Finance, Faculty of
Management and Economics, Universiti Pendidikan Sultan
Idris,35900 Tanjung Malim, Perak, Malaysia
Nurzatul Ain Seri Lanang Jaya Department of Accounting
and Finance, Faculty of Management and Economics,
Universiti Pendidikan Sultan Idris,35900 Tanjung Malim
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steady recovery in 2012, the emerging countries such as China and India are expected to continue
outperforming the developed countries. Elsewhere within the ASEAN countries, Thailand and Indonesia
are also expected to continue their strong growth this year in line with the GDP forecasted by respective
countries, while Malaysia forecasts at least a 5.1% growth in 2012. As such, the total industry volume (TIV)
is also likely to flourish in 2012 due to high correlation between gross domestic product (GDP) and TIV.
The concepts of sustaining lean improvements (SLI) have been studied in particular by Schlichting
(2009) and Murti (2009). Schlichting (2009) focus on investigate the root causes that lead to a time
dependent loss of lean improvements among manufacturing organizations from three different
perspectives such as standard work, employee involvement and continuous improvement. In addition, in
for create standards, one should implement standard work all across the shop floor and in addition use
standard improvement to ensure that further development will not distort the standards. In order to
achieve employee involvement, the finding suggested visual management tools to empower every
employee by making information available as well as kaizen events to teach employees about lean and
train their problem solving skills (Schlichting (2009). In conjunction with job rotation, which enables the
employees to cooperate on problem solutions, these tools ensure thorough employee involvement which
will increase the buy-in into the lean improvement ideas and thereby make them more sustainable. At last,
continuous improvement supports the sustainability of lean implementations by constantly challenging
the current state process, thereby not allowing for a loss of focus on the already implemented changes.
Meanwhile, Murti (2009) has seeks to study the lean journeys of nine New Zealand companies to
establish key inhibitors and enablers to sustaining lean manufacturing sector in New Zealand. The
companies were assessed for lean sustainability using a recognized sustainability model. The findings
showed that many companies experienced good initial gains from implementation lean but the majority
failed to sustain these improvements. These problem were; erroneous understanding of lean, poor change
strategy, poor senior management team commitment, New Zealand Trade and Enterprise funding pushing
change, high staff turnover, high staff resistance and failure to develop the lean champion’s capabilities. As
a conclusion, lean improvements were not sustained across New Zealand manufacturing companies
except one case study company looked likely to sustain improvements.
In Malaysian automotive industry, the concept of SLI has change and becoming more stable in our
country and industries. As a good example is, Malaysia has made significant progress, with Proton
unveiling its first locally-designed model in 2000 and developing its own engine in 2002. The new Proton
plant in Tanjung Malim, Perak is highly automated, employing robotic technology, and is designed for
high volume production and efficiency, using lean manufacturing processes. Therefore, the complexities
involved in the above-mentioned focus areas for SLI, optimized solution, and corresponding underlying
models, are necessary. Thus, this paper presents a review of current trends for achieving sustainability at
the lean practices and performance, with a focus on modeling and optimization aspect.
1. Brief Literature Review
1.1 Sustaining Lean Improvements (SLI)
For more than 40 years, lean manufacturing techniques have been achieving outstanding success
rates. First in Japanese plants, and now in advanced factories throughout North America, it has proven to
be a cost effective and flexible approach to achieving superior customer satisfaction (Kivell, 2012). Hence,
this paper’s proposed that SLI depends on three aspects such as standards work (Foschi, 2009; Graban,
2009; Murphy, 2001), employee involvement (Jones and Kato, 2005; Cabrera et al., 2003) and continuous
improvement (Schlichting, 2009; Pay, 2008; Terziovski and Sohal, 2000) which have adopted the
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conceptual proposed by Schlichting (2009). However, some amendments constructs have been made
based on this paper’s proposed.
Standards work is the current one best way to safety completes an activity with the proper outcome
and the highest quality (Graban, 2009). Taiichi Ohno is often quoted as declaring that improvement will
be occurring while applying a standard work. Tim Whitmore, Vice President of Consulting Services at
Simpler Consulting, elaborates on this quote by saying that the principles of lean do not work well when
everyone is allowed to choose their own work method or work sequence in which to do a job: the
outcome is unpredictable; flow and pull are impossible (Schlichting, 2009 cited in Whitmore, 2008). Many
researchers have done their study in this area. For instance, a study by Murphy (2001) makes a research in
incentives which has focused on performance measures and pay-performance sensitivities but has largely
ignored the performance standard, which generates important incentives whenever plan participants can
influence the standard-setting process. According to Murphy (2001), internally determine standards are
directly affected by management actions in the current or prior year, while externally determine standards
are less easily affected. The finding showed that 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.
