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DESIGN OF A MODEL FOR IMPLEMENTING

LEAN MANAGEMENT IN VIETNAM MANUFACTURING

SMALL AND MEDIUM SIZED ENTERPRISES

VNU University of Economics and Business

Nguyen Thi Linh Chi

Nguyen Thi Giang

Tran Thu Hoan

Email: nguyenlinhchi2410@gmail.com

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ABSTRACT

Lean management has become one of the most well-known and beneficial management philosophy all over

the world, which is based on a vast number of lean tools and metholodogy such as 5S, Kaizen (continuous

improvement), mieruka (visual management)… to eliminate wastes occuring in production and operation

processes, thus, increase the company„s productivity and efficiency. With high efficiency of results, lean

management opens a first-hand and innovative way of management and operation thinking in Vietnamese

enterprises, particularly in Small-and-medium enterprises (SMEs).The study focused on exploiting three

basic tools of management: 5S, Kaizen, Visual Managemen;, find out the problem in the lean application of

Vietnam SMEs and indicate the reason why Lean can not achieve maximum efficiency, simultaneously

propose application model adapted to the situation of Vietnam Manufacturing SMEs.

Keywords: Viet Nam Small and medium enterprise, Lean management, 5S, Kaizen, Visual management,

Lean implementation model.

1. INTRODUCTION:

According to Vietnam Government‟s plans to develop small and medium-sized enterprises (SMEs) in the

period of 2011 -2015 , the number of new established Vietnam SMEs is estimated to reach 600,000,

accounting for over 95% of total Vietnam enterprises until December, 31th in 2015. These SMEs are

expected to contribute 25% of total export-import turnover, 40% of GDP; 30% of nationwide budget

revenue and create 3.5 – 4 millions of new employment from 2011 until 2015. Therefore, Small and

medium - sized enterprises (SMEs) has a vital role in economy development. Based on the announcement

of Ministry of Planning and Investment, there was 71,018 new established enterprises during the first 11

months of 2013 , however, the number of enterprises that must be dissolved and bankrupted reach to 54,

932, nearly 77, 34%. On the other hand, another survey also conducted by Ministry of Planning and

Investment indicate that the failure come from weaknesses of management ability and production method

and lack of sustainability of business strategies in almost Vietnam SMEs. Hence,finding new directions to

to increase the productivity as well as the competitiveness is not only the misson of Managers but also

Vietnam researchers.

Orginated from Japan, and successfully developed in many country around the whole world

(Rodger and Wong 1996), Lean management is considered as an administration method which can be used

successfully for Viet Nam SMEs if it is creatively and flexible applied.

Recognizing these issues, the research team chose the theme: "Design of a model for implementing

lean management in Vietnam manufacturing Small and medium sized enterprises" as research topics and

provide new avenues for Vietnam SMEs.

2. LITERATURE REVIEW

In the world, the concept of Lean was introduced first by Toyota Motor Corporation through Toyota

Production System (Womack et. al, 1990; Liker, 2004). After 10 years, companies in America and Europe

started applying Lean management widely. Pratt, Whitney, Sikorky, Delphi, Ford, Boing and many other

big companies applied Lean management in their operation line and get positive business result (Schmidt.

M,2000).

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Developed from lean production methods, Lean management is managing methodology creating value

and profits for enterprises through reducing waste and continuous improvement.

Based on the formula

Profit = Total revenue – Total cost (1)

Of which: Total cost = Total actual cost + Total waste

Total waste = Tangible wastes + Intangible wastes

(Source:: Nguyễn Đăng Minh et al, 2013)

According to formula (1), if enterprises want to increase their profit, they need to increase the price or

reduce total cost. However, in fact, price usually is set by market and it is difficult for enterprises to raise

their product‟s price. In contrast, if price can be considered that customers are willing to pay, so the only

way of increasing profit is reducing production cost in enterprises. In turn, producers could reduce cost

only by eliminating wastes in production process (Shigeo Shingo & Andrew P. Dillon, 1994)

To identify and remove all the elements of production waste, Ohno introduced the concept of the types

of waste in manufacturing systems. There are 7 basic types of waste. However, this list has been modified

and expanded by those who practice lean manufacturing and generally include the following

Figure 1: Ten types of wastes

(Source: Ohno, 1988; Liker, 2004)

Still using methods like 5S, JIT, pull production systems, TQM and kaizen, lean management helps

administrators identify the existing waste in operation line. Thus, enterprises cut cost through reducing

waste and doing improvement to enhance productivity (Lonnie Wilson, 2010). Then, the enterprises could

enhance competitiveness (MA Lewis, 2000) as well as create a foundation for business operations more

sustainable and environmentally friendly (Sawhey, Teparakul, Aruna and Li, 2007).

