2012 Lean Manufacturing in Developing Countries

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2012 Lean manufacturing in developing countries

DATASET · SEPTEMBER 2014

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4 AUTHORS, INCLUDING:

Roberto Panizzolo

University of Padova

21 PUBLICATIONS 234 CITATIONS

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Patrizia Garengo

University of Padova

21 PUBLICATIONS 313 CITATIONS

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Available from: Patrizia Garengo

Retrieved on: 12 September 2015

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This article was downloaded by: [Universita di Padova]On: 31 October 2012, At: 08:36Publisher: Taylor & FrancisInforma Ltd Registered in England and Wales Registered Number: 1072954 Registered office: Mortimer House37-41 Mortimer Street, London W1T 3JH, UK

Production Planning & Control: The Management of

Operations

Publication details, including instructions for authors and subscription information:http://www.tandfonline.com/loi/tppc20

Lean manufacturing in developing countries: evidence

from Indian SMEsRoberto Panizzolo

a , Patrizia Garengo

a , Milind Kumar Sharma

b & Amol Gore

c

a Department of Innovation in Mechanics and Management, University of Padua, Via Venez

1, 35131 Padua, Italyb Department of Production and Industrial Engineering, MBM Engineering College, Jai Nara

Vyas University, Jodhpur 342011, Rajasthan, Indiac European Commission Scholarship (2010) cd. France, Management and Engineering,

Padova, ItalyVersion of record first published: 04 Jan 2012.

To cite this article: Roberto Panizzolo, Patrizia Garengo, Milind Kumar Sharma & Amol Gore (2012): Lean manufacturing in

developing countries: evidence from Indian SMEs, Production Planning & Control: The Management of Operations, 23:10-11,

769-788

To link to this article: http://dx.doi.org/10.1080/09537287.2011.642155

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Production Planning & Control

Vol. 23, Nos. 10–11, October–November 2012, 769–788

Lean manufacturing in developing countries: evidence from Indian SMEs

Roberto Panizzoloa

, Patrizia Garengoa

, Milind Kumar Sharmab

* and Amol Gorec

aDepartment of Innovation in Mechanics and Management, University of Padua, Via Venezia 1,35131 Padua, Italy; bDepartment of Production and Industrial Engineering, MBM Engineering College,

Jai Narain Vyas University, Jodhpur 342011, Rajasthan, India; c

European Commission Scholarship(2010) cd. France, Management and Engineering, Padova, Italy

(Received in final form 10 November 2011)

India is emerging as a new manufacturing destination and many companies are seeking ways to increase the valueof their products and services by eliminating unnecessary processes and wasteful practices from their productionsystems. The powerful lean manufacturing approach that has proved successful as an operations model indeveloped economies, as well as in some large Indian companies, is now increasingly being recognised by thesmall- and medium-size enterprises (SMEs). The purpose of this research is to investigate the adoption of leanproduction in India and to examine the lean practices deployed by the SMEs. The case study methodology wasutilised and this article presents the findings of four SMEs in India that have implemented lean strategy to drive

significant improvement in manufacturing performance.

Keywords: lean practices; lean manufacturing; India; small and medium companies

1. Introduction

The past decades of the twentieth century were clearly

marked by the decline of the Fordist production

system. Among the various alternatives which emerged

to traditional production methods as depicted in

Fujimoto et al. (1997), the attention of managers and

researchers all over the world soon focused on new

production models based on techniques such as just-in-

time (JIT) and total quality control (TQC) and termedWorld Class Manufacturing or Lean/Flexible

Production or Toyota Production System.

The dominant feature of these new production

systems is that they question the traditional assump-

tion of trade-offs and are able to manufacture a wide

range of models but maintain high degrees of quality

and productivity (Krafcik 1988). Throughout the

1980s, and well into the 1990s, innumerable articles

took, as axiomatic, both the superiority of Japanese

manufacturing and its basis in new and improved

management practices. The message of much of this

literature was that new management techniques havetranscendent virtues which can be applied everywhere.

The culmination was perhaps the publication in 1990

of The Machine That Changed the World , preaching the

gospel of lean production and offering the promise of

two-for-one improvement for all who followed these

Japanese-initiated doctrines (Haslam et al. 1996).

The principles of JIT and TQC thus appeared one of

the most important turning points in the recent history

of operations management (Coriat 1991). Womack

and Jones (1996) continued their research in lean

production and studied the transfer of other companies

into lean crusade in their second book, ‘Lean

Thinking’. They explained that lean manufacturing is

much more than a technique; it is a way of thinking,

and the whole system approach that creates a culture inwhich everyone in the organisation continuously

improve operations.

The successful application of various lean practices

had a profound impact in a variety of industries, such

as aerospace, computer and electronics manufacturing,

forging company, process industry (steel), machine

tools, joy and automotive manufacturing. In the last 10

years, even the manufacturers located in the developing

countries such as China and India are also working to

transform their manufacturing base from traditional

low-cost, labour-intensive ‘Fordist’ production to

higher value, more flexible and more productive

‘lean’ manufacturing systems. The term ‘lean

manufacturing’ is here used as shorthand for a broad

set of changes embodied in efforts to promote ‘high

performance’, ‘continuous improvement’, ‘JIT’ and

ultimately much more efficient and profitable

production.

*Corresponding author. Email: [email protected]

ISSN 0953–7287 print/ISSN 1366–5871 online

2012 Taylor & Francis

http://dx.doi.org/10.1080/09537287.2011.642155

http://www.tandfonline.com


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The driving forces leading this change are twofold.

First, the will of these countries to become more than

just a low-cost production platform for transnational

corporations, they are working to move up the value

chain to design and engineer next-generation, higher

tech, higher fashion and higher value products.

Second, there are so many companies now producing

goods in China and India that simply relying on their

low-cost labour to churn them out inexpensively

confers precious little competitive edge. Overcapacity

in many industries – from automobiles to household

appliances – is already leading to price wars, squeezed

margins and, in some cases, heavy losses.

