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International Journal of Lean Thinking Volume 3, Issue 2 (December 2012)

Lean Thinkingjournal homepage: www.thinkinglean.com/ijlt

THE DEVELOPMENT OF SUSTAINING LEAN IMPROVEMENTS AND SUSTAINABLE PERFORMANCE IN MALAYSIAN AUTOMOTIVE INDUSTRY

Nurul Fadly Habidin* Department of Management

and Leadership, Faculty of Management and Economics,

Universiti Pendidikan Sultan Idris,35900 Tanjung

Malim, Perak, Malaysia

E-mail: [email protected]

Anis Fadzlin Mohd Zubir Department of Accounting

and Finance, Faculty of Management and

Economics, Universiti Pendidikan Sultan

Idris,35900 Tanjung Malim, Perak, Malaysia

A B S T R A C T K E Y W O R D S

A R T I C L E I N F O

Lean Manufacturing,

Sustainable Performance,

Standards work, Employee Involvement,

Continuous Improvement,

Received 11 July 2012

Accepted 07 September 2012

Available online 01 October 2012

This paper shows a relationship between sustaining lean

improvements and sustainable performance is at the roots of

environmental sustainability, economic sustainability and corporate

social responsibility (CSR) sustainability via proposed model to

carry out an empirical research in Malaysian automotive industry.

For this decade, automotive manufacturing companies are dealing

with the sustainability problems in input materials, manufacturing

processes, and waste disposal, among others. Hence, this paper

attempts to gain a picture of the current theme of emphasis on

sustaining lean improvements indicators among the automotive

manufacturing companies in Malaysia and also on sustainable

performance. In brief, more extensive research and collaboration is

needed to increase understanding of sustaining lean improvements

in manufacturing area and applications of sustainable.

________________________________

* Corresponding Author

1. Introduction and literature survey

Malaysia which is located in the centre of ASEAN region with a population of more than 28

million people offers vast opportunities for global automotive and component manufacturers

to set up manufacturing and distribution operations in this country. External environment of

business namely: (i) economic stability; (ii) culture of the country; (iii) research and

development of technology; (iv) politic and law stability; and (v) global participation have

attracted major international automotive and component manufacturers to invest in Malaysia.

Currently, according to Malaysia’s Automotive Industry (MAI, 2010), there are 28

manufacturing and assembly plants producing passenger and commercial vehicles, composite

body sports cars as well as motorcycles and scooters. These plants have a total installed capacity

of approximately 963,300 passenger and commercial vehicles and about 1 million motorcycles

per year, with production catering primarily for the domestic market. Moving forward into

2012, Malaysia Automotive Institute (2012) foresees a brighter automotive sales and production

despite the uncertain economic environment. While sales in the US are set to continue a

Juriah Conding

Department of Accounting and Finance, Faculty of

Management and Economics, Universiti Pendidikan Sultan


Suzaituladwini Hashim Department of Accounting and Finance, Faculty of

Management and Economics, Universiti Pendidikan Sultan


Nurzatul Ain Seri Lanang Jaya Department of Accounting

and Finance, Faculty of Management and Economics,

Universiti Pendidikan Sultan Idris,35900 Tanjung Malim

HABIDIN,MOHD ZUBIR, CONDING, SERI LANANG JAYA, HASHIM / International Journal of Lean Thinking Volume 3, Issue 2(December 2012)

80

steady recovery in 2012, the emerging countries such as China and India are expected to continue

outperforming the developed countries. Elsewhere within the ASEAN countries, Thailand and Indonesia

are also expected to continue their strong growth this year in line with the GDP forecasted by respective

countries, while Malaysia forecasts at least a 5.1% growth in 2012. As such, the total industry volume (TIV)

is also likely to flourish in 2012 due to high correlation between gross domestic product (GDP) and TIV.

The concepts of sustaining lean improvements (SLI) have been studied in particular by Schlichting

(2009) and Murti (2009). Schlichting (2009) focus on investigate the root causes that lead to a time

dependent loss of lean improvements among manufacturing organizations from three different

perspectives such as standard work, employee involvement and continuous improvement. In addition, in

for create standards, one should implement standard work all across the shop floor and in addition use

standard improvement to ensure that further development will not distort the standards. In order to

achieve employee involvement, the finding suggested visual management tools to empower every

employee by making information available as well as kaizen events to teach employees about lean and

train their problem solving skills (Schlichting (2009). In conjunction with job rotation, which enables the

employees to cooperate on problem solutions, these tools ensure thorough employee involvement which

will increase the buy-in into the lean improvement ideas and thereby make them more sustainable. At last,

continuous improvement supports the sustainability of lean implementations by constantly challenging

the current state process, thereby not allowing for a loss of focus on the already implemented changes.

