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Seminar 3 - AMReG 09, 29 Julai 2009, Kajang,Selangor, Malaysia

A REVIEW ON LEAN MANUFACTURING PRACTICES IN SMALL AND


MEDIUM ENTERPRISES
Ahmad Nasser Mohd. Rose, Baba Md. Deros and Mohd. Nizam Abdul Rahman
Department of Mechanical and Materials Engineering,
Faculty of Engineering and Built Environment,
Universiti Kebangsaan Malaysia
43600 UKM Bangi, Selangor, Malaysia
Email: hjbaba@eng.ukm.my

ABSTRACT
The literature studies showed lean manufacturing started at Toyota car
manufacturing plant, Japan, which is known as Toyota Production System (TPS).
The main pillars in TPS are Just in time and automation which main objective is to
identify and eliminate waste in an organization. Lean manufacturing can be
applied successfully in all industries providing a full understanding on lean
ingredients i.e. concept, principles and practices. There are numerous practices
being highlighted by academicians and practitioners which are compulsory to be
implemented in order to gain full benefits of lean. As small and medium
enterprises (SMEs) are resources constraints, facing difficulties to adopt all lean
principles. To compete in global competitive marketplace, the SMEs have to strive
for world class performance through implementation of lean manufacturing. The
main objective of this paper is to carry out a critical review on the lean
manufacturing practices. Previous studies showed total lean manufacturing
practices could help manufacturing organization to gain full benefits i.e. reduction
in inventory, lead time, set up time, and etc., provided theyre adopting all
practices. As the resources constraint to SMEs, the selected practices should be
feasible to the company problem and low investment.
Keywords: Lean manufacturing, TPS, Small and Medium Enterprises (SME)

INTRODUCTION
The global industry in 21st century has forced most of the leaders in several sectors
to implement more competitive manufacturing system. The best answer as found
in the journals is lean manufacturing. Initially its started at Toyota plant, Japan,
which is known Toyota Production System (TPS). It has been widely known and
implemented since 1960. According to (Rineheart et al 1997) lean manufacturing

Seminar 3 - AMReG 09, 29 Julai 2009, Kajang,Selangor, Malaysia

will be the standard manufacturing mode of the 21st century. There is no


alternative to lean manufacturing (Dankbaar 1997). Researchers agreed that lean
manufacturing could be a cost reduction mechanism and if well implemented it will
be a guideline to be world class organization (Papadopoulu & Ozbayrak 2005).
Theoretically, Lean Manufacturing can be applied to all industries (Billesbach
1991, Womack et al 1990). Meier & Forrester (2001) found lean manufacturing
was successfully implemented in the tableware industry
This system is comprised of universal set management principles which could
be implemented anywhere and in any company, it doesnt 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 lean manufacturing methods have
substantial cost and quality advantages over those who still practicing traditional
mass production (Pavnaskar et al. 2003). Lean manufacturing 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 lean manufacturing is to reduce the waste in human effort,
inventory, time to market and manufacturing space to become highly responsive to
customer demand while producing world-class quality products in the most
efficient and economical manner (Pavnaskar et al. 2003). Lean manufacturing is
known as manufacturing without waste (Taj 2005). The waste is consisting of non
added value. There are seven type of waste overproduction, waiting time,
transportation, inventory, inappropriate processing, excess motion and product
defects (Melton 2005; Womack & Jones 2003; Ohno 1988). Most of the
companies waste about 70%~90% of their available resources (Taj 2005). 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
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).

LITERATURE REVIEW
The importance of small manufacturer (SME) to take part in lean implementation is
align with large manufacturer which implementing new management system i.e.
lean manufacturing, as to improve their performance. Therefore, it will affect the
small and medium enterprises (SMEs) that are the suppliers to the large

Seminar 3 - AMReG 09, 29 Julai 2009, Kajang,Selangor, Malaysia

manufacturers. Due to limited resources, SMEs are impossible to implement all


elements or practices at one time (Achanga 2006). As been published by past
researchers and practitioners, lean manufacturing has been implemented
successfully in many large organizations but there is still less documented evidence
of its implementation in smaller organizations (Achanga et al. 2006). The
increasing demand for high quality products and highly capable business processes
by large organization has left no choice on the SMEs to consider Lean
Manufacturing.
The main purpose of this study is to find out the fundamental practices which
are relevant to all SMEs.