As pressure on margins in the domestic market

increases, more Chinese and Indian companies with a

strong home base are successfully entering interna-

tional markets. However, to generate profits from

increasingly big investments, these companies will have

to improve the utilisation of factories, manufacture a

broader and more customised range of products, andenhance product quality. The best way to achieve these

goals would be to apply the same lean techniques that

leading manufacturers around the world have success-

fully implemented. As reported by Aminpour and

Woetzel (2006), there is much room for improvement.

Waste is endemic in these factories – those owned by

multinationals and by locals alike. Machines often sit

idle, inventory piles up and bottlenecks choke produc-

tion. Parts deliveries from suppliers arrive late. Defect

rates for components run high. So long as the

advantages of low-cost labour were substantial and

competition was limited, companies tolerated such

inefficiency. Now that margins are shrinking, they havelittle choice but to find ways of raising their produc-

tivity and of improving the quality of their goods.

Lean techniques aim to identify and eliminate the

root causes of waste. But implementing these tech-

niques in China and India presents challenges that can

easily trip up even companies that are well-versed in

the discipline. Managers lack not only crucial skills in

problem solving, coaching and performance manage-

ment but also the industry-specific expertise needed to

accurately diagnose complex technical problems and to

rapidly develop effective solutions. Relentless growth

in many industries means that since factories

constantly scramble to fill orders and expand capacity,

they have little time to refine their production

processes. What is more, these factories often make

products in big batches, thereby creating large inven-

tories of partly finished goods that are prone to

damage, since they lie around for lengthy periods. The

result is higher costs and late deliveries. Poor coordi-

nation between different steps in the production

process often creates bottlenecks. Furthermore, high

employee turnover undercuts the continuity that is

central to the use of lean techniques.

The purpose of our research study is to investigate

the adoption of the current state of lean practice in

four firms in India. This article presents the best

practice case studies from selected manufacturers that

have recently improved or deployed Lean strategies,techniques and technologies.

In order to carry out the empirical study, a research

model able to accurately define and operationalise the

lean production concept had to be developed. More

specifically, we use a lean assessment tool to obtain key

information about the actual operations management

practice in these manufacturing facilities.

This article is organised as follows. First, we review

literature about lean manufacturing and its application

in India. Second, the research methodology is pre-

sented. Third, we describe the assessment tool and how

the empirical investigation was carried out. Fourth, we

present the findings and conclusion of the four assessedcompanies.

2. Diffusion of lean manufacturing in India

As India is entering the global arena and emerging as

the new destination for global manufacturing, a

number of manufacturing management practices and

philosophies are finding their way into the Indian

industries. According to a study conducted by Deloitte

(2010) and the US Council on Competitiveness in 2010,

India ranks second in manufacturing competitiveness

and India’s talented pool of engineers and managersare rapidly grasping the techniques and strategies

necessary to achieve success in the highly competitive

global markets. India has been on tenterhooks since

1991 when a series of reforms were initiated as

monetary, fiscal, trade, exchange rate, licensing regu-

lations, capital issues and there was a sea of change

with the entire nation in the process of deconstruction,

the changes uprooting the deep-seated paradigms and

all that go with it – mindsets, beliefs, attitudes, lifestyle

and so on. Today, India is the place to be for design,

development and manufacturing of innovative prod-

ucts and major companies from Europe, USA and

Japan are viewing Indian industries as active partici-pants in the entire value chain. Many Indian compa-

nies are attempting to establish operations models that

have proved successful in the developed economies and

as the Indian-born Dean of Harvard Business School,

Nohria (2010) implied at a key address in Mumbai, it is

for the Indian companies to absorb modern operations

strategies and work to achieve, maintain and sustain as

a significant player in the global competition.

770 R. Panizzolo et al.


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The lean manufacturing approach is such a pow-

erful operations model that has been vastly explored

and practised by successful organisations in developed

countries and has been applied in Indian companies

recently. Research shows that initially, the lean imple-

mentation process was slow in India, similar to other

developing countries, largely because of the anxiety in

changing the mindset of people, lack of awareness and

training about the lean concepts, and cost and time

involved in lean implementation. Nevertheless, Indian

managers are learning from an array of lean practices

and over the last 5 years, there have been significant

efforts in developing a lean strategy. Evidence suggests

that the diffusion of lean manufacturing in India has

been substantial in the automotive and electronic

sectors that were exposed to global competition faster

(Mohanty et al . 2006, Dangayach and Deshmukh

2008). Although the lean production principles were

derived from the Toyota Production System in Japan

and popularised as the Japanese manufacturing tech-nique (Wooldridge 2010), it seems today that Indian

companies are stronger proponents and practitioners

of lean production while the Japanese automakers are

now exploring ways to modify their approaches with

Toyota making an annual loss of USD 4.4 billion in

2009, a loss for the first time after 1963 on a year-

on-year basis, and Japan tumbling to 27th position on

the IMD’s World Competitiveness Rankings 2010.

According to Cusumano (1994, 2010), the Japanese

gains in manufacturing productivity and their rapid

expansion and replacement of product lines may have

indeed reached a limit. On the other hand, Indian

organisations are seeking ways to increase the value of their products and services by eliminating unnecessary

processes and practices from all systems.

It is only in this decade that Indian industries have

realised the importance of manufacturing as a com-

petitive weapon. This strategic asset has been typically

overlooked by the Indian top management in the past

but it has now become discernable probably because

the traditional sources of competitive advantage have

become order-qualifying criteria and no longer the

remarkable order winners anymore. The manufactur-

ing in India is at a critical juncture as firms attempt to

adopt world class practices and face grim challenges in

the competition-driven market akin to those faced by

firms the world over. Indian companies need to reduce

the product development cycle times, develop products

that achieve strategic objectives, make optimum use of

resources, develop not one but a stream of new

products over time, and build on opportunities for

growth rather than getting obsessed with market share.