Meanwhile, Murti (2009) has seeks to study the lean journeys of nine New Zealand companies to

establish key inhibitors and enablers to sustaining lean manufacturing sector in New Zealand. The

companies were assessed for lean sustainability using a recognized sustainability model. The findings

showed that many companies experienced good initial gains from implementation lean but the majority

failed to sustain these improvements. These problem were; erroneous understanding of lean, poor change

strategy, poor senior management team commitment, New Zealand Trade and Enterprise funding pushing

change, high staff turnover, high staff resistance and failure to develop the lean champion’s capabilities. As

a conclusion, lean improvements were not sustained across New Zealand manufacturing companies

except one case study company looked likely to sustain improvements.

In Malaysian automotive industry, the concept of SLI has change and becoming more stable in our

country and industries. As a good example is, Malaysia has made significant progress, with Proton

unveiling its first locally-designed model in 2000 and developing its own engine in 2002. The new Proton

plant in Tanjung Malim, Perak is highly automated, employing robotic technology, and is designed for

high volume production and efficiency, using lean manufacturing processes. Therefore, the complexities

involved in the above-mentioned focus areas for SLI, optimized solution, and corresponding underlying

models, are necessary. Thus, this paper presents a review of current trends for achieving sustainability at

the lean practices and performance, with a focus on modeling and optimization aspect.

1. Brief Literature Review

1.1 Sustaining Lean Improvements (SLI)

For more than 40 years, lean manufacturing techniques have been achieving outstanding success

rates. First in Japanese plants, and now in advanced factories throughout North America, it has proven to

be a cost effective and flexible approach to achieving superior customer satisfaction (Kivell, 2012). Hence,

this paper’s proposed that SLI depends on three aspects such as standards work (Foschi, 2009; Graban,

2009; Murphy, 2001), employee involvement (Jones and Kato, 2005; Cabrera et al., 2003) and continuous

improvement (Schlichting, 2009; Pay, 2008; Terziovski and Sohal, 2000) which have adopted the


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conceptual proposed by Schlichting (2009). However, some amendments constructs have been made

based on this paper’s proposed.

Standards work is the current one best way to safety completes an activity with the proper outcome

and the highest quality (Graban, 2009). Taiichi Ohno is often quoted as declaring that improvement will

be occurring while applying a standard work. Tim Whitmore, Vice President of Consulting Services at

Simpler Consulting, elaborates on this quote by saying that the principles of lean do not work well when

everyone is allowed to choose their own work method or work sequence in which to do a job: the

outcome is unpredictable; flow and pull are impossible (Schlichting, 2009 cited in Whitmore, 2008). Many

researchers have done their study in this area. For instance, a study by Murphy (2001) makes a research in

incentives which has focused on performance measures and pay-performance sensitivities but has largely

ignored the performance standard, which generates important incentives whenever plan participants can

influence the standard-setting process. According to Murphy (2001), internally determine standards are

directly affected by management actions in the current or prior year, while externally determine standards

are less easily affected. The finding showed that companies using budget based and other internally

determined performance standards have less-variable bonus payouts and are more likely to smooth

earnings, than companies using externally determined standards.

With reference to previous studies related to employee involvement definition, Apostolou (2000)

concluded that employee involvement is regarded as a unique human being, not just a part in a machine

and each employee is involved in helping the organization meet its goals. Each employee’s input is

solicited and valued by management. Currently most researchers agree that employee involvement is one

of the major causes of the increase in running the business. This is clearly supported by Cabrera et al.

(2003) results, which showed a highly significant positive relationship between competition and employee

involvements. Besides that, it may also be due to the fact that employees that are in direct contact with the

customer are more aware of their needs and, therefore, have valuable information regarding how to better

serve the client. Thus, organizations will be able to improve their customer service, if the employees are

involved in the decision making process. This is also coincides with another author like Jones and Kato

(2005). This is because, Jones and Kato (2005) presented an econometric case study for employee

involvement on manufacturing firm performance. One of the findings showed that employee involvement

will produce improved enterprise performance through diverse channels such as: (i) membership in

offline teams initially enhances individual productivity by about 3% and rejection rates by about 27%; (ii)

these improvements are dissipated, typically at a rate of 10 to 16% per 100 days in team; (iii) the

introduction of teams is initially accompanied by increased rates of downtime and these costs diminish

over time. In addition: (iv) the performance-enhancing effects of team membership are generally greater

and more long-lasting for team members who are solicited by management to join teams whereas the cost

of team membership (increased downtime) is smaller and diminishes more rapidly as team members

engage in learning by doing for such solicited members; similar relationships exist for more educated team

members.