With reference to previous studies related to employee involvement definition, Apostolou (2000)
concluded that employee involvement is regarded as a unique human being, not just a part in a machine
and each employee is involved in helping the organization meet its goals. Each employee’s input is
solicited and valued by management. Currently most researchers agree that employee involvement is one
of the major causes of the increase in running the business. This is clearly supported by Cabrera et al.
(2003) results, which showed a highly significant positive relationship between competition and employee
involvements. Besides that, it may also be due to the fact that employees that are in direct contact with the
customer are more aware of their needs and, therefore, have valuable information regarding how to better
serve the client. Thus, organizations will be able to improve their customer service, if the employees are
involved in the decision making process. This is also coincides with another author like Jones and Kato
(2005). This is because, Jones and Kato (2005) presented an econometric case study for employee
involvement on manufacturing firm performance. One of the findings showed that employee involvement
will produce improved enterprise performance through diverse channels such as: (i) membership in
offline teams initially enhances individual productivity by about 3% and rejection rates by about 27%; (ii)
these improvements are dissipated, typically at a rate of 10 to 16% per 100 days in team; (iii) the
introduction of teams is initially accompanied by increased rates of downtime and these costs diminish
over time. In addition: (iv) the performance-enhancing effects of team membership are generally greater
and more long-lasting for team members who are solicited by management to join teams whereas the cost
of team membership (increased downtime) is smaller and diminishes more rapidly as team members
engage in learning by doing for such solicited members; similar relationships exist for more educated team
members.
Furthermore, continuous improvement, also known as kaizen event, is arguably the most critical of
SLI. The concept behind continuous improvement is that changes are made and continually improved
upon. Although perfection will never be achieved, the goal is to continue reaching for it through small
improvements. Evidence showed that numerous organizations that have deployed continuous
improvement initiatives have not been successful in getting what they set out to achieve. Results of a 2007
survey of US manufacturers showed that while 70% of plants had deployed lean manufacturing
techniques, 74% of these were disappointed with the progress they were making with lean (Pay, 2008).
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However, the advantages of continuous improvement have been found in previous literatures. The data
analysis from Terziovski and Sohal (2000) revealed that the motivation to adopt continuous improvement
is relate to improve quality conformance, increase productivity, to reduce costs and improvement in
delivery reliability. Schlichting (2009) has also identified the advantages of continuous improvement
namely: (i) reduce the cost; (ii) move towards the goal of regaining profitability; (iii) reducing
transportation; (iv) eliminate the waste of waiting; and (v) decrease the utilization.
Based on the current findings above, it is concluded that SLI implementation gives many benefits to
our country from social, economic, and environmental aspect. The anticipated approaches in Table 1 can
help meet the others benefit of SLI Implementation. In conclusion, standard work, employee involvement
and continuous improvement are a foundational element of SLI methodologies. Without these, the gains
made from organizing work cells, creating flow production, and starting continuous improvement teams
will only be temporary.
Table 1. Benefit of SLI Implementation
Category Authors Benefit of SLI implementation
Standard
Work
Schlichting (2009)
1. Understanding of process steps at all levels (operator and
manager);
2. Minimizing process variations;
3. Traceability of quality issues (man or machine);
4. Elimination of unnecessary process steps (muda);
5. Production to customer pull (due to set process times);
and
6. Supporting sustainability of implementation changes
(documentation).
Radnor and Bucci
(2011)
1. To work better together;
2. To combine some of processes;
3. Give the confidence to challenge their work; and
4. To seek assistance to help them make the improvements.
Rutter et al. (2008)
1. Simplify training;
2. Prevent mistakes;
3. Reduce cycle times; and
4. Improve safety.
Employee
Involvement
Schlichting (2009)
1. Different opinion have to be heard;
2. The consensus has to be reached;
3. Accept the employee’s input in the problem solution
process;
4. To change their way of thinking; and
5. Implement suggestion systems.
Radnor and Bucci
(2011)
1. Their involvement was made clear to them and the
argument for improvement was delivered in an appropriate
manner; and
2. During the Rapid Improvement Workshop, staff were
engaged in the exercises and contributed. The feedback of the
experience was also very positive.
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Continuous
Improvement
Schlichting (2009)
1. To reduce the cost;
2. To move towards the goal of regaining profitability;
3. Reducing transportation;
4. To eliminate the waste of waiting; and
5. To decrease the utilization of the two computers
numerical controlled machines to 1.5 instead of 2.
