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IJLSS
4,2 A model for applying lean
thinking to value creation
Rania A.M. Shamah
204 Business Administration Department, Arab Open University, Cairo, Egypt

Abstract
Purpose – The purpose of this paper is to provide guidance for the management of supply chains in
order to increase the likelihood of lean thinking being generally adopted for the purposes of value
creation, and to examine the potential role of the customer in improving supply chain performance.
This study aims to address the impact of lean thinking when it is used in supply chains, then to
address the relevant factors needed to enhance the entire process of chain value creation.
Design/methodology/approach – A survey of extant studies in the Egyptian industrial sector is
undertaken here, involving a questionnaire which was distributed to all managerial levels in all
departments of a number of companies. This questionnaire is divided to two main sections. The first
section considers the question of value creation, while the second is related to lean thinking.
Findings – The model which is presented here is intended to examine the nature of the relationship
between lean thinking and value creation in supply chains. Consequently, it could help to enhance
customer satisfaction, increase internal-customer performance and provide innovative products.
Research limitations/implications – The study is based on a sample of relatively limited
geographical scope (in Egypt) and the duration of the survey is limited to one year. Future research
could expand the geographical coverage to other parts of the world over a longer duration.
Practical implications – Internal resistance is more of a barrier than external (customer or
supplier) resistance to lean thinking. Thus, organizations should focus first on internal (functional)
integration, and then move on to inter-organizational integration. Furthermore, people are often critical
of the role of technology in implementing lean thinking.
Originality/value – Little empirical research has previously been carried out into the
implementation of lean thinking. Practitioners and researchers should find value in this unique
comparative study.
Keywords Lean thinking, Value creation, Joint productivity, Egypt, Supply chain management,
Value chain
Paper type Research paper

Introduction
In order to cope with increasingly intense competition, manufacturing companies often
attempt to improve their operations by addressing specific needs (Hallgren and
Olhager, 2009). The primary resources for competitive advantage have shifted from
financial capital to knowledge and information (Allee and Taug, 2006). The strategies
used by companies to avoid competitive disadvantages include the elimination of
operational inefficiencies (which are considerable in the financial sector, accounting for
20 per cent or more of total banking industry costs) (de Koning et al., 2008a) and an
improvement of revenue by increasing the number of customers and their levels of
International Journal of Lean Six satisfaction, through processes of innovation and improvement (de Koning et al.,
Sigma 2008b).
Vol. 4 No. 2, 2013
pp. 204-224 Nowadays, a business’s real value lies outside the firm itself, in the minds of
q Emerald Group Publishing Limited
2040-4166
potential buyers (Kapferer, 1992) or suppliers (Shamah, 2012). Therefore, the intention
DOI 10.1108/20401461311319365 of successful organizations is to create value for customers, employees, investors,
stakeholders and suppliers, as the interests of these three groups are inextricably Applying lean
linked (Shamah, 2012; O’Malley, 1998). thinking
Utilization and value creation are expected to cut across established professional,
occupational and organizational boundaries and may disrupt existing practices. This
makes collaborating and forming partnerships highly important (Walsh, 2004; Jansen,
2009). Hence, value creation is a central concept in the management and organization
literature at both the micro level (individual, group) and the macro level (organization 205
theory, strategic management research) (Lepak et al., 2007).
Consequently; enterprises may need to adapt their management style to find
solutions to certain challenges that they are subjected to by their competition, as well as
the marketplace and the institutional environment they operate in. This novel scenario
has led to a search for an alternative management style that aims to guarantee to meet
customers’ needs in order to reinforce the company’s competitive position. Numerous
researchers have identified the existence of a trend towards the implementation of lean
principles which not only affect enterprises internally but also the way they are
organised externally (Shah and Ward, 2007; Moyano-Fuentes and Sacristán-Dı́az, 2012).
A lean enterprise is “an integrated entity that efficiently creates value for its
multiple stakeholders by employing lean principles and practices” (Mathaisel, 2005;
Nightingale and Milauskas, 1999). Therefore, a critical element of lean thinking is its
focus on value. Value creation is frequently seen as being equivalent to cost reduction.
This represents a common critical shortcoming of the understanding of what is meant
by “lean” (Hines et al., 2004). In 1996, Womack and Jones explained that the notion of
value is the first principle of lean thinking. Hence, lean thinking had progressed from a
merely being a “shop-floor-focus” on waste and cost reduction to an approach that
consistently sought to enhance perceived value for customers by adding product or
service features and/or avoiding wasteful activities.
In fact, the value created by a firm can be said to equal the benefits a firm’s customers
receive minus both the costs the firm’s suppliers incur and the costs of using the firm’s
own assets. To increase the value created, enterprises try to increase benefits for their
customers, reduce costs for their suppliers, uses their resources more effectively and
combine suppliers and customers in new or more efficient ways (Spulber, 2009). Hence,
leanness has been the focus of growing attention from the scientific community as a
good management method for improving companies’ competitiveness. Therefore, this
study focuses on improving the role of lean thinking on value creation as one of the
newly explored topics.