SMALL AND MEDIUM ENTERPRISES


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 todays 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 lean manufacturing (Rineheart et al. 1997; Dankbaar 1997;
Papadopoulu & Ozbayrak 2005). The strengths and weaknesses of SME to adopt
lean manufacturing as listed in Table 1.
Table 1. Strengths and weaknesses of SMEs
SMEs strengths
SMEs weaknesses
Flexible and hence changes can be Low degree of standardization and
introduced fairly quickly
formalization
Flat with few layers of management Focus is on operational matters rather
and fewer departmental interfaces
than planning
Top management highly visible and Lay off employees when the work
absence of bureaucracy in management becomes superfluous.
teams
This makes SMEs work harder to
Tend to have high employee loyalty
retain a high caliber staff
Rapid execution and implementation of Budget and resources constraints
decisions
Culture of learning and change rather Responsible for many facets of the

Seminar 3 - AMReG 09, 29 Julai 2009, Kajang,Selangor, Malaysia

than control

business and many decisions.


Decisions are generally made for
short-term profitability

More responsive to market needs and Lack of skills, time and resources; no
customers demand
specified training budget
Loose
and
informal
working Formation of strategy process is
relationships
and
absence
of intuitive rather than analytical
standardization

Source: Antony & Kumar 2005


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).
However, Finch (1986) identifies difficulties in which SMEs may face the
problems compared to large company:
i)
SMEs may not have negotiating power to ensure suppliers provide
frequent delivery and quality standards due to small business
ii)
SMEs have limited resources i.e. manpower and financial, to make
operational changes for lean practices implementation.
iii)
SMEs management have lack of exposure on lean practices
Apart of that, there are critical factors faced by SMEs in productivity
improvement programme as discovered by Gunasekaran & Cecille (1998);
Top management support
Involvement of managers in a team
Education and training
Empowerment of employees
This viewed was supported by Achanga et al. (2006), they discovered four
main fundamental critical success factors to the successful of lean implementation
in SMEs, the most critical is leadership and management, followed by
Financial
Organization structure
Skill and expertise
Rathje et al.(2001) found one of the leading organizations in Europe failed in
lean implementation due to lack of top management commitment, lack of team
autonomy, lack of organizational communication and interest in lean. Therefore, to
success in lean, the organization has to plan properly with total employee

Seminar 3 - AMReG 09, 29 Julai 2009, Kajang,Selangor, Malaysia

involvement and clearly highlight on vision and mission. Lean is not an easy task
as seen.

THE CONCEPT OF LEAN


Lean is considered as a concept which integrates manufacturing system, comprise
of principles, practices and techniques (Karlsson & Ahlstrom 1997). The objective
of lean is to identify and eliminate waste throughout the organization from ordering
raw materials to delivering goods to customer.

Lean concept/philosophy

Lean principles

Lean
practices/techniques/tools

Lean outcomes/benefits

Figure 1. The features of lean


Each element in Figure 1 has to support each other in order to gain full benefits
of lean. According to Standard & Davis (2000);
- Lean philosophy is emphasizing on total system
- Lean principles is focusing the flow of production material throughout the
entire enterprise and
- Lean practices are supporting lean principles by reducing production
variability. Perhaps the single best measure for tracking lean progress is total
product cycle time (total time that material spends in the production system).