According to Womack (2008), companies in India have

to move from mass production model to lean

production since lean uses less of everything – human

effort, investment in tools, engineering time and

inventory – compared with mass production. The

lean producer combines the advantage of craft and

mass production while avoiding the high cost of the

former and the rigidity of the latter. Moreover, the

governments and companies in the developed countries

are pressing upon all entities in the supply chain to

ensure sustainability and environmental responsiveness

(Shukla et al . 2009) by providing cooperation under

certain bilateral frameworks. The government of India

has instituted the lean manufacturing competitiveness

scheme for micro, small and medium enterprises to

assist firms in reducing their manufacturing costs

through improved process flows, better space utilisa-

tion, scientific inventory management and reduced

engineering time. Although there is no specific per-

centage identified as the level of diffusion of lean

manufacturing in India, the debate around the lean

operations model and the level of diffusion in India canbe progressed by reviewing the studies, research, or

substantiating data available in this regard. Table 1

consolidates some work in this field.

The Indian automotive sector is way ahead of the

other sectors in the implementation of lean

manufacturing principles. It is observed that the

Indian companies having tie-up with reputed foreign

companies, this being common in the automotive

sector, progressed in the lean practices or became

aware of lean concepts through company-wide training

programmes. For example, Maruti Suzuki draws the

learning of lean manufacturing from its parent com-

pany Suzuki Motor Corporation and hinges its modelaround four important pillars, namely cost, quality,

safety and productivity. Another example is Ford

India automobile plant near Chennai, built around an

array of new lean manufacturing techniques to make it

ultra-efficient and its products cost-competitive. The

lean approach enables Ford India to organise build-to-

order production with parts and components supplied

from the adjacent 30-acre supplier park and other local

suppliers.

Indian small- and medium-size enterprises (SMEs)

have been consistently outperforming large industries

on crucial parameters such as production, employment

and role in the global market (Tuteja 2001). These

firms have shown a consistent growth rate, both under

a protected economy and an open economy (Ghose

2001), and they are of major importance to the future

economic growth of the Indian community, as well as

the international market. However, in order to sustain

this role, they need support in defining their specific

managerial needs and in finding the right approach to

respond to them (Dangayach and Deshmukh 2005).

Production Planning & Control 771


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The large organisations in India have greater aware-

ness of lean manufacturing while the SMEs lag behind.

In the SMEs, the perceived benefits of lean are low

and the management is often reluctant to invest in

consultants due to the high consultancy fees. The

research in the machine tool sector (Eswaramoorthi

et al . 2010) shows that the reasons for medium to low

diffusion have been attributed to frequent changes in

design, customer-specific tooling, long lead time to

produce a machine tool and resource constraints. The

process industry on the other hand has not extensively

explored the possibility of lean implementation as there

is a perception that the process industry is inherently

more efficient and presents relatively less need for

improvement activities. According to Mishra et al .

(2008), it is essential to systematically demonstrate how

lean manufacturing tools can help to eliminate waste,

achieve better product quality and inventory control.

More generally, lean manufacturing diffusion in India

could be constrained by lack of in-depth training,

inadequate number of qualified lean thinkers and

limited lean education–industry association.

3. Research methodology

Case studies form the methodological basis of the

research presented in this article. Four Indian compa-

nies were selected from a larger pool of firms because

of better availability of data. Access to information is

an important factor in conducting case study research

(Yin 1994). In all four cases, access was gained throughthe chief executive and senior management of each

company. The research team had unrestricted access to

the organisation at all levels, thanks to the consoli-

dated collaboration with the authors.

Each case study presented is unique, the industries

are varied, some companies are Lean veterans, and

others have just implemented Lean processes for the

first time. The four cases were selected because the

Table 1. Evidence to comprehend the level of diffusion of lean manufacturing in India.

Industry sector inIndia

Journal/research studies onlean manufacturing in India Authors/companies Level of diffusion

Automotive International Journal of Production Research

Interfaces

Vilakshan – XIMB Journal of Management

IIM Bangalore Working PaperNo. 286

Dangayach and Deshmukh(2001)

Balakrishnan et al . (2007)

Mohanty et al . (2006)Saranga et al . (2009)Ashok Leyland, Bajaj Auto,

Tata Motors, Ford India,Maruti Suzuki India,TVS-Wabco India

Very high

Machine tool International Journal of Advanced ManufacturingTechnology

Eswaramoorthi et al . (2010) Medium to low

Electronics/IT/engineering

Benchmarking: AnInternational Journal

Gurumurthy and Kodali(2009)

Wipro, Samsung India,Flextronics, LG Electronics,Lapp India

High

FMCG International Journal of Advanced OperationsManagement

International Journal of Rapid Manufacturing

Upadhye et al . (2010)Singh et al . (2010)HUL, Britannia Industries,

Godrej

Medium to low

Process industries CurieJournal of Scientific and

Industrial Research

Mishra et al . (2008)Mahapatra and Mohanty

(2007)Grasim Industries, Jindal Steel,

Kansai Nerolac

Medium to low

Aerospace SMEworld Janakiram (2008)Hindustan Aeronautics Ltd.

Medium to low



7/22

adopted lean practices favour the selected companies’

revival after the big jolt they experienced from the stiff

competition from domestic competitors and globalisa-

tion. These companies stand out from their peers

because their lean programmes have driven and

continue to drive significant improvements in

manufacturing performance, customer responsiveness

and bottom-line financial results. Timely following

best practices helped companies to regain their status

in the market and, considering the performance indi-

cators identified by Bititci et al . (2011), they are

recognised as leading companies in their respective

sectors in India.

The unit of analysis was lean managerial practices.