Literature review
This section will attempt to provide a review of the relevant literature about value
creation and lean thinking.

(1) Value creation

It is important to define the concept of value creation in order to make its meaning clear.
Numerous researchers have attempted to define the concept of value from various
different perspectives. They have all attempted to explore ways in which firms can
achieve better rewards by investing capital, carrying out efficient operations, and using
their existing resources. There have been a number of attempts to create a strategic
management philosophy, not only in order to enhance the overall profits of shareholders
IJLSS but also to add value for customers and suppliers in their transactions. According to
4,2 Armitage and Fog (1996) value management (VM) describes a management philosophy
built on the principle of creating economic benefits. On the other hand, Condon and
Goldstein (1998) see VM as a management philosophy which uses analytical tools and
procedures to help organisations focus on the single objective of reinforcing shareholder
value. Thus, Liu and Mei (2002) defend value as a service that develops from concept to
206 completion by examining the decision-making of the enterprise’s value system, and by
ensuring the maximization of a project’s functional value. VM is an organized method
designed to provide necessary functions at the lowest possible cost, and is an organized
way of identifying and eliminating unnecessary costs. This is why Simmes (2001)
focuses on seeing value based management as a management approach to maximising
shareholder value through the earning of an excess return over the cost of capital.
Based on previous definitions, value creation can be seen in two dimensions. The
first of these is the magnitude of returns in excess of the cost of capital that a company
can, or will, generate. The second is how long a firm can earn returns in excess of the
cost of capital-fade rate in a period of competitive advantage (CAP) (Mauboussin and
Bartholdson, 2002; Shamah, 2013).
Hence, value creation relies on three parties: customers, employees and investors
(O’Malley, 1998). Therefore, matching customers and providers’ practices requires not
only a recognition of what value means but also an understanding of the importance of
the process of value creation (Alderson, 1957; Ramirez, 1999; Normann, 2001; Sheth and
Uslay, 2007; Grönroos, 2008; Lusch et al., 2008). The existing models devoted to this
topic have yet to focus on the question of how an organization creates value (Cengiz
kayacan et al., 2004; Shamah, 2013).
Bowman and Ambrosini (2000) explore ways of introducing value creation and
differentiating between two types of value at the organizational level of analysis: use
value and exchange value. Therefore, they see value as referring to:
[. . .] the specific quality of a new job, task, product, or service as perceived by users in relation
to their needs, such as speed or quality of performance on a new task or the aesthetics or
performance features of a new product or service (Lepak et al., 2007).
With regard to these definitions, judgments may be subjective and specific. The second
type of value is labelled as exchange value, and this can be recognized as either the
monetary amount appreciated at a certain point in time, when the exchange of the new
task, good, service, or product takes place, or the amount paid by a user to a seller for
the use value of the focal task, job, product, or service (Bowman and Ambrosini, 2000;
Lepak et al., 2007).
According to Rokeach (1973), Gutman (1982), Peter and Olson (1987), Zeithaml
(1988), Day (1990), Holbrook (1994), Woodruff (1997), De Chernatony et al. (2000) and
Grönroos and Helle (2010), value is the end result of value creating activities and
implies some form of an assessment of the benefits of sacrifice.