Seminar 3 - AMReG 09, 29 Julai 2009, Kajang,Selangor, Malaysia

Then, Womack & Jones (1996) in their book, had highlighted five key
principles should be viewed and practiced in conjunction to success in lean,
namely;
i)
Value the end customers perspectives on product/service
capabilities, price, performance and availability
ii)
Elimination of waste through value streamline, that is, all activities
that do not add value and for which the end customer is unwilling to
pay
iii)
Managing continuous flow of product, information through the
system on a just-in-time basis avoiding batches, waiting, and down
time between activities
iv)
Using pull/kanban, producing only what customers needs
v)
Continual improvement, striving for perfection.
They stressed that the lean is not mainly focus in the production line, but also
relates to activities from product development, procurement and manufacturing
over to distribution.
According to (Karlsson & Ahlstrom 1996), there are nine principles which are
necessary in assessing lean performance, namely
i)
Elimination of waste
ii)
Continuous improvement
iii)
Zero defects
iv)
JIT deliveries
v)
Pull of materials
vi)
Multifunction teams
vii)
Decentralization
viii)
Integration of functions
ix)
Vertical information
Based on the above principles, organization has to implement all activities in order
to gain full benefits of lean.

LEAN PRACTICES
There are number of lean practices explained by academicians and practitioners in
the previous publications. Table 2 is the list of lean practices (Mclachlin 1997;
Shah & Ward 2006). Do SMEs need to apply all practices in the organization?
Among the highest highlighted practices are quick changeover, kanban, continuous
flow, lot size reduction, total quality management and continuous improvement
program.
Researchers found large organisation do not have any difficulties on adopting
lean practices and are likely to implement all practices compared to small
organisation (White et al. 1999; Shah & Ward 2003). The Engineering Employers

Seminar 3 - AMReG 09, 29 Julai 2009, Kajang,Selangor, Malaysia

(2001) final report mentioned that to enjoy full benefits of lean, organizations
should utilize a package of four or five tools and was supported by Bhasin (2006),
the organization should implement most of lean practices in order to fruitful the
greater benefits of lean. Another view from researcher, that if the management uses
a few of the lean techniques only, then, the real potential benefits and continuous
improvement is usually less effective (Spann et al. 1999). However, Bhasin (2006),
has stressing the organisation should implement most of the highlighted practices
as in the Table 3. Through lean practices, it will be able to discover any abnormal
process in the system, and if not solve, it will cause high implication to the system
(Bhasin 2006). The true benefit of lean is able to strengthening the overall system
(Meier & Forrester 2001).
Due to SMEs limited budget, Lee (1997) suggested small manufacturer should
strive to apply the feasible practices only, not all tools at once. It was supported by
White (1999) in his publication. There are four practices which are similarly
suggested in small and large organization namely; set up time reduction, preventive
maintenance, kanban and total quality control as shown in Table 3.
The finding shows that, numerous practices can be applied in the organization
depending on the suitability of organization. Therefore, lack of skill and
knowledge on lean practices will cause wrong interpretation, as a result it cause
inaccurate findings. Four categories of misapplications were highlighted by
Pavnaskar et al. (2003) and Herron & Braiden (2007) are:
i)
use the wrong tool to solve a problem
ii)
use one tool to solve all problems
iii)
use the same set/group of tools to solve all problems.
iv)
lack of understanding
The misapplication of using lean tools or techniques will cause low confident
among employees on lean system (Pavnaskar et al. 2003).

Seminar 3 - AMReG 09, 29 Julai 2009, Kajang,Selangor, Malaysia

Table 2. Lean practices and their appearance in key references (adapted from McLachlin, 1997; Shah & Ward 2003)
Practices

Chan
et al.
(1990
)

Shingo
Prize
Guideline
s (1996)

Flynn
et al.
(1999)

Sakakibar
a et al.
(1997)

Koufteros
et al.
(1998)

White
et al.
(1999)

White
(1993)

Wantu
ck
(1983)

Voss and
Robinson
(1987)

Hay
(1988)

Biche
no
(1989)

Piper
and
McLa
chlin
(1990)

Suzaki
(1985)

Finch and
Cox
(1986)

Lee &
Ebrahimp
our
(1984)

Sugimori
et al.
(1977),
Monden(
1981) &
Pegels
(1984)