Furthermore, continuous improvement, also known as kaizen event, is arguably the most critical of

SLI. The concept behind continuous improvement is that changes are made and continually improved

upon. Although perfection will never be achieved, the goal is to continue reaching for it through small

improvements. Evidence showed that numerous organizations that have deployed continuous

improvement initiatives have not been successful in getting what they set out to achieve. Results of a 2007

survey of US manufacturers showed that while 70% of plants had deployed lean manufacturing

techniques, 74% of these were disappointed with the progress they were making with lean (Pay, 2008).


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However, the advantages of continuous improvement have been found in previous literatures. The data

analysis from Terziovski and Sohal (2000) revealed that the motivation to adopt continuous improvement

is relate to improve quality conformance, increase productivity, to reduce costs and improvement in

delivery reliability. Schlichting (2009) has also identified the advantages of continuous improvement

namely: (i) reduce the cost; (ii) move towards the goal of regaining profitability; (iii) reducing

transportation; (iv) eliminate the waste of waiting; and (v) decrease the utilization.

Based on the current findings above, it is concluded that SLI implementation gives many benefits to

our country from social, economic, and environmental aspect. The anticipated approaches in Table 1 can

help meet the others benefit of SLI Implementation. In conclusion, standard work, employee involvement

and continuous improvement are a foundational element of SLI methodologies. Without these, the gains

made from organizing work cells, creating flow production, and starting continuous improvement teams

will only be temporary.

Table 1. Benefit of SLI Implementation

Category Authors Benefit of SLI implementation

Standard

Work

Schlichting (2009)

1. Understanding of process steps at all levels (operator and

manager);

2. Minimizing process variations;

3. Traceability of quality issues (man or machine);

4. Elimination of unnecessary process steps (muda);

5. Production to customer pull (due to set process times);

and

6. Supporting sustainability of implementation changes

(documentation).

Radnor and Bucci

(2011)

1. To work better together;

2. To combine some of processes;

3. Give the confidence to challenge their work; and

4. To seek assistance to help them make the improvements.

Rutter et al. (2008)

1. Simplify training;

2. Prevent mistakes;

3. Reduce cycle times; and

4. Improve safety.

Employee

Involvement

Schlichting (2009)

1. Different opinion have to be heard;

2. The consensus has to be reached;

3. Accept the employee’s input in the problem solution

process;

4. To change their way of thinking; and

5. Implement suggestion systems.

Radnor and Bucci

(2011)

1. Their involvement was made clear to them and the

argument for improvement was delivered in an appropriate

manner; and

2. During the Rapid Improvement Workshop, staff were

engaged in the exercises and contributed. The feedback of the

experience was also very positive.


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Continuous

Improvement

Schlichting (2009)

1. To reduce the cost;

2. To move towards the goal of regaining profitability;

3. Reducing transportation;

4. To eliminate the waste of waiting; and

5. To decrease the utilization of the two computers

numerical controlled machines to 1.5 instead of 2.

Radnor and Bucci

(2011)

1. Improvement activity being undertaken with staff;

2. Starting to change the culture in specific areas of the

organizations;

3. Helping staff to develop skills;

4. Become familiar with Lean and to implement the tools and

techniques to solve specific issues; and

5. The success of Rapid Improvement Workshops - to enable

staff to look at improving other processes.

Melton (2005)

1. Decreased lead times for customers;

2. Reduced inventories for manufacturers;

3. Improved knowledge management; and

4. More robust processes (as measured by less errors and

therefore less rework)

1.2 Sustainable Performance (SP)

Existing performance measurement is used to improve organizational performance. Performance

measurement can help an organization measure progress towards its goals, understand its current

situation, address the key issues, and the options available (Searcy et al., 2008). This statement is also

supported by Amaratunga et al. (2000) who proved that performance measurement as the process of

quantifying the efficiency and effectiveness of an action. Effective performance measurement can let us

know about a way of doing something, achieve the goals, customers’ satisfaction, work under control, and

improvements are necessary (Isik, 2009). Therefore, performance measurement is the process to identify

how successful organizations or individuals have been in attaining their objectives and strategies.