(2) Lean thinking

“Lean” is a relatively new term, although the philosophy behind it can be traced back
to the factories of Ford in the 1920s and to the Toyota production system (TPS) that
has developed from the 1950s until the present day (Julien and Tjahjono, 2009;
Bicheno et al., 2004; Womack and Jones, 1996a, b, c; Womack et al., 1990). Lean got its
name from Womack et al. (1990) whose book chronicles the development of automobile Applying lean
manufacturing through the stages from craft production to mass production to lean thinking
production.
Hence, “lean” can be considered from both a philosophical perspective, related to
guiding principles or overarching goals; and from a practical perspective; as a set of
management practices, tools, or techniques that can be observed directly (Boyle et al.,
2011; Shah and Ward, 2007). From an operational perspective, “lean” involves 207
implementing a set of shop floor tools and techniques aimed at reducing waste within a
plant and along a supply chain (Boyle et al., 2011; Shah and Ward, 2003, 2007; de Treville
and Antonakis, 2005; Narasimhan et al., 2006; Hoop and Spearman, 2004; Liker, 2004).
The term does not indicate a set of tools but a philosophy of operation (Julien and
Tjahjono, 2009).
“Lean thinking” is all about adding value, where value is defined by the customer.
It has its roots in manufacturing and there are numerous examples of its impact on
operations (Julien and Tjahjono, 2009). For instance, it was used by Toyota (Mathaisel,
2005; Monden, 1983; Ohno, 1988; Shingo, 1989), and was shown to facilitate increased
capacity, higher quality, and higher productivity while simultaneously reducing
inventory and order lead times (Mathaisel, 2005; Kilpatrick, 1997) and focusing on
flexible manufacturing systems in order to increase production efficiency. Also, “lean”
implies the idea of “manufacturing without waste”. In other words, lean production
focuses on preventing defects, not merely on finding them (Wu, 2003; Shingo, 1989).
Hence, being “lean” involves eliminating waste, which is defined as anything other
than the minimum amount of equipment, materials, parts, and working time that is
absolutely essential for production (Shamah, 2008a, b; Taj, 2005).
The idea of “lean” is also considered with reference to controlling resources in
accordance with customers’ needs and for reducing unnecessary waste, “including the
waste of time” (Andersson et al., 2006). In adopting this belief in “lean”, the following
definition of is suitable:
Lean is a systematic approach for identifying and eliminating waste through continuous
improvement (NIST, 2000) and for providing services to the customer in pursuit of
perfection, which require rooting out everything that is non-value-added (Comm and
Mathaisel, 2000).
From the same perspective, Shah and Ward (2007) define lean production as “an
integrated socio-technical system whose main objective is to eliminate waste by
concurrently reducing or minimizing supplier, customer, and internal variability”.
Eliminating waste focuses on the value of people’s efforts at the creating activities
that customers’ desire and are willing to pay for, and results in improved business
processes (Shamah, 2008a, b; Emiliani et al., 2003; Swank, 2003). Indeed, as a holistic
approach, lean requires discipline and attention needs to be given to each layer of the
lean philosophy, including the value stream, business improvement, and application to
business situations (Lean Recourses Center, 2008).
Nevertheless; lean production is a well-established management concept in many
manufacturing organizations (Kollberg et al., 2007). Also, leanness focuses on value for
the customer, provided in a flexible and responsive way in order to improve business
competitiveness (Julien and Tjahjono, 2009).
IJLSS Purpose and theoretical approach
4,2 First, the aim of this study is based on a review of previous literature. This study
aims to:
(1) provide guidance for the management of supply chains in order to improve the
likelihood and extent of lean thinking for value creation, with regard to coupling
the potential role of the customer to increase supply chains performance;
208
(2) establish a model construction for leanness privileged on supply chains value
creation;
(3) investigate the factors needed to enhance the entire process of chain value
creation; and finally
(4) understand the degree of leanness that exists within the Egyptian industry
sector.