Quick
changeover
techniques
Pull system/kanban

*
*

*
*

*
*

*
*

*
*

*
*

*
*

*
*

*
*

*
*

*
*

*
*

*
*

*
*

*
*

*
*

*
*

*
*

*
*

*
*

*
*

*
*

*
*

*
*

*
*

*
*

*
*

*
*
*

*
*
*

*
*
*

*
*
*

*
*

JIT/continuous
flow
production
Lot size reductions
Total
quality
management
Continuous
improvement programs
Preventive
maintenance
Cross-functional work
force
Self-directed
work
teams
Focused
factory
production
Cellular manufacturing
Cycle time reductions
Process
capability
measurements
New
process
equipment/technologies
Safety
improvement
programs

Source : Adapted from Mclachlin 1997; Shah & Ward 2003

*
*

Seminar 3 - AMReG 09, 29 Julai 2009, Kajang,Selangor, Malaysia

Table 3. Lean practices

Mclahlin (1997)
and Shah &
Ward (2003)
i) Set up time
reduction
ii) Kanban
iii) JIT/continu
ous
flow
production
iv) Small lot
v) Total
quality
managemen
t
vi) Continuous
improveme
nt programs
vii) TPM
viii) Multifuncti
on
employee
ix) Selfdirected
work teams
x) Focused
factory

Large organization
Bhasin 2006

i)

Set up time
reduction
ii) Kanban
iii) Continuous
improvement
iv) Group
technology
v) Process
mapping
exercise
vi) Step
change/kaika
ku
vii) 5S and visual
management
viii) Value
and
seven waste
ix) Supplier
development
x) Supplier base
reduction
xi) TPM

Small organisation
Lee, 1997
White, 1999

White, 1999

i)

ii)
iii)

iv)

v)

vi)

vii)
viii)
ix)
x)

Set up
time
reduction
Kanban
Total
Quality
Control
Group
Technolo
gy
JIT
Purchasin
g
Multifunc
tion
Employee
Quality
Circles
Uniform
workload
TPM
Focused
Factory

i)

Set-up time
reduction
ii) Kanban
iii) Total
Quality
Control
iv) Small lot
v) Multifuncti
on
Employee
vi) Group
Technology
vii) JIT
purchasing
viii) Uniform
Workload
ix) TPM
x) Focused
Factory

i)
ii)
iii)

iv)
v)

vi)
vii)
viii)
ix)
x)

Set up time
reduction
Kanban
Total
Quality
Control
Group
technology
Multifuncti
on
Employee
JIT
Purchasing
Quality
Circles
Uniform
Workload
TPM
Focus
factory

THE DIFFERENCES BETWEEN SMALL AND LARGE ORGANISATION


As large organization have strong resources (finance, manpower, and equipment),
they might not facing any difficulties on lean implementation. But, as to small
organisation, the implementation of any new management system might face
obstacles especially on financial. The implementations of lean manufacturing in
small organisation are dependent on their key major customers (Inman & Mehra
1990; Finch 1986). Small organisation may feel the implementations of lean
practices are beyond them (Finch 1986). Any cost implications in the new
management system such as the education and training component, is much harder
for them (Antony & Kumar 2005). But, the small organisation have advantages

Seminar 3 - AMReG 09, 29 Julai 2009, Kajang,Selangor, Malaysia

such as, they are more agile, it is much easier to get management support and
commitment, as opposed to large organizations. Other advantages on small
organisation as listed in Table 1.
No difference was found between small and large organizations related to
workforce management practices (Doolen & Hacker 2005). Supported by (Shah &
Ward 2003), that the small organisation shows similar with large organisation
implementation on cross functional workforce and quality management programs.
It shows that the small organisation are also aware on the importance of these two
practices in order to sustain in global competitive market. Small organisation are
likely to implement multifunction employees compared to large organisation,
whereas quality circles, quality controls, TPM, set-up time reduction and kanban
were higher implemented in large organisation (White et al. 1999). Hence, the
employees are flexible enough to move around to different jobs as needed.
Lee (1997) and Bonavia (2006) found that large and small companies have the
right opportunity to implement lean manufacturing. But to SMEs, to implement all
elements at one time is impossible since the factors of financial constraint and lack
of management commitment (Achanga 2006).