According to previous authors (Mayyas et al., 2012; Moldan et al., 2012; Schoenherr, 2011; Bartelmus,

2010; Singh et al., 2009; Labuschagne et al. 2005; Veleva and Ellenbecker, 2001), sustainable

developments could improve three dimensions of SP namely: (i) environmental sustainability; (ii)

economic sustainability; and (iii) corporate social responsibility (CSR) sustainability. Environmental

sustainability refers to the use of energy and other resources and the footprint companies leave behind as

a result of their operations. It is often related to waste reduction, pollution reduction, energy efficiency,

emissions reduction, decrease in the consumption of hazardous materials, and decrease in the frequency

of environmental accidents. Social sustainability shifts the focus to both internal communities and external

ones (Pullman et al., 2009). Indeed, firms engage in CSR activities as a way to enhance their social

reputation (Fombrun, 2005). Whereas, economic sustainability is the criteria by how a pound of profit is

made is a building block in the creation of a just capitalism; progressive profitability must replace simple

financial profitability as the sole yardstick of business success (Doane and MacGilivray, 2001 cited in

Hutton, 2001). Based on the current literature, there have been various dimensions of the sustainable

performance that were used by previous studies. A summary of SP measurements is given in Table 2.


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Table 2. The summary research finding on sustainable performance

Dimension Literature/Authors Findings

Environmental

Sustainability

Yang et al.

(2011)

1. Improved environmental performance; and

2. Reduced the negative impact of environmental

management practices on market and financial performance.

Schoenherr (2011)

1. Provide further motivation for firms to implement

environmental initiatives;

2. Increase the customers’ perception of the plant’s

product in the marketplace;

3. Increase the quality performance; and

4. Increase a plant’s competitive advantage.

Hermann et al.

(2007)

1. Complete in that it includes parts of the production

chain that are outside the boundaries of the industrial system

itself;

2. Making the results easy to interpret for policy

purposes; and

3. Uses readily available information.

Economic

Sustainability

Rennings et al.

(2006)

1. Increase in the number of employees;

2. Increase in turnover; and

3. Increase in exports.

Kumar and

Sutherland (2009)

1. Decrease the price paid to the last user;

2. Increase the selling price;

3. Increase the overhead cost; and

4. Increase levels of dismantling.

CSR

Sustainability

Hutchins and

Sutherland (2008)

1. Positive impact of social change;

2. Establish a comprehensive social footprint;

3. Form a single social sustainability metric; and

4. Form a single measure of performance.

Flack and Heblich

(2007)

1. Involve a long-term shareholder value approach;

3. Profit maximization for a long-term;

4. In the case of manager-led companies, this will make

necessary a change in incentive structure; and

4. A company's goal to survive and prosper, it can do

nothing better than to take a long term view and understand

that if it treats society well, society will return the favor.

Parast and Adams

(2011)

1. Top management support for quality;

2. The availability of quality information has a positive

impact on corporate social responsibility;

3. Social responsibility has a positive and significant effect

on internal quality results; and

4. The effect of corporate social responsibility on external

quality results is not significant.


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3. METHODOLOGY

This research is going to use quantitative survey in the Malaysian automotive industry. The main

reason why this research chose the Malaysian automotive industry it is because the performance of the

national car and the supplied parts by local suppliers still receive criticism, complaints and various

suggested approaches to improve their product quality, operation management, and customer satisfaction

(Habidin, 2012). Population of this research comprised on automotive industry in Malaysia.

Questionnaires will distribute to respondents from the listing of automotive industry obtained from

Malaysian Automotive Component Parts Association (MACPMA), Proton Vendors Association (PVA) and

Kelab Vendor PERODUA.

To determine the causal relationship between the different constructs of the suggested model of the

research, Structural Equation Modeling (SEM) technique was adopted. Ullman (2001) has been described

that SEM as a combination of exploratory factor analysis and multiple regression. A review of current

trends in SEM methodology research according to Wothke (2010) are (i) statistical models and

methodologies for missing data; (ii) combinations of latent trait and latent class approaches; (iii) Bayesian

Models to deal with small sample size; (iv) non-linear measurement and structural models; and (v)

extensions for non-random sampling, such as multi-level models. Thus, SEM technique is one of the most

techniques that one can use to reduce the number of observed variables into a smaller number of latent

variables by examining the co-variation among the observed variables Schreiber et al. (2010). Due to the

increased emphasis on SEM technique that perform the require statistical analysis of the data from the

survey, this paper employed the SEM technique to investigate the relationship between SLI and SP as

shown in Figure 1. Meanwhile, Statistical Package for the Social Sciences (SPSS) version 17 was used to

analyze the preliminary data and provide descriptive analyses about thesis sample such as means, standard

deviations and frequencies. Also, SEM using AMOS 6.0 will be use to test the measurement model.

For this paper proposed, a conceptual model has been used to present the relationship between SLI

and SP as presented in Figure 1. This proposed model has adopted the conceptual proposed by Zubir

(2012) cited in Millar and Russell (2011) and Fairfield et al. (2011). However, some amendments

especially on SLI implementation and SP constructs have been made.