Second, scales and measurement tools used for this study: to measure lean thinking and
value creation, this study used an instrument developed and validated by Shamah (2013).
Shamah identified four dimensions for elaborating the existence of leanness as follows:
lean thinking concepts, improvement programmes, waste elimination and lean culture.
These were based on Karlsson and Ahlström’s (1996) framework and Soriano-Meier and
Forrester’s (2002) model. Shamah argued that the core dimensions of value creation are
reducing operational cost and achieving customer satisfaction, creating a product mix’
knowledge accumulation; joint productivity and perceived quality. Therefore, she
measured the validity and the reliability of the suggested dimensions.
A reliability of 0.7 or higher is sufficient for this study. The Cronbach’s a results
from the analysis show that the output of the survey is reliable and consistent, as
demonstrated in Table I.
This study is based on data collected from an in-depth survey and interviews in the
Egyptian industrial sector, but it has applications beyond this, which indicate that this
kind of survey (in an adapted format) could be deployed for data collection in future

Dimensions Cronbach’s a No. of items

Part 1: lean thinking (LP) 0.895 54

1.1. Lean thinking concepts (LPC) 0.890 9
1.2. Improvement program (IP) 0.850 13
1.3. Waste elimination (WE) 0.890 11
1.3.1. Identify the Muda “non-value-added work” 0.840 4
1.3.2. Identify the Muri “overburden” 0.850 3
1.3.3. Identify the Mura “unevenness” 0.845 4
1.4. Lean culture 0.900 21
Part 2: value creation (VC) 0.940 44
2.1. Reducing operational cost and achieving
customer satisfaction (ROC and ACS) 0.900 11
2.2. Product mix (PMix) 0.936 5
2.3. Knowledge accumulation (KA) 0.850 9
2.4. Joint productivity ( JP) 0.890 12
Table I. 2.5. Perceived quality (PQ) 0.744 7
Total reliability statistics All items 0.978 98
studies in order to test the leanness of manufacturing firms. A Lickert points fifth Applying lean
rating scale was used in order to instruct the respondents. thinking
Third, the research questions used here were:
RQ1. Does lean thinking play a key role in supply chain value creation?
RQ2. Which sector in the Egyptian industry is willing to move towards leanness?
Finally, the research methodology is empirical research, for which the hypotheses were
209
tested in the Egyptian industrial sector – on technology companies, such as electronics
firms, air conditioner and refrigerator manufacturers and food, medicine, and
automobile companies, across all managerial levels (see Appendix). 400 questionnaires
were distributed, and 350 valid and complete questionnaires were returned. The
questionnaires were distributed by email and during field visits to companies among a
period of one year. For the purpose of this study, the study hypotheses are:
H1. There is significant difference between the industrial sectors when applying
lean thinking.
H2. The revised model of applying lean thinking for value creation as a
prospective improvement is a valid tool for explaining the situation in Egypt.
Based on the previous literature review, this research structure can be shown within
Figure 1.

Model for applying lean thinking to value creation

With reference to the previous literature review, it is noticeable that leanness is
regarded as being all about adding value, since it has shifted from only being applied
on the production shop-floor to a strategic philosophy. Hence, lean production has been
the most influential model or label used to characterize manufacturing reform
(Thompson and Wallace, 1996). Leanness principles are based on the fundamental
assumption that organizations are made up of processes and that this is linked to the
concept of value, waste reduction and continuous improvement and mindsets, as it
requires a strategy for the orchestration of tools, techniques and cultural change
(Hines et al., 2008; Shah and Ward, 2007; Spear and Bowen, 1999).
The profile of leanness is also becoming more prominent as it is now improving the
quality of processes in organizations by reducing their cycle time and operating costs,
creating continuous flows, satisfying customers and eliminating waste (or Muda, as the
Japanese call it) (Suárez-Barraza and Ramis-Pujol, 2010; Liker, 2004; Taylor and Brunt,
2001).