Studies of successful Lean implementation have been examined for many years. Determinant factors for

the effectiveness of Lean as well as for SMEs have been recognized by scholars over the world. In 2006,

Achanga et. al, described the four key factors which enable SMEs to implement Lean successfully, which

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are leadership and management, leadership and management, financial capabilities, skills and expertise

and organizational culture. In 2013, another literature identified the success factors linked to human

resources management during the lean adoption process. number of success factors that depend on the

phase of the Lean adoption process. In the phase prior to adoption, the success factors are the

incorporation of external change agents and the management averting inertia, whereas in the other phases

of the adoption process five main factors were found: training, communication, rewards, job design and

work organization (Pedro, J.M and Jose M.F, 2013). On the other hand, Due to financial and resources

constraints, SMEs should start with minimal financial investment on lean practices such as 5S. Kaizen,

Visual management (….)

In Vietnam, nearly 20 years ago, as a result of opened economy, Foreign Directed Investment (FDI)

enterprises especially Japanese FDI enterprises come into Vietnam together with introduction of lean

manufacturing. However, it is considered as a new concept due to the number of Vietnamese documents,

the number of research scholars and the number of enterprises implementing Lean is still small.

Nguyen Dang Minh et al (2013) pointed out the current situation of 5S implementation in Vietnam SMEs

base on investigating at 52 firms which have been applied lean management. Then, the authors introduced

the first proposed model for applying 5S in Vietnam as follow in Figure 2. In this model, the authors

suggested putting S5 – Sustain in the heart of implementation project, therefore Sustain is not a simply

independent step as the theoretical 5S model rather a key element affecting to other first four steps.

.

Figures 2: A model of 5S implementation in Vietnam

(Source: Nguyen Dang Minh et al, 2013)

Nguyen Thi Duc Nguyen and Bui Nguyen Hung (2010) presented a framework of implementing Lean

manufacturing in Vietnam as showed in Figure 3. However, the framework was drawn from three

untypical cases of Vietnam SMEs because they are all big companies with large foreign investment.

.

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Figure 3: Model illustrates Lean management implementation steps

(Source: Nguyen Thi Duc Nguyen, Bui Nguyen Hung, 2010)

In Vietnam, Lean management has been penetrating for more than ten years and still a new theme.

Therefore, most of researchers pay attention to study a single tool of Lean management or formulate an

application plan for a specific enterprise. Until now, there is no author thoroughly research about Lean

Management Application model to implement in Vietnam, especially Vietnamese Manufacturing Small

and Medium Enterprises.

3.RESEARCH METHODOLOGY

The thesis is conducted in regarding to empirical research methodology (Figure 4). Literature review was

conducted to gather secondary data from international and domestic articles discussing about the

appication of Lean Management. Having carried out the literature review, a number of survey

questionnaire delivered and site visits to discuss with senior manager on management control and Lean

Management practices to find out answer. The research was conducted in 3 following stages:

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5whys

Figure 4: Thesis Framework

Figure 1: Thesis Framework

Propose model

Conclusion

Check with

specialist

No

Yes

Recommendation

Problem‟s core reasons

investigation

Problem

identification

Stage 1

Stage 2

Stage 3

Application of Visual Management in Vietnam MSMEs:

Current situation and solution

Data analyze

Literature review

Site Observation; Indepth

Interview with top managers

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4. RESULT AND DISCUSSION

4. 1 Current issues in applysing Lean Management in Vietnamese Manufacturing Small and

Medium Enterprises

According to Japanese International Cooperation Agency‟s report in term of “Program of capacity

enhacing Vietnam supporting industry“, after 3 years (From June 2010 to March 2013), there is only 19

enterprises out of 69 enterprises receive new receipts from Japanese partners chỉ có 19 DN, which

accounts for 27%.

Figure 5: The number of enterprises applying 5S, Kaizen, Visual Management

Furthermore, according to questionnaire analysis in 15 manufacturing enterprises located in

typical industry zones in Hanoi and surroundings, the enterprises just apply 3S/5S and cannot

maintain lean activities in the long term; Kaizen implementation hasn‟t built up idea suggestion

process, improvement assessment criterias and attracted attention and proative from employees;

Visual management activities just support for 5S and Kaizen.