Radnor and Bucci
(2011)
1. Improvement activity being undertaken with staff;
2. Starting to change the culture in specific areas of the
organizations;
3. Helping staff to develop skills;
4. Become familiar with Lean and to implement the tools and
techniques to solve specific issues; and
5. The success of Rapid Improvement Workshops - to enable
staff to look at improving other processes.
Melton (2005)
1. Decreased lead times for customers;
2. Reduced inventories for manufacturers;
3. Improved knowledge management; and
4. More robust processes (as measured by less errors and
therefore less rework)
1.2 Sustainable Performance (SP)
Existing performance measurement is used to improve organizational performance. Performance
measurement can help an organization measure progress towards its goals, understand its current
situation, address the key issues, and the options available (Searcy et al., 2008). This statement is also
supported by Amaratunga et al. (2000) who proved that performance measurement as the process of
quantifying the efficiency and effectiveness of an action. 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 (Isik, 2009). Therefore, performance measurement is the process to identify
how successful organizations or individuals have been in attaining their objectives and strategies.
According to previous authors (Mayyas et al., 2012; Moldan et al., 2012; Schoenherr, 2011; Bartelmus,
2010; Singh et al., 2009; Labuschagne et al. 2005; Veleva and Ellenbecker, 2001), sustainable
developments could improve three dimensions of SP namely: (i) environmental sustainability; (ii)
economic sustainability; and (iii) corporate social responsibility (CSR) sustainability. Environmental
sustainability refers to the use of energy and other resources and the footprint companies leave behind as
a result of their operations. It is often related to waste reduction, pollution reduction, energy efficiency,
emissions reduction, decrease in the consumption of hazardous materials, and decrease in the frequency
of environmental accidents. Social sustainability shifts the focus to both internal communities and external
ones (Pullman et al., 2009). Indeed, firms engage in CSR activities as a way to enhance their social
reputation (Fombrun, 2005). 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 MacGilivray, 2001 cited in
Hutton, 2001). Based on the current literature, there have been various dimensions of the sustainable
performance that were used by previous studies. A summary of SP measurements is given in Table 2.
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Table 2. The summary research finding on sustainable performance
Dimension Literature/Authors Findings
Environmental
Sustainability
Yang et al.
(2011)
1. Improved environmental performance; and
2. Reduced the negative impact of environmental
management practices on market and financial performance.
Schoenherr (2011)
1. Provide further motivation for firms to implement
environmental initiatives;
2. Increase the customers’ perception of the plant’s
product in the marketplace;
3. Increase the quality performance; and
4. Increase a plant’s competitive advantage.
Hermann et al.
(2007)
1. Complete in that it includes parts of the production
chain that are outside the boundaries of the industrial system
itself;
2. Making the results easy to interpret for policy
purposes; and
3. Uses readily available information.
Economic
Sustainability
Rennings et al.
(2006)
1. Increase in the number of employees;
2. Increase in turnover; and
3. Increase in exports.
Kumar and
Sutherland (2009)
1. Decrease the price paid to the last user;
2. Increase the selling price;
3. Increase the overhead cost; and
4. Increase levels of dismantling.
CSR
Sustainability
Hutchins and
Sutherland (2008)
1. Positive impact of social change;
2. Establish a comprehensive social footprint;
3. Form a single social sustainability metric; and
4. Form a single measure of performance.
Flack and Heblich
(2007)
1. Involve a long-term shareholder value approach;
3. Profit maximization for a long-term;
4. In the case of manager-led companies, this will make
necessary a change in incentive structure; and
4. A company's goal to survive and prosper, it can do
nothing better than to take a long term view and understand
that if it treats society well, society will return the favor.
Parast and Adams
(2011)
1. Top management support for quality;
2. The availability of quality information has a positive
impact on corporate social responsibility;
3. Social responsibility has a positive and significant effect
on internal quality results; and
4. The effect of corporate social responsibility on external
quality results is not significant.
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3. METHODOLOGY
This research is going to use quantitative survey in the Malaysian automotive industry. The main
reason why this research chose the Malaysian automotive industry it is because the performance of the
national car and the supplied parts by local suppliers still receive criticism, complaints and various
suggested approaches to improve their product quality, operation management, and customer satisfaction
(Habidin, 2012). Population of this research comprised on automotive industry in Malaysia.
Questionnaires will distribute to respondents from the listing of automotive industry obtained from
Malaysian Automotive Component Parts Association (MACPMA), Proton Vendors Association (PVA) and
Kelab Vendor PERODUA.