Figure 1.
Research structure
IJLSS Lean manufacturing expands the scope of the TPS by providing an enterprise-wide
4,2 term that draws together the five elements of the “product development process, the
supplier management process, the customer management process, and the policy
focusing process for the whole enterprise” (Pepper and Spedding, 2010; Holweg, 2007).
Simultaneously, lean focuses on the value of an individual product and its value stream
(identifying value-added and non-value-added activities), and tries to eliminate all
210 waste, which is the main target of lean thinking (Pepper and Spedding, 2010; Womack
and Jones, 1996a, b, c). The core variables for identifying whether a supply chain tends
towards leanness are shown in Figure 2.
As Figure 2 shows, this model is based on seeing lean thinking as a core element
which needs to exist in the internal and external features of organisations, to make a
flow of improvement between different parties in the supply chain possible, so that
value can be achieved. Hence, lean constitutes an innovative philosophy which aims to
use fewer resources compared to traditional mass production systems, focusing
instead on general principles at a strategic level and tools and techniques at an
operational level (Hines et al., 2004; Shah and Ward, 2003).
Lean can mean “less” in terms of less waste, less design time, less costs, fewer
organizational layers and fewer suppliers per customer. One lean operations
management design approach focuses on the elimination of waste and excess from
the tactical product flows at Toyota (Toyota’s “seven wastes”) and represents an
alternative model to that of capital-intense mass production (with its large batch sizes,
dedicated assets and “hidden waste”) (Hines et al., 2004). Nevertheless, lean can also
mean “more” in terms of more employee empowerment, more flexibility and capability,
more productivity, more quality, more customer satisfaction and more long-term
competitive success (Nightingale, 2000). To summarise, lean is focused on value-added
activities (Comm and Mathaisel, 2003; MIT, 2001; Liker, 1997).
Therefore; leanness is a strategic philosophy that can add perceived value to all
supply chain parties; in other words, stakeholders; while at the same time concentrating
on waste elimination (Shamah, 2013). Womack and Jones (2003) define waste as “any
human activity which absorbs resources without creating value”.

Figure 2.
Model for applying lean
thinking to value creation
Based on TPS related to identification of waste in the 1950s, TPS classified three types Applying lean
of waste: thinking
(1) Muri. Focusing on what work can be avoided proactively by design.
(2) Mura. Focusing on the implementation and the elimination of fluctuation at the
scheduling or preparation level.
(3) Muda. Elements which are discovered after the process is in place and which 211
deal with variations in output (Shamah, 2008a, b).

Product provider and customer relationships: a supply chain consists of a perspective

involving a customer experience which is built up over an extended period of time,
starting before and ending after the actual sales experience or transaction (Voss and
Zomerdijk, 2007). When making purchases, customers usually rely on their knowledge
of the total life-cycle costs and benefits. Therefore, the product provider should consider
creating the greatest value, then think about the value of a product or service in terms of
whether a customer would pay for it if he had all the possible information about it.
Finally, there is some focus on capturing part of that value as profit (O’Malley, 1998).
During a customer’s “journey”, numerous points of contact occur between the
customer and the product provider. These need to be carefully designed and managed
(Voss and Zomerdijk, 2007).
In trying to solve the perspective problem (Nickerson and Zenger, 2004) share the
assumption of the knowledge-based view that the key managerial objective is to create
valuable new knowledge (Teece et al., 1997; Conner and Prahalad, 1996; Kogut and
Zander, 1992; Barney, 1986; Wernerfelt, 1984). By creating new knowledge, firms
uncover new means to convert inputs into valued outputs (Nelson and Winter, 1982;
Arrow and Hahn, 1971). Consequently, the manager’s organizational task is to craft an
organization that efficiently generates and protects knowledge (Conner and Prahalad,
1996; Madhok, 1996; Kogut and Zander, 1992). The manager, however, cannot specify a
priori the knowledge she or he wishes to obtain, because more often than not, this
knowledge does not yet exist (Nickerson et al., 2007).
Therefore; value creation logic requires unique activity configuration frameworks
to satisfy the final customer. These may be:
.
Long-linked. Through transforming inputs into saleable outputs.
.
Mediating. Through linking customers within a network.
.
Intensive. Through solving clients’ problems by using experts and the
application of expertise (Norman and Verganti, 2011; Shamah, 2013).