The object of analysis was SMEs that were identified

using Scott and Bruce’s (1987) definition with some

further specifications to define both the characteristics

of the population from which the research sample was

drawn and the boundaries of generalisation of the

findings (Eisenhardt 1989, Yin 1994). These specifica-tions are as follows: the management is independent,

i.e. capital was supplied by an individual or a small

group and a parent company could not influence the

adoption of lean practices; the company belongs to the

manufacturing sector; the area of operations is the

global market and the number of employees is between

100 and 250.

The data were collected by visiting the companies

and interviewing entrepreneurs and managers at dif-

ferent organisational levels. Company documents and

interviews with company consultants were used to

collect additional information and to better understand

the data gathered. The interview protocol was dynam-ically adjusted to maximise insights into the themes

that emerged during the interviews (Eisenhardt 1989).

The case studies were tested for construct validity and

internal validity. To ensure construct validity (Kidder

and Judd 1986), the authors looked for multiple

sources of evidence for each of the important elements

in the propositions using the triangulation technique

(Denzin 1978, Fielding and Fielding 1986). Use of

multiple informants and archival data helped authors

crosscheck pertinent information and verify the reli-

ability of data obtained. To demonstrate internal

validity (Yin 1994, Shadish et al . 2001), the authors

recorded evidence of other factors that could be

alternative explanations for the observed patterns.

Although this study was retrospectively carried out

to the adoption of lean management practices, the

research team further engaged with the case study

companies to validate and verify oral data, observa-

tions, interpretations and conclusions. The research

team discussed each case study and created a map of

factual events and mapped their data (including oral

data, observations, documentation and research log)

against these events, together with the hypothesised

reasoning behind these observations. For example, on

adoption of a particular lean practice (factual event), a

change in management behaviour was observed (obser-

vation) which was possibly caused by a fear of

exposure (hypothesis). These maps were then testedthrough discussions with individuals or groups of

individuals at the company to verify the validity of the

observation.

In order to carry out the empirical study, an

assessment tool able to accurately define and oper-

ationalise the lean production concept has been devel-

oped. In investigating this issue, we adopted an

approach that combined elements of systematic liter-

ature review (Denyer and Tranfield 2008, Rousseau

et al . 2008) with the authors’ previous knowledge of the

field. All the collected information was brought

together using the categorical aggregation and inter-

pretation technique, which brings instances togetheruntil something can be said about them as a group

(Buckley et al . 1976, Stake 1995). The identified tool

(Figure 1) allows for the operationalisation of a

complex and multidimensional concept such as lean

production. It summarises the principles contained

within lean production and allows the process of

adoption and implementation of lean production

philosophy to be studied better.

4. The assessment tool

Several studies in the literature have tried to identify

the determinants of these innovative production sys-

tems (Bartezzaghi and Turco 1989, Chan et al . 1990,

Moras et al . 1991, Goyal and Deshmukh 1992, Mehra

and Inman 1992, Sakakibara et al . 1993). An exami-

nation of these works shows, clearly, that this wide

range of best practices concerns:

. interventions in the manufacturing area;

. actions taken in other areas of the firm

(design, human resources, strategy, etc.);

. relationships with external actors (suppliers

and customers).Early studies mainly focused on manufacturing

planning and control practices and on the character-

istics of production processes in lean firms (Hall 1993).

In the area of manufacturing planning and control, the

goals are to synchronise production and market

demand, simplify management and speed up flows.

These goals can be attained through levelled and

synchronised production, the use of small lots, pull



8/22

AREAS OF INTERVENTION IMPROVEMENT PROGRAMMES

Process & EquipmentPE1 Set up reduction

PE2 Flow lines

PE3 Cellular manufacturing

PE4 Rigorous preventive maintenance

PE5 ‘Error proof’ equipment

PE6 Progressive use of new process technologiesPE7 Process capability

PE8 Order and cleanliness in the plant

PE9 Continuous reduction of cycle time

Manufacturing Planning & Control

PPC1 Levelled production

PPC2 Synchronised scheduling

PPC3 Mixed model scheduling

PPC4 Under-capacity scheduling

PPC5 Small lot sizing

PPC6 Visual control of the shop floor

PPC7 Overlapped production

PPC8 Pull flow control

Human Resources

HR1 Multifunctional workers

HR2 Expansion of autonomy and responsibility

HR3 Few levels of management

HR4 Worker involvement in continuous quality

improvement programmes

HR5 Work time flexibility

HR6 Team decision making

HR7 Worker training

HR8 Innovative performance appraisal and performance

related pay systems

Product Design

PD1 Parts standardisation

PD2 Product modularisation

PD3 Mushroom concept

PD4 Design for manufacturability

PD5 Phase overlappingPD6 Multifunctional design teams

Supplier Relationships

SR1 JIT deliveries

SR2 Open orders

SR3 Quality at the source

SR4 Early information exchange on production plans

SR5 Supplier involvement in quality improvement

programmes

SR6 Reduction of number of sources and distances

SR7 Long-term contracts

SR8 Total cost supplier evaluation

SR9 Supplier involvement in product design and

development

Customer RelationshipsCR1 Reliable and prompt deliveries

CR2 Commercial actions to stabilise demand

CR3 Capability and competence of sales network

CR4 Early information on customer needs

CR5 Flexibility on meeting customer requirements

CR6 Service-enhanced product

CR7 Customer involvement in product designCR8 Customer involvement in quality programmes

Figure 1. The assessment tool.



9/22

control of flows and visual control of the shop floor

and so on (Monden 1983).

Whether it is possible to operate along these lines

depends on the availability of production processes

that are able to guarantee regularity and uniformity,

over time, of the mix. These conditions require, for

example, shortening of set-up times, the use of cellular

layouts and of mixed model lines, process capability,

availability and reliability of machines, the use of

‘error-proof’ equipment, and so on (Schonberger

1986). The perspective of analysis was only broadened

in later studies as it became clearer that setting up a

lean production system required the adoption of best

practices not only in relation to manufacturing but also

in other areas of the firm. This broadening of the range

of analyses led some authors to introduce such

concepts as ‘core JIT’ and ‘JIT infrastructure’

(Sakakibara et al . 1992).