According to interview results and site visits, enterprises‟s leaders assess lean performances are low,

just match 30-40% to expectation. Moreover, specialists and lean researchers indicates lean

implementation in Vietnam tô formalistically. The majority of enterprises do not understand deeply the

nature of lean management, thus apply theoretically or copy from other successful model.

Based on throroughly research about lean application in Vietnam enterprises and compare between

theories and practices and interview specialist, the author realize that the issuss existing in most of

Vietnamses enterprises is: “Lean management (includes 5S, Kaizen and Visual management) is not

applied effectively in Vietnamses Manufacturing Small and Medium enterprises.

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4.2. Main roots causing problem “Lean Management is not applied effectively in Vietnamese MSMEs”

Figure 6: Main root causes

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4.2.1. The employee are unaware of the benefits of Lean management to themselves

The majority of employees are unaware of the benefits of lean management to themselves such as

defect decrease, time reduce… The employess think that 5S and Kaizen do not create direct values in

term of their salary receive. The employee performance in lean implementation is low, which has huge

influence to lean implementation performance in the whole company. Employees unaware of the

benefits of Lean management can be consider as significate factor afftecting to lean performances.

4.2.2. Employees are unaware of their inevitable role in the success of Lean management

The employees plays a paramount role in lean application because they are the people who directily

implement lean activities. However, if the employees do not realize the benefits of lean management

to themselves, their attitude won‟t be as good as expected. Thus, enterprises cannot promote

significantly the human resources and increase invisible wastes.

4.2.3 Lack of formal training programs for employees

In the process of implementing Lean management, most of enterprises go straight to implementation

steps and miss training step. Therefore, the employees are not granted proper knowledge which make

them feel difficult in turing lean management theory into practices and fully exploiting the benefits of

lean management.

4.2.4. Training methods are inappropriate

Training methods are inappropriate, which is illustrated in 3 different perspectives. Training contents;

training formulas and training time selection.

Inappropriate training contents: The company applys lean management in formalistic ways and

do not improve and innovate with the aim of adjusting and updating to adapt the situation. Morever,

middle managers are trained by Off-the-job-traning which mainly deliver theorectical knowledge.

Inappropriate training formulas: The Company are in hurry of training knowledge in stead of

awaness, thus, the employess do not have opportunities to aware of benefits of lean management to

themselfves.

Inappropriate training time selection: Due to lack of detail training roadmap, middle managers

take advantage of the meeting time to combine lean training.

In short, inappropriate training methods lead to passive knowledge acquiring and understanding of

employees,

4.2.5 Company have not built up specific, detail Lean management process

Process standardization is one of the fundermental tools of Lean management. The process to

implement 5S, Kaizen, VM need to be made rules and specifically deliverd to make sure the unity

application. Nevertheless, most of enterprises applying Lean Management are unable to formulate

standardization process which leads to inconsistent situtation in the process of implementing Lean

management. As the consequence, the enterprise cannot maintain Lean in the long term.

4.2.6 Companies have not developed evaluation criteria for working performance

In the process of deploying 5S, Kaizen, Visual Management, the employees are unable to self-assess

and control their job due to lack of assessment criterias. Moreover, the company cannot assess

properly the quality of job completion, thus, the company cannot have concrete perspectives about the

situation in implementing 5S, Kaizen, VM. As the result, it leads to two cases: The lean performances

are assess higher than actual and the lean performances are assess lower than actual, which causes to

the issue that solutions delivered to improve lean implementation are inappropriate with situation of

enterprises.

4.3. A proposed model for applying Lean Management in Vietnam MSMEs

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Figure 7: A proposed model for applying lean management in Vietnamese MSMEs

The model (Figure 7) is divided into 2 outstandings parts:

(1) The three- stage process of deploying lean management in Vietnamese MSMEs

(2) Affecting factors to the success of lean management application

7.1. The implementation process of lean management

7.2.

Stage 1: Establishing the procedure and measurement checklists for 5S, Kaizen and Visual

management activities

In Figure 7, authors proposed the first stage that focuses on establishing the procedures to apply lean

activities including 5S, kaizen and visual management activities combined with forming checklist for

measuring the quality of implementing process. It enables enterprises to apply lean conveniently and

synchronously from the first step and creates a good stepping stone for further implementation.