This process is recognized as a form of co-creation, as it transforms the consumer into

an active partner in the creation of future value. This may play a part in shaping the
boundaries of the firm by “outsourcing” innovation and value creation to the customer
(Roser and Samson, 2009).
Companies who are successful in identifying customer desires and needs and can
subsequently develop and bring to market products and services to address them, tend
to fare better than companies that cannot do so (Judson et al., 2006; Rogers, 1996;
Calantone et al., 2002; Di Benedetto et al., 1999; Pooltan and Barclay, 1998; Li and
Calantone, 1998; Song and Montoya-Weiss, 1998).
IJLSS A product provider and supplier relationship between establishing partners is
4,2 important for improving competitive advantage and creating better positioning in the
marketplace. This can also help in creating a new earnings logic for their service
activities and in generating new and more effective ways of finding growth and
revenue-generation opportunities (Grönroos and Helle, 2010). Thus, all supplier
activities and processes relevant to a customer’s business can be coordinated with the
212 customer’s corresponding activities and processes into one integrated stream of action,
with the aim of supporting the customer’s processes, and eventually of influencing the
business outcome (Grönroos and Helle, 2010). In other words, joint productivity between
different parties can be facilitated.
Hence, productivity is defined in a way that reflects the rate, value, and costs of
producing computational results with regard to achieving the mission objectives of
the institution in question (Sterling, 2004). Productivity has been seen as the main
attribute of the process of computing which delivers ultimate value to the end-
user (Sterling, 2004). Despite this, over the last few years, productivity gaps have
increased and manufacturing bases have been eroded in many countries, resulting in a
drive for change within the manufacturing sector (Noke and Hughes, 2010). Moreover,
productivity is a measurement which serves as a score card for the effective use of
resources. Business leaders are concerned with productivity as it relates to
competitiveness (Stevenson, 1999).
The key to successfully competing is to determine customer needs, then to make
direct efforts towards meeting customer expectations. Employees, departments and
organisations can improve productivity through enhancing performance, which leads
to added value for stakeholders.
Consequently, product provider suppliers’ levels of productivity can directly affect
their ability to meet customer needs. Grönroos and Helle (2010) suggested the idea of
joint productivity, which refers to measuring the integration of productivity both for a
firm and its customers. This concept is developed and the relationships between values
created for the customer and for the firm on one hand and productivity on the other.
Finally, the philosophy of lean considers the interrelationship of these practices in
order to improve overall levels of quality, productivity, integration, and waste reduction
as regards manufacturing, as well as dealing with over-functional areas (e.g. R&D,
accounting), within the supply chain (Boyle et al., 2011).
Indeed, applying leanness can increase business firms’ competitive advantages
through achieving the following benefits: reduced work-in-process; increased
inventory turns; increased capacity; cycle-time reduction; and improved customer
satisfaction (Andersson et al., 2006; Deming, 1994).
Liker (2004) states that: [. . .] to be a lean manufacturer requires a way of thinking
that focuses on making the product flow through value adding processes without
interruption (one piece flow), creating a “pull” system that cascades back from
customer demand by replenishing only what the next operation takes away at short
intervals, and creating a culture of improvement.
Therefore, enterprises should benchmark their activities to competitors to make
sure of their efficiency after applying leanness.
Interestingly, every firm has to find its own way to implement the lean method: there
is no universal method that applies to all. Despite the wide knowledge and available
resources, many companies are struggling to stay “lean” (Shamah, 2008a, b; Taj, 2005).
Discussions and findings Applying lean
Testing hypotheses H1 thinking
One-way ANOVA analysis is used for testing this hypothesis (ANOVA). Using this
method, the differences between various group means on a single-response variable are
studied (Gill, 2001; Johnson, 1996). As represented in Table II.
After this, a post hoc test (Scheffe) is used to assess the significance of lean thinking
dimensions in the Egyptian industrial sector (the mean difference is significant at the 213
0.05 level). However, no mean difference is also significant between any other paired
industrial sectors.
It is obvious from Table II that there is a significant difference between air
conditioner companies and food companies. This indicates that air conditioning (AC)
had the most capabilities for the best application of lean thinking in comparison with
other companies, although there was a degree of homogeneity in the industry, as
shown in Figure 3. Therefore, (H1) is accepted.