First of all, JIT operating practices have a profound

impact on human resources management insofar as theyrequire increased involvement and commitment on the

part of employees. Furthermore, human resources take

on strategic importance because of their role in carrying

out the continuous quality improvement plans which

are the basis for success in the lean production model

(Blackburn and Rosen 1993). This has meant that both

the instruments and the classic human resources man-

agement models have had to change.

Much attention is also being devoted to the study

of the relationships between product development and

manufacturing (Clark and Fujimoto 1990). All prac-

tices which seek to improve ‘product producibility’,

such as product simplification, parts standardisation,modular architecture of the product and mushroom

concept, play an important role. In this way, it is

possible to improve the links between product devel-

opment and manufacturing, that is, to design products

which are tuned to the physical and managerial

characteristics of the production system.

At the same time as studies on the relation between

the adoption of best practices in manufacturing and its

implications for other areas in the firm, the first studies

began to appear, in the international literature, where

operations were seen in a broader, more integrated

manner, upstream with suppliers and downstream with

customers, according to a view of networks of firms

and of the relations between them.

The subject of supply chain management has been

taken up by many authors who have described the

practices and the innovative policies adopted by lean

manufacturers (see e.g. Lamming 1993). These prac-

tices and policies highlight the importance of reducing

the number of suppliers; of establishing closer and

longer term relations with suppliers; of using

innovative vendor rating programmes based on

global costs; of involving suppliers not only in logistic

decisions (i.e. lot size, regularity and timeliness of

deliveries, quality at the source) but also at the

technological/strategic level (i.e. joint design of new

products/technologies and sharing business’ risks and

opportunities).However, adopting a lean production logic also

means setting up innovative relationships with cus-

tomers and, in comparison with other perspectives, this

has, so far, been somewhat neglected in the literature.

Harper (1985) was one of the first authors to analyse

this problem and draw attention to the crucial

importance of managing relations with customers.

This particular aspect was later taken up by other

authors (Schonberger 1990, Fincke and Goffard 1993,

Westbrook and Williamson 1993), who underlined the

need to construct a ‘customer in’ organisation in which

the important topics are the capability and competence

of the sales network, exchange of information withcustomers, the ability to carry out frequent and rapid

deliveries, and customer involvement in product plan-

ning and design.

This focus on suppliers and customers emphasises a

strategic vision of lean production, one which focuses

on the external networks of the firm. Some authors

have conceptualised this vision suggesting the use of

the term lean enterprise instead of lean production:

We’ve seen numerous examples of amazing improve-ments in a specific activity in a single company. Butthese experiences have also made us realise thatapplying lean techniques to discrete activities is not

the end of the road. If individual breakthroughs can belinked up and down the value chain to form acontinuous value stream that creates, sells, and servicesa family of products, the performance of the whole canbe raised to a dramatically higher level. We think thatvalue-creating activities can be joined, but this effortwill require a new organisational model: the leanenterprise (Womack and Jones 1994).

Building upon the literature, the model, depicted in

Figure 1, represents a conceptualisation of lean

production which consists of a number of improve-

ment programmes or best practices that characterise

different areas of the lean company. These areas are:

Process and Equipment, Manufacturing Planning and

Control, Human Resources, Product Design, Supplier

Relationships and Customer Relationships. The prin-

cipal improvement programmes are highlighted for

each of the above areas.

5. Empirical investigation

In this section, we present the four independent case

studies. The description highlights the important role



10/22

played by the change in the competitive environment

caused by the liberalisation of the 1991. For each case

study, we summarise the company profile, the mana-

gerial approach previous to and after 1991 and we

present in tabular form the following factors:

. Competitive factors characterising the envi-

ronmental context after the liberalisation of the 1991. The authors had access to the

dispatch advice-related documents and quar-

terly sales review reports to further crosscheck

the views expressed by the interviewers about

the subsequent ranked competitive factors.

. Lean manufacturing practices to face the new

competitive environment: the authors listed

the main lean manufacturing practice that the

company identified as a potential stimulus to

answer to the chances in the competitive

environment.

.

Key changes introduced by the leanmanufacturing implementation.

. Benefits observed b y following lean

manufacturing practices. Benefits observed

again strengthen the viewpoints of the authors

to carry out this study as all these benefits are

directly related to the improvement in the

overall business performance of the company.

. Barriers in implementing lean manufacturing.

The top management feels that these barriers

are temporary in nature and could affect the

lean manufacturing practice only in initial

stages of its implementation.

In the following, we summarise the four cases and

then we highlight the quantitative benefits observed by

adopting Lean Manufacturing.

5.1. Company A

Company A is the oldest surgical disposable needles

and syringes manufacturing company (established in

1981) and catering to the consumer goods market

segment. It belongs to a medium-scale industrial SMEs

located in the western part of India. The company

produces all types of disposable needles and syringes.With 100 employees, it enjoys 15% market share in the

disposable needles and syringes market. Presently,

company A is the third largest manufacturer of

disposable needles and syringes in India and has

20% exports (mainly in US market) of total sales.

Plant and machinery together with the technology were

brought from Korea. It is an ISO 9001 certified

company.

5.1.1. Until 1991

During the 1950–1990 period, an era of limited supply,

the National industrial policy was restrictive and

regulative, therefore the company’s production was

less than demand. Being the oldest disposable needles

and syringes manufacturer, the company enjoyed a

monopoly status in India. Initially, the company didnot have proper lean practices for manufacturing and

other peripheral business activities as demand out-

stripped capacity and it enjoyed a protected seller’s

market.

