Lean manufacturing: context, practice bundles, and performance

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Abstract

Management literature has suggested that contextual factors may present strong inertial forces within organizations that inhibit implementations that appear technically rational [R.R. Nelson, S.G. Winter, An Evolutionary Theory of Economic Change, Harvard University Press, Cambridge, MA, 1982]. This paper examines the effects of three contextual factors, plant size, plant age and unionization status, on the likelihood of implementing 22 manufacturing practices that are key facets of lean production systems. Further, we postulate four “bundles” of inter-related and internally consistent practices; these are just-in-time (JIT), total quality management (TQM), total preventive maintenance (TPM), and human resource management (HRM). We empirically validate our bundles and investigate their effects on operational performance. The study sample uses data from IndustryWeek’s Census of Manufacturers. The evidence provides strong support for the influence of plant size on lean implementation, whereas the influence of unionization and plant age is less pervasive than conventional wisdom suggests. The results also indicate that lean bundles contribute substantially to the operating performance of plants, and explain about 23% of the variation in operational performance after accounting for the effects of industry and contextual factors.

Introduction

Heightened challenges from global competitors during the past 2 decades have prompted many US manufacturing firms to adopt new manufacturing approaches (Hall, 1987, Meredith and McTavish, 1992). Particularly salient among these is the concept of lean production (Womack and Jones, 1996; Womack et al., 1990). Lean production is a multi-dimensional approach that encompasses a wide variety of management practices, including just-in-time, quality systems, work teams, cellular manufacturing, supplier management, etc. in an integrated system. The core thrust of lean production is that these practices can work synergistically to create a streamlined, high quality system that produces finished products at the pace of customer demand with little or no waste. Anecdotal evidence suggests that several organizational factors may enable or inhibit the implementation of lean practices among manufacturing plants. With the notable exception of White et al. (1999), there is relatively little published empirical evidence about the implementation of lean practices and the factors that may influence implementation.

A majority of articles on the topic of lean production system focus on the relationship between implementation of lean and performance. While most of these studies have focused on a single aspect of lean and its performance implications (e.g. Hackman and Wageman, 1995, Samson and Terziovski, 1999, McKone et al., 2001), a few studies have explored the implementation and performance relationship with two aspects of lean (e.g. Flynn et al., 1995, McKone et al., 2001). Even fewer studies have investigated the simultaneous synergistic effects of multiple aspects of lean implementation and performance implication. A noteworthy exception is Cua et al.’s (2001) investigation of implementation of practices related to just-in-time (JIT), total quality management (TQM), and total preventive maintenance (TPM) programs and their impact on operational performance. However, conceptual research continues to stress the importance of empirically examining the effect of multiple dimensions of lean production programs simultaneously.

We examine the relationship between contextual factors and extent of implementation of a number of manufacturing practices that are key facets of lean systems. These contextual factors have been suggested as possible impediments to implementing lean production systems. Specifically, we focus on three contextual factors, plant size, plant age, and extent of unionization. Further, we extend Osterman (1994) and MacDuffie’s (1995) notion of “bundles” from human resource practices to a larger set of manufacturing practices. Specifically, we postulate four “bundles” of inter-related and internally consistent practices; these are just-in-time (JIT), total quality management (TQM), total preventive maintenance (TPM), and human resource management (HRM). We empirically validate our bundles and further investigate their simultaneous and synergistic effects on operational performance.

Section snippets

Lean practices and lean bundles

In the last several years, scholarly journals have published a number of articles that focus on the content of lean production or comprise of case studies that concentrate on individual firm experiences. A review of this literature reveals a number of manufacturing practices that are commonly associated with lean production. Table 1 summarizes our review by cross-listing key practices identified with references.

Table 1 links substantive literature on high performance, lean manufacturing with

Instrument development and data collection

Penton Media Inc., publishers of IndustryWeek and other manufacturing-related publications, conduct an annual survey of manufacturing managers and made their 1999 data available to the authors. IndustryWeek (IW) is an industrial magazine targeted at executives and managers of US manufacturing firms. Penton Media Inc. and PricewaterhouseCoopers jointly developed a mail survey with input from a number of manufacturing experts external to both firms. The survey included four pages of questions

Context and implementation of lean practices

We use likelihood ratio χ2-test statistic to evaluate the relationship of association between contextual factors and implementation of lean practices. For example, for plant size and cellular manufacturing, the 3×3 (small/medium/large size×no/some/extensive implementation) matrix is decomposed into three separate 2×2 component matrices. The likelihood ratios are then compared to evaluate the direction of the overall association. Thus, we computed a likelihood ratio χ2 statistic for each of the

Conclusion

This research suggests two major findings. First, organizational context, i.e. plant size, unionization and plant age, matters with regard to implementation of lean practices, although not all aspects matter to the same extent. Second, applying synergistic bundles of lean practices concurrently appears to make a substantial contribution to operational performance over and above the small but significant effects of context. We discuss each of these findings in turn.

Acknowledgements

The authors would like to thank three anonymous reviewers for thoughtful, constructive suggestions that greatly improved this paper. We also thank the Center for Excellence in Manufacturing Management (CEMM) and Fisher College of Business, both at Ohio State University, for financial support. We are grateful to Penton Media, publishers of IndustryWeek, for allowing access to their data.

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