Stage 2: Pilot lean management in a specific factory

In the second stage in which the toolkits for applying lean consisting of procedures and measuremeng

checklists are basically formed, enterprises should pilot them in practices in a specific factory or

department. All activities are applied following the completed toolkits. After this step, there will be

two possible situations: Good and Bad.

(1) For good situation meaning that the toolkits are suitable to the specific context of enterprises,

then it will go to stage 3 to apply in the whole company.

(2) For bad situation meaning that the toolkits are not suitatble to the specific context of enterprises,

then it should return to the first state to change and repair. This process will continue improving

until it can work well and be effectively applied in practice.

Stage 3: Applying widely lean management in the whole enterprise

EMPLOYEE PARTICIPATION (1)

Compe-

nsation

policies

(4)

Training

program

(3)

TOP MANAGEMENT COMMITMENT (2)

Establishing the

procedure/

measurement

checklist for 5S,

Kaizen, VM

Apply in

the whole

enterprise Pilot in

a

specific

factory

Not OK

OK

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In third stage, lean activities should be applied synchronously according to the standardized

procedures and measurement checklist in the scope of entire company.

7.3 Affecting factors to the success of lean management application

(1) Active participation of employee in implementation process

Dombrowski et al (2011) stated that a lean production system (LPS) is an enterprise – specific

compilation of rules, standards, methods and tools. Even more important than these formant elements,

is an appropriate philosophy and culture to exploit the potential of the individual elements. For

example, it is essential to establish a no-blame culture in which the first occurrence of a fault is seen as

an opportunity to improve the processes. Because of this necessary cultural transformation, the

implementation of a LPS or 5S is not a short-term rationalization project with the goal to reach for

example higher productivity or quality of products. Rather, the transformation towards a lean

enterprise takes several years. Critical factors for the sustainable success of production systems are

generally rather people-related than technology-related.

Employees are the resource who directly involve in the production process and understand the

opportunities and challenges in lean implementation process most. Therefore, to deploy lean

application process successful, the participation of employee is necessary. If employees do not actively

participate in the implementation, the application can not promote maximum efficiency.

In short, the implementation of lean management requires awareness and commitment from all

organizational members across all departments and all management levels. In order to have a

dedicated and committed employee towards the implementation of lean management, top management

levels need to be proactive in introducing and promoting the importance of exercising lean practices

among their subordinates. This is because the implementation of lean is seen to become the agenda for

a limited numbers of employees because of their low awareness towards the importance of having lean

system. Thus, it is believed that the level of awareness and the active participation among the

employees would bring positive effect towards developing and implementation of leanimplementation.

(2) Long-term commitment from top management

Herron and Hicks (2008) has affirmed that the long-term commitment of leadership is a critical factor

affecting the results of applying lean model.Commitment from the top management is very crucial

because they are the one who position the organization‟s direction. Furthermore, lean implementation

takes several years as a journey of company, so that top management members must be willing to

allocate valuable organizational resources to ensure project continuance and success. Lean requires

change in the entire company but not any part or any department of company. Therefore, managers

have to pay attention in developing certain factors before the implementation of lean management in

their organizations, as well as another set of factors that needs to be emphasized to sustain the

implemented lean, or even any other quality concept for a longer period of time.

Top management commitment should be strong enough so that all employees must be aroused to

believe that the organization is committed to the program. Most importantly, BOM‟s long term

commitment must combine with specific goals and detail plans because “easier said than done”. One

way for top management to get involved on a continuing basis is to conduct quarterly visits to each

work area to inspect working conditions and offer advice and support to employees. Another effective

method for demonstrating top management commitment is to mandate and to participate in the visible

promotion of lean management such as designated 5S or Kaizen days, Slogans and seminars.

(3) Training program

Training is a stepping stone in the process of lean implementation so as to prepare well for employees

both awareness and knowledge.

Lean management including 5S, Kaizen and VM is best learned through doing. The best approach is

one of in-house training and facilitation led by someone with experience in the disciplines of lean. The

training should be preceded by ensuring that there are clear objectives for both the direction of the

company and for the specific working area in which lean management is to be applied.

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The training should begin with an initial session to explain the aims of lean implementation in terms of

the entire company and the individuals.

Training about awareness:

The purpose of awareness training is to help employees understand the necessary and benefit of lean in

order to enhance their attitude, responsibilities, voluntary and activeness toward lean implementation.