5.1.2. Since 1991 to current time: adoption of a lean

manufacturing approach

After relaxation in the industrial policy, many new

companies have entered in this sector with foreign

collaboration. Since 1991, the company had to face

cut-throat competition from local SMEs and large-

scale manufacturers. It had to introspect its businessactivities from all angles to survive in the highly

competitive market. The company decided to become

leading disposable needles and syringes manufacturer

in India (Vision) and to supply superior quality,

eco-friendly and low-cost disposable needles and

syringes on time (Mission). Owing to increased

competition, the company adopted proper lean

manufacturing practices that focused on waste

reduction and optimum utilisation of resources. The

company decided to adopt the best practices

characterising different operations (i.e. process and

equipment, manufacturing planning and control,

human resources, product design, supplier relation-

ships, customer relationships, etc.). It also extensively

invested in electronic data interchange, internet, extra-

net, intranet, websites, bar-coding, fax, etc. and framed

a proper lean manufacturing strategy. The company

also hired professional help outside from consultants

and experts from time to time for proper implemen-

tation, use and review of lean manufacturing practices.

It is also thinking to appoint at least two full-time

employees to look after the lean manufacturing

activities round the clock (Table 2).

In 1995, the company has grown explosively and its

production volume has also increased. The companyalso started exporting to Europe (12 countries) since

1998.

5.2. Company B

Company B is a small-scale bearing balls manufactur-

ing company. It produces bearing balls for all types of

bearings. Its customer ranges from country’s largest



11/22

T a b l e 2 . C o m p a n y A .

C o m p e t i t i v e f a c t o r s

( a f t e r t h e 1 9 9 1 )

L e a n m a n u f a c t u r i n g

p r a c t i c e s t o f a c e n e w

c o m p e t i t i v e e n v i r o n m e n t

K

e y c h a n g e s i n t r o d u c e d b y t h e l e a n

m a n u f a c t u r i n g i m p l e m e n t a t i o n

Q u a l i t a t i v e b e n e f i t s

o b s e r v e d b y f o l l o w i n g

l e a n m a n u f a c t u r i n g

p r a c t i c e s

B a r r i e r s i n i m p l e m e n t i n g


D e l i v e r y s p e e d ( p r o v i d e

f a s t d e l i v e r i e s )

D e p e n d a b l e d e l i v e r i e s

( o n t i m e d e l i v e r i e s )

P r o d u c t r e l i a b i l i t y

E a s y a n d e c o - f r i e n d l y

d i s p o s a l o f t h e u s e d

p r o d u c t s

C o n f o r m a n c e q u a l i t y

Q u i c k r e s p o n s e t o

c u s t o m e r s

C o m p e t i t i v e c o s t

P r o c e s s a n d e q u i p m e n t ,

m a n u f a c t u r i n g

p l a n n i n g a n d c o n t r o l

H u m a n r e s o u r c e s

P r o d u c t d e s i g n

S u p p l i e r r e l a t i o n s h i p s

C u s t o m e r r e l a t i o n s h i p s

F a s t c o m m u n i c a t i o n

w i t h t h e t r a d i n g

p a r t n e r s o n r e a l - t i m e

b a s i s

O n l i n e s u p p l i e r

i n f o r m a t i o n t r a c k i n g

A u t o m a t i c r e l e a s e o f

p u r c h a s e o r d e r s

( b a s e d o n i n v e n t o r y

l e v e l )

S p e e d

u p t h e p r o d u c t i o n p r o c e s s

I n v e n t

o r y s i z e a n d l e a d t i m e r e d u c t i o n b y

i m p

l e m e n t i n g J I T t e c h n i q u e

Q u i c k

l a u n c h i n g o f n e w p r o d u c t

E m p l o

y e e s ’ i n v o l v e m e n t i n c o n t i n u o u s q u a l i t y

i m p

r o v e m e n t p r o g r a m m e s

M a t c h

i n g c o m p e t i t o r s ’ f e a t u r e s b y c o n t i n u -

o u s l y i m p r o v i n g p r o d u c t s a n d s e r v i c e s

t h r o

u g h s u p p l i e r a n d c u s t o m e r i n v o l v e m e n t

i n p

r o d u c t d e v e l o p m e n t

O n l i n e

i n f o r m a t i o n f o r i n t e r n a l f u n c t i o n a l

c o n t r o l l i k e w o r k - i n - p r o c e s s o n s h o p f l o o r ,

d a i l y p r o d u c t i o n t a r g e t , d a i l y , w e e k l y a n d

m o n t h l y p r o d u c t i o n s c h e d u l e , d a t a r e l a t e d

t o q

u a l i t y c o n t r o l , a l l i n v e n t o r y c o n t r o l

a s p e c t s , d e t a i l e d h e a l t h a n a l y s i s o f e a c h

e q u i p m e n t

T r a i n i n g o f e m p l o y e e s

C o m p u t e r i s a t i o n o f c o m p a n y ’ s p u r c h a s e a n d

d i s t r i b u t i o n s y s t e m w i t h m o r e t h a n 5 0 % o f

i t s v

e n d o r s a n d c u s t o m e r s c o n n e c t e d

t h r o

u g h t h e n e t w o r k

I m p r o v e d r e l a t i o n s i n

t h e s u p p l y c h a i n

B e t t e r c u s t o m e r s e r v i c e

A c c u r a t e f o r e c a s t i n g

A n e d g e o v e r c o m p e t i -

t o r s i n t h e i n d u s t r y

I m p r o v e m e n t

s i g n i f i c a n t l y i n t h e

p r o d u c t i v i t y a n d

w a s t e e l i m i n a t i o n

I n c r e a s e r e s p o n s i v e n e s s

a n d c r o s s -

f u n c t i o n a l i t y

L a c k o f t r a i n i n g a n d

a w a r e n e s s a m o n g

e m p l o y e e s

P o o r i n f r a s t r u c t u r a l

f a c i l i t i e s

R e s i s t a n c e t o c h a n g e

a n d t o a d o p t

i n n o v a t i o n s



12/22

bearing manufacturing company to big multi-national

companies operational in India. It is an ISO 9002

certified SMEs and operates in a multi-plant environ-

ment, all located in the same vicinity in the western

region of India. The company has technical links with

a leading Japanese company. The company was

established in 1985 and started production in 1986.It enjoys a 20% market share and it supplies products

to leading bearing manufacturing companies.