*Note: SLI = Sustaining Lean Improvements, SW = Standard Work, EI = Employee Involvement, CI

= Continuous Improvement, SP = Sustainable Performance, CSR = Corporate Social Responsibility

Figure 1. A Proposed Conceptual Model for SME Framework


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3.1 The Relationship between SLI and SP

To ensure the relationship between SLI implementation and environmental sustainability

performance, research by Jayaram et al. (2008) which are studied in the automotive supplier industry find

positive relationships between: (i) relationship building and lean design; (ii) relationship building and

lean manufacturing; and (iii) lean design and firm performance. This suggests that relationship building is

more valuable for enhancing the product aspects of lean strategy as opposed to the process aspects of lean

strategy. Process aspects of lean strategy appear to be largely a function of internal efforts. This finding is

also supported by Schoenherr (2011). The test of hypothesis revealed ISO 14000 certification, pollution

prevention and waste reduction as having a significant and positive effect on quality, delivery, flexibility,

and cost performance measures; the initiative of recycling of materials failed to exhibit a significant

influence in all four instances. These results, while partially supporting hypothesis, provide intriguing

insight, especially also compared to findings in prior research. As such, their study overall supports the

notion that environmental initiatives are beneficial, not only in terms of doing the right thing, but also in

terms of operational performance Schoenherr (2011) cite in Montabon et al. (2007).

From the aspect of economic sustainability, Hofer et al. (2012) explored the relationship between

lean production implementation and financial performance. Based on an analysis, the effect of lean

production on financial performance is found to be partially mediated by inventory leanness. In addition,

there is strong evidence that the concurrent implementation of internally-focused and externally-focused

lean practices yields greater performance benefits than selective lean production implementation. The

studies’ findings are largely consistent with Yang et al. (2011). This study explores relationships between

lean manufacturing practices, environmental management and business performance. The findings

suggest that prior lean manufacturing experiences are positively related to environmental management

practice. Therefore, the paper provides empirical evidences with large sample size that environmental

management practices become an important mediating variable to resolve the conflicts between lean

manufacturing and environmental performance. Additional contextual analyses suggest that differences

exist in terms of the strengths and statistical significance of some of the proposed relationships.

Meanwhile, Demeter and Matyusz (2011) who have concentrate on how companies can improve their

inventory turnover performance through the use of lean practices. According to their main proposition,

firms that widely apply lean practices have higher inventory turnover than those that do not rely on lean

manufacturing.

Evidence of positive effects of lean improvements on CSR sustainability performance is presented by

Groen et al. (2012) have showed the performance can improve via: (i) attitude, in consequence of

feedback in improvement initiatives; (ii) social pressure, because it provided the maintenance technicians

with shared priorities and targets; and (iii) capability, because the performance measures uncovered

various improvement opportunities. These variables in turn positively influenced employee initiative.

Questionnaire results show that attitude, social pressure, and capability are significantly correlated with

employee initiative. Another study by Brammer et al. (2005) found that the importance of gender variation

and suggest both that external CSR is positively related to organizational commitment and that the

contribution of CSR to organizational commitment is at least as great as job satisfaction.

However, the relationship between SLI and SP in Malaysian automotive industry will be investigated

deeply via this paper propose. A hypothesis regarding the relationship between SLI and SP is formulated as

follow: H1- There is a positive and direct significant relationship between SLI implementation and SP in

Malaysian automotive industry.


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4. CONCLUSION

The aim of this paper was to carry out the theoretical study on the determinants of critical success

factors (CSF) of SLI namely (i) standard work, (ii), and SP in the Malaysian automotive industry. The main

contribution of this paper was to persuade practitioner from the listing of automotive industry to take an

attention on the relationship among CSFs of SLI and SP in Malaysian automotive industry.

Due to lack of studies on above addressed problem in the country, attempts were made to investigate

the CSFs of SLI in Malaysian automotive industry. This study theoretically reviewed prior literatures on

same problem in our country. The aim was to shed some light on the research problem. In future agenda,

a survey is designed in order to conduct an empirical research for examining survey’s hypotheses. It is

hoped that the important facts addressed in this paper will be a means whereby managers and researchers

will be able to investigate the SLI problem in Malaysian automotive industry with better awareness.

5. ACKNOWLEDGEMENT

The researchers would like to acknowledge the Ministry of Higher Education (MOHE) for the financial

funding of this research thought Fundamental Research Grant Scheme (FRGS), and Research Management

Centre (RMC), UPSI for Research University Grant (RUG).

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