Some activities to motivate awareness training consist of:

Focus on propaganda activities like: Celebrate contest, visualize slogan…

Construct a specific agenda for training activities in order to maintain it frequently and

repeatedly.

Associate employees‟ benefits with company benefits: (1) Commit to promotion for high

performance employees; (2) Empower for subordinate staff under the support of managers, (3)

Encourage through reward systems.

Generally, training about awareness of employees should be conducted first and maintain it frequently

before deploying lean in reality.

Training about knowledge

The purpose of this activity is to help workers understand how to implement lean and practice it in

their workplace. The content should come from the reality and the training method should focus both

on- the- job training (OJT) and off- the- job training.

For example, Toyota where Toyota Production System originated has focused on OJT. In Toyota, OJT

consists not only of training on how to perform specific job, but also on the proper use of tools,

equipment, observation of safety rules, quality procedures, HR policies, preventive maintenance,

ordering materials and reporting problems. It consisted of learning how the individual operating

processes worked and what the role of each team membe was in oder to support these processes. OJT

was conducted on the shop floor. The training was done by observing, trying out and practicing

different work elements of a job, using Standardized Work sheet as a guideline.

It is a simple learning activity that can be organized in any department of a company. It is not only

shop floor specific. By going through all the steps of training program, employees have an opportunity

to work together on a meaningful project. It opens their eyes and their minds to “waste", it gets them

involved in a decision makingprocess and quizzes them to find answers and solutions to existing

problems.

(4) Compensation policy

Compensation policy includes reward and recognition, incentives and punishment. It can be used

systematically to motivate employees to perform desired behaviors so that both the company and its

workers can benefit from the policy. Furthermore, compensation policy also shows top management

commitment to both employees and lean project.

The most common problem leading to lean failures today is that they fail to notice the important

component of reward and recognition. Most of company supposes that activities of lean belong to

workers‟ responsibilities therefore, the company do not need to concern about rewarding and

recognizing.

In order to maintain 5S activities in long term, company needs to measure 5S performance in each

work area and set up a reward system to reward teams that achieve 5S success. Organizations that

have successful 5S programs measure their performance through weekly audits using checklists and

score sheets. Results of the audits are posted in public areas. This creates an atmosphere of friendly

competition and will help to instill pride in the teams the company have set up.

This measurement and competition should be combined with a reward system; most successful

organizations offer monthly or quarterly rewards for their teams in various categories. The rewards

can range from movie tickets to cash bonuses and even promotion. However, company should have

clear and transparent measuring criteria in order to create the equity in company‟s culture.

5. CONCLUSION

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In the world, lean management has been widely applied in many countries and become an advanced

global management philosophy. In Vietnam, lean management is considered as a suitable management

methodology with context of Vietnamese enterprises, particularly Vietnamese MSMEs due to low

investment cost required, high effectiveness and environment preservation. However, a large number

of Vietnamese MSMEs has been facing challenges to apply lean management effectively in practices.

In order to achieve the success of lean implemantation, enterprises should apply it creatively and

flexibly.

The paper firstly reviews literature of lean implementation internationally and domestically. Secondly,

the paper presents the current situation of lean management in Vietnamese MSMEs based on

observation, survey, and interview employees who took part in lean projects and then, identify issues

that company are facing when implement lean as well as analyze its roots by 5Whys technique. Finally,

the thesis proposes a model of 5S implementation to solve problems and help company exercise lean

projects more effectively.

Based on the result of survey and in-depth interview, authors investigated a three-stage process of

implementing lean and four affecting factore to success of lean deployment including: top

management commitment; employee participation; training program; and compensation policy. Top

management commitment ensures to allocate resources suitably and remain lean activities in long term.

Besides, employee participation is a very important factor affecting to 5S effectiveness because it is

the employee who directly exercises and takes part in 5S activities. In order to get employees involved

actively and voluntarily in company‟s 5S projects, top management should emphasize the role of

training activity and reward system.

In short, the thesis would like to contribute a reference document that:

1. Summarize the literature review of lean management internationally and domestically

2. Analyzing the current situation of lean implementation in Vietnam SME and identifying problems

and roots.

3. Provide useful information and recommendations for companies that have plans to implement

lean in the future. Findings from this study will significantly provide several positive

contributions to the company, which desires to catch up with lean management, one of the most

advance management philosophies in the world.

Further research

1. Expand the sample size

2. Focus on evaluating effectiveness of lean management before and after implementing.

3. Expand the research scope into the field of services such as healthcare, financial service and

public administration.

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