It exports 15% of its total production to overseas

market. Its MD is a graduate engineer in mechanical

engineering and is a quality-conscious person.

The number of employees in the firm is 100.

5.2.1. Until 1991

The company enjoyed and maintained its market share

consistently with reasonably handsome profit margins.

As the company’s core competency lies in its quality, it

invested extensively to establish and maintain world-class quality system in house, which further led to high

manufacturing costs. Since the company was getting

sufficient economic returns from its customers, it

hardly looked into its high production cost aspect.

There were excessive inventory and waste (due to scrap

and rework) in the work place. The company used to

purchase its raw material from some selected local

suppliers by paying hefty premium prices. There were

hardly any interdepartmental coordination that led to

delay and poor decision-making.

5.2.2. Since 1991 to current time: adoption of a leanmanufacturing approach

Post-liberalisation era allowed large multinational

corporations to come in India and sell the bearings at

much lower price than India’s local bearing manufac-

turers. That forces local bearing manufacturers to

negotiate their suppliers (bearing ball manufacturers)

on cutting their prices drastically. Also in 1992, three

new local manufactures in the same industrial region

started and launched production of bearing balls and

supplied them at much lower prices than the company

B. There was cut-throat competition in bearing market

that led the bearing manufacturing companies to

compromise on quality. No doubt, product quality of

Company B was much superior to that of new entrants

in the market. Initially, Company B did not realise the

degree of competition because of its high-quality

products but after losing about 25% of its market

share by such local companies, it decided to introspect

its internal system. It also started to explore export

opportunities but did not succeed much due to stiff

competition from Chinese manufacturers (Table 3).

The company managed to regain its lost local

market share due to the entry of new local entrants, by

exporting its products at very attractive profit margins.

By following lean manufacturing practices, the com-

pany was able to attract international customers and

able to get much attractive international orders than

what it had lost in local market and was able toeconomically justify the initiatives taken on lean

manufacturing.

5.3. Company C

The Company operates in a multi-plant environment

in western India. It is in the business of iron handicraft

manufacturing and exclusively export-oriented unit.

Majority of its customers are based in United States of

America and Europe. The company is running five

overseas marketing offices also to look after market-

ing- and sales-related activities for better customer

services. It is a medium-scale company managed by

three professionally qualified partners. It is the largest

company in its segment of products and ISO 9001

certified company. The company was established in

1985 with a small turnover. The company has about

200 employees. The use of computers and IT tools is

very prominent in the day-to-day functioning of the

company. The strength of the company lies in its

innovative design and product development.

5.3.1. Until 1991

Before the opening of the Indian economy and

liberalisation (1991), the company was following tra-

ditional industry practice due to a license regime in the

country. Much of the time was spent in translating

the design requirements of the customer orders into the

acceptable finished products. As majority of its

customers were based at overseas market, much of

company’s productive time was lost in searching for

the quality customers and then to procure their repeat

orders. Retaining customers for the long duration of

time was the biggest challenge for the company, besides

the cost, quality and delivery issues. The fast-growingcompetition from the China and the other local

manufacturers forced the company to cut its profit

margins considerably. Hence, the top management of

the company had to give a serious thinking to cut

down its production costs and other overheads.

Decision-making process was also slow and complex

in view of absence of the proper performance mea-

surement system.



13/22

T a b l e 3 . C o m p a n y B .


( a f t e r t h e 1 9 9 1 )

L e a n m a n u f a c t u r i n g p r a c t i c e s

t o f a c e n e w c o m p e t i t i v e

e n v i r o n m e n t

K

e y c h a n g e s i n t r o d u c e d b y t h e


i m p l e m e n t a t i o n

Q u a l i t a t i v e b e n e f i t s o b s e r v e d

b y

f o l l o w i n g l e a n

m a

n u f a c t u r i n g p r a c t i c e s

B a r r i e r s i n i m p l e m e n t i n g l e a n

m a n u f a c t u r i n g

C o n f o r m a n c e q u a l i t y

P r o d u c t r e l i a b i l i t y

P r o d u c t p e r f o r m a n c e

C o m p e t i t i v e p r i c e




( o n - t i m e d e l i v e r i e s )