BENEFITS OF LEAN
The previous publications have highlighted various benefits of lean implementation
in Table 4.
Table 4. Lean benefits
Benefits
Stocks reduction

Authors
Billesbach (1994), Fullerton and McWatters (2001),
Lee (1997), Sanchez and Perez (2001), Sakakibara
et al. (1997), White et al. (1999) and Womack et al.
(1990)

Quality
improvements

Billesbach (1994), Cua et al. (2001), Fullerton and


McWatters (2001), Krafcik (1988), Lee (1997),
Sakakibara et al. (1997), Shah and Ward (2003),
Wafa and Yasin (1995), White et al. (1999) and
Womack et al. (1990)

Productivity
(direct labour)

Billesbach (1994), Krafcik (1988), Shah and Ward


(2003), White et al. (1999) and Womack et al.
(1990)

Seminar 3 - AMReG 09, 29 Julai 2009, Kajang,Selangor, Malaysia

Lead or cycle time

Fullerton and McWatters (2001), Sakakibara et al.


(1997), Shah and Ward (2003) and White et al.
(1999)

On-time delivery

Cua et al. (2001), Lee (1997) and Sakakibara et al.


(1997)

Smaller batches

Womack et al. (1990), Lee (1997)

Delivery time

Womack et al. (1990), Fullerton and McWatters


(2001)

IMPEDING FACTORS IN LEAN IMPLEMENTATION


Based on the previous publications, the author noticed that, most of the SMEs
faced the same problem no matter where its located (Lee 1997; Achanga 2006;
White et al. 1999). Among the highlighted problems are:
i)
Lack of top management commitment.
ii)
Lack or resources i.e. workforce and financial
iii)
Lack of expertise and skills in any management system, lean tools and
techniques
iv)
Lack of support from workers
v)
Lack of support from suppliers. Unable to supply in smaller quantities
vi)
Lack of knowledge on tangible and intangible benefits.
vii)
Lack of knowledge on selecting the relevant lean tools
viii)
Unstable demand. Customer may be unable to place predictable
orders.
Based on the highlighted problem, the author will conduct further research as
to find the solution on raised question.
i)
What is the best model/framework can be applied in SME?
ii)
What are the obstacles and how to overcome these obstacles?
iii)
What are the basic lean practices relevant to SME ?
iv)
What are the critical success factors for lean implementation ?

DISCUSSION AND CONCLUSION


In order to ensure SMEs could sustain in global competitive in the 21st century, the
authors stress that lean manufacturing is the best management technique which can
improve their performance. Securing the full benefits of lean manufacturing,

Seminar 3 - AMReG 09, 29 Julai 2009, Kajang,Selangor, Malaysia

requires the organization to concentrate to the whole chain value by implementing


comprehensive tools (Liker 2004; Sanchez & Perez 2000). Several research studies
have shown that lean manufacturing produces higher levels of quality and
productivity and better customer responsiveness (Krafcik 1988).
Large organisation may not facing any difficulties to adopt the whole set of
lean principles but SMEs organisation might face problem due to limited resources.
However, Lee (1997) suggested that the SME could implement lean manufacturing
by implement the feasible practices and low cost consumption such as 5S, Kanban
without computerized system, employee involvement.
Apart of that, as immediate action, the SME also could strengthen the internal
capability by appointed lean management representative. He or she will look the
overall lean process and conduct in house training for particular principles and
practices.
Other alternative, the SME should actively participate with main customer on
lean practices. The smart partnership between supplier and customer in lean
manufacturing could benefit both partners.
Since there is no research being conducted on fundamental of lean practices in
SME, the authors would like to carry out further research in order to;
i)
find the basic lean practices which is feasible to be implemented in
SME
ii)
propose the feasible lean model which could help the SMEs to
implement lean successfully
As a conclusion the authors noticed that there is still gap in lean model and
practices which requires further research.

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