To determine the causal relationship between the different constructs of the suggested model of the
research, Structural Equation Modeling (SEM) technique was adopted. Ullman (2001) has been described
that SEM as a combination of exploratory factor analysis and multiple regression. A review of current
trends in SEM methodology research according to Wothke (2010) are (i) statistical models and
methodologies for missing data; (ii) combinations of latent trait and latent class approaches; (iii) Bayesian
Models to deal with small sample size; (iv) non-linear measurement and structural models; and (v)
extensions for non-random sampling, such as multi-level models. Thus, SEM technique is one of the most
techniques that one can use to reduce the number of observed variables into a smaller number of latent
variables by examining the co-variation among the observed variables Schreiber et al. (2010). 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 relationship between SLI and SP as
shown in Figure 1. Meanwhile, Statistical Package for the Social Sciences (SPSS) version 17 was used to
analyze 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.
For this paper proposed, a conceptual model has been used to present the relationship between SLI
and SP as presented in Figure 1. This proposed model has adopted the conceptual proposed by Zubir
(2012) cited in Millar and Russell (2011) and Fairfield et al. (2011). However, some amendments
especially on SLI implementation and SP constructs have been made.
*Note: SLI = Sustaining Lean Improvements, SW = Standard Work, EI = Employee Involvement, CI
= Continuous Improvement, SP = Sustainable Performance, CSR = Corporate Social Responsibility
Figure 1. A Proposed Conceptual Model for SME Framework
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3.1 The Relationship between SLI and SP
To ensure the relationship between SLI implementation and environmental sustainability
performance, research by Jayaram et al. (2008) which are studied in the automotive supplier industry find
positive relationships between: (i) relationship building and lean design; (ii) relationship building and
lean manufacturing; and (iii) lean design and firm performance. This suggests that relationship building is
more valuable for enhancing the product aspects of lean strategy as opposed to the process aspects of lean
strategy. Process aspects of lean strategy appear to be largely a function of internal efforts. This finding is
also supported by Schoenherr (2011). The test 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; the initiative of recycling of materials failed to exhibit a significant
influence in all four instances. These results, while partially supporting hypothesis, provide intriguing
insight, especially also compared to findings in prior research. As such, their study overall supports the
notion that environmental initiatives are beneficial, not only in terms of doing the right thing, but also in
terms of operational performance Schoenherr (2011) cite in Montabon et al. (2007).
From the aspect of economic sustainability, Hofer et al. (2012) explored the relationship between
lean production implementation and financial performance. Based on an analysis, 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. The
studies’ findings are largely consistent with Yang et al. (2011). This study explores relationships between
lean manufacturing practices, environmental management and business performance. The findings
suggest that prior lean manufacturing experiences are positively related to environmental management
practice. Therefore, the paper provides empirical evidences with large sample size that environmental
management practices become an important mediating variable to resolve the conflicts between lean
manufacturing and environmental performance. Additional contextual analyses suggest that differences
exist in terms of the strengths and statistical significance of some of the proposed relationships.
Meanwhile, Demeter and Matyusz (2011) who have concentrate on how companies can improve their
inventory turnover performance through the use of lean practices. According to their main proposition,
firms that widely apply lean practices have higher inventory turnover than those that do not rely on lean
manufacturing.
Evidence of positive effects of lean improvements on CSR sustainability performance is presented by
Groen et al. (2012) have showed the performance can improve via: (i) attitude, in consequence of
feedback in improvement initiatives; (ii) social pressure, because it provided the maintenance technicians
with shared priorities and targets; and (iii) capability, because the performance measures uncovered
various improvement opportunities. These variables in turn positively influenced employee initiative.
Questionnaire results show that attitude, social pressure, and capability are significantly correlated with
employee initiative. Another study by Brammer et al. (2005) found that the importance of gender variation
and suggest both that external CSR is positively related to organizational commitment and that the
contribution of CSR to organizational commitment is at least as great as job satisfaction.
However, the relationship between SLI and SP in Malaysian automotive industry will be investigated
deeply via this paper propose. A hypothesis regarding the relationship between SLI and SP is formulated as
follow: H1- There is a positive and direct significant relationship between SLI implementation and SP in
Malaysian automotive industry.
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4. CONCLUSION
The aim of this paper was to carry out the theoretical study on the determinants of critical success
factors (CSF) of SLI namely (i) standard work, (ii), and SP in the Malaysian automotive industry. The main
contribution of this paper was to persuade practitioner from the listing of automotive industry to take an
attention on the relationship among CSFs of SLI and SP in Malaysian automotive industry.
Due to lack of studies on above addressed problem in the country, attempts were made to investigate
the CSFs of SLI 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 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 SLI problem in Malaysian automotive industry with better awareness.
5. ACKNOWLEDGEMENT
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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