P r o d u c t i o n s y s t e m a n d

p r o c u r e m e n t p a r t n e r

S u p p l i e r r e l a t i o n s h i p

E q u i p m e n t i n n o v a t i o n

E f f e c t i v e a n d f a s t c o m m u n i c a -

t i o n

S h o p f l o o r s u p e r v i s i o n

U

s e o f e x t e n s i v e l y e a r l y

i n f o r m a t i o n e x c h a n g e o f

p r o d u c t i o n p l a n w i t h

s u p p l i e r s

R

e d u c e d n u m b e r o f s u p p l i e r s

a n d a w a r d e d t h e m l o n g -

t e r m c o n t r a c t s a t

c o m p e t i t i v e p r i c e s

C u t d o w n i t s s e l l i n g p r i c e i n t h e

d o m e s t i c m a r k e t

s i g n i f i c a n t l y

C h e c k o f t h e q u a l i t y o f r a w

m a t e r i a l a t t h e o w n e n d o f

t h e s u p p l i e r s

S u p p o r t t o J I T d e l i v e r i e s

w i t h i n t h e p l a n f o r m a n a g -

i n g i n v e n t o r y

I d

e n t i f y b o t t l e n e c k s a n d t a k e

c o r r e c t i v e a c t i o n s

P u r c h a s e s e c t i o n i s f u l l y

c o m p u t e r i s e d

P r o c e s s o f p u r c h a s e i s

s t r e a m l i n e d

R e d u c t i o n o f w a s t e

Q u i c k

d e c i s i o n - m a k i n g

C o m p

l e t e l y b o o k e d f o r i t s

p r o

d u c t i o n t i l l t h e n e x t y e a r ,

2 0 %

o f w h i c h i s f r o m e x p o r t

o r d

e r s

A c c u r a t e f o r e c a s t i n g

C o n s i s t e n t l y b e i n g r e c o g n i s e d

b y

b e s t q u a l i t y p r o d u c e r a t

c o m

p e t i t i v e p r i c e s

W o n

c u r r e n t y e a r ’ s N a t i o n a l

P r o

d u c t i v i t y C o u n c i l ’ s

a w a r d

L o w p r i o

r i t y b y t h e

m a n a g e m e n t

R e s i s t a n c

e t o c h a n g e a n d t o

a d o p t i n n o v a t i o n s

L a c k o f v

i s i o n



14/22



After liberalisation, due to intense competition,

spurred by the local and the Chinese manufacturers,

the top management of the company in consultation

with the division heads set a vision and mission for the

company. Vision and mission were revised as follows:the vision was to be the leader in iron handicraft

products by producing innovative designed products at

competitive prices, and the mission was to continue

efforts for the design and development of iron

handicrafts through new product development, design

innovation, investment in sophisticated design

technologies, investment in manufacturing methods,

efficient management and deployment of the

lean manufacturing practices for cost reduction

(Table 4).

The two barriers listed above are observed primar-

ily during interaction with the top management and the

supervisory operational level staff. Authors feel that

highly ranked barriers are due to the lack of awareness

and as the time passes, the mindset of the workers will

change.

After implementation of lean manufacturing with

the top management’s involvement, the company

improved its operations in various quarters of business.

It was able to procure repeat orders from customers.

The company improved its lost market share, which

reflects its better economic performance and supports

our view. Thanks to the adoption of lean practice, the

company won the National award for being the largest

exporter in the iron handicraft sector. In the past 3years, there is an increasing trend observed in market

share and sales turnover. It is interesting to note here

that most of the supply orders are repetitive in nature.

The company is not only able to maintain its customer

base but also widen its overseas market share.

5.4. Company D

The company is a leading manufacturer of brakes and

clutches of all types of four wheelers. It manufactures a

wide range of brakes and clutches of diesel commercial

vehicles (heavy, medium and large commercial vehi-cles) and passenger cars. It was established in 1973 and

situated in the most developed state of the western

India and belongs to a reputed industrial group of the

State. The company operates in a single plant

environment. It enjoys 40% market share in domestic

market for light commercial vehicles and 30% in

medium and heavy commercial vehicles. It does not

export its products.

5.4.1. Until 1991

Until 1990, the company enjoyed monopoly in sup-

plying its products to OE (Original Equipment) man-

ufacturers at premium prices. There was no strict

quality system either for manufacturing or service for

the customers. There was no proper supply chain

coordination in trading partners and the company wasrunning like a typical family-owned business. There

was no proper system in place to suggest the right kind

of business methods at the right time, which usually led

to poor decision-making and costlier production.

There was no proper control over inventory levels,

which resulted in surpluses and stock-outs many times

round the year. Frequent breakdowns in machines that

led to shut down of plant were very common. All these

causes ultimately led to rise in the manufacturing costs.

As company’s 100% productions were booked in

advance most of the time, it hardly paid any attention

towards productivity improvement and reduction in

production costs efforts. The company was verypoor in adhering to the delivery schedules most of

the times.



Post-liberalisation and opening of the economy era

posed some serious challenges. Its largest customer was

based in the northern part of the country, which was

the biggest public sector company of India with a

foreign collaboration with a giant Japanese motor

company in light four-wheeler vehicles segment. Three

new companies started production of brakes andclutches in the vicinity and area near to this public

sector company. To take the advantage of economies

of scale and scope, the customer (the public sector

company) of the company started giving preference to

the local manufacturers over its traditional supplier

and hence the company had to lose its market share

and monopoly. That was the turning point for the

company.

In view of the stiff competition, the top manage-

ment of the company, in consultation with profes-

sionals, set a vision and mission for the company: the

vision was to develop the company with world class

capabilities in design, engineering, manufacturing,

quality control, sales and services. The stated mission

to be a reliable supplier of quality products to OE

manufacturers (Table 5).

All these efforts led to improvement in productivity

and improved deliveries at competitive cost. It further

helped to improve relations with vendors and cus-

tomers. With this performance measurement system

development and management, the company



15/22

T a b l e 4 . C o m p a n y C .


( a f t e r t h e 1 9 9 1 )

L e a n m a n u f a c t u r i n g p r a c t i c e s

t o f a c e n e w c o m p e t i t i v e

e n v i r o n m e n t

K

e y c h a n g e s i n t r o d u c e d b y t h e


i m p l e m e n t a t i o n

Q u a l i t a t i v e b e n e f i t s o b s e r v e d

b y f o

l l o w i n g l e a n m a n u f a c t u r -

i n g p r a c t i c e s

B a r r i e r s

i n i m p l e m e n t i n g l e a n

m

a n u f a c t u r i n g




( o n - t i m e d e l i v e r i e s )

L o w c o s t

B u s i n e s s r e l a t i o n s w i t h

s u p p l y c h a i n p a r t n e r s

I n n o v a t i v e p r o d u c t s

D e s i g n c h a n g e s

V o l u m e c h a n g e s

Q u i c k r e s p o n s e

C o n t i n u o u s i

Documents

2012 Lean Manufacturing in Developing Countries