Testing hypotheses H2
Structural equation modelling (SEM), using AMOS, serves to test and estimate causal
relationships using statistical data as well as qualitative causal assumptions. It is
suited for theory testing rather than for the development of theory, hence is rarely used
in exploratory research. It tests the qualitative causal assumptions embedded in the
model against the quantitative data, in order to confirm the model’s conclusions. One
strength of this tool is its ability to estimate latent variables (variables which are not

Industrial sector Mean SD F

Electronic 3.6351 0.21517 3.699

Air conditioner 3.7568 0.30959
Refrigerator 3.7216 0.20347 Sig. F
Food 3.6284 0.17622
Medicine 3.6865 0.25588 0.003 Table II.
Automobiles 3.6568 0.37116 Descriptive and one-way
Total 3.6809 0.26685 ANOVA analysis

3,750
Mean of Lean Thinking

3,725

3,700

3,675

3,650

3,625
Figure 3.
Electronic Air Refrigerator Food Medicine Automobiles Significance deference
Conditioner
between industrial sectors
Industrial Sectors
IJLSS measured directly) from measured variables. SEM allows measuring direct and
indirect relationships (Gudergan et al., 2008).
4,2 SEM grows out of and serves purposes similar to multiple regression, but in a more
powerful way which takes into account the modelling of interactions, nonlinearities,
correlated independents, measurement error, correlated error terms and multiple latent
independents; each of which is measured by multiple indicators, and one or more latent
214 dependent factors; also with multiple indicators (Lee, 2007; Raykov and Marcoulides,
2006; McDonald and Ho, 2002; Hoyle, 1995).
SEM findings are useful for modelling the complex causal relationship between
variables. In this study, SEM was used to examine the model of applying lean thinking
for value creation as Figure 4 could explain the interrelation between key factors
affecting the value creation, followed by Figure 5 which provides the intersection results.
In this model, three endogenous (observed) variables were measured by average
questions: L, Q, and VC, exogenous (observed), seven variables L2, L3, L4, L5, Q2, Q3, Q4,
exogenous (unobserved) and three variables: E1 to E3.
We can add the structural equations model (SEM):
L ¼ b1 L2 þ b2 L3 þ b 3 L4 þ b4 L5 þ E 1 ð1Þ
Q ¼ b 5 Q2 þ b 6 Q 3 þ b 7 Q4 þ E 2 ð2Þ
VC ¼ b11 L þ b12 Q þ b13 T þ E4 ð3Þ
Estimates can be made using the model AMOS V17.0 by applying the data collected.
Table III shows paths of estimates of exogenous and endogenous variables

Figure 4.
Path model for explaining
the interrelation between
key factors affecting value
creation

L2 E1
0.47
0.75 0.48
L3 0.34
0.51
0.62 0.34
L
L4
0.34 0.69
L5
E3
0.90 0.59
0.01 0.08 0.50
Q2
0.56 0.35 VC
Figure 5. 0.54 Q
Path model, using Q3 0.50
structural equation 0.74 Q4 0.16
modelling E2
 Applying lean
Path B b SE CR p-value
thinking
L ˆ L2 0.395 0.465 0.013 31.089 0.000
L ˆ L3 0.255 0.339 0.012 20.668 0.000
L ˆ L4 0.276 0.336 0.010 26.628 0.000
L ˆ L5 0.256 0.453 0.011 22.576 0.000
Q ˆ Q2 0.385 0.501 0.020 19.518 0.000 215
Q ˆ Q3 0.405 0.562 0.018 21.918 0.000
Q ˆ Q4 0.388 0.531 0.019 20.134 0.000
CV ˆ T 0.243 0.337 0.011 21.587 0.000
CV ˆ Q 0.298 0.354 0.013 23.292 0.000
CV ˆ L 0.442 0.694 0.010 43.774 0.000
Table III.
Notes: x 2 ¼ 1,344.97; df ¼ 46; p ¼ 0.000; GFI ¼ 0.879; AGFI ¼ 0.855; CFI ¼ 0.932; Paths estimates
RMSEA ¼ 0.067 of the model

(un-standardized – standardized), standard error, critical ratio and p-value. Table IV

shows the covariance’s and correlations between exogenous variables of the model
(values, standard error, critical ratio and p-value).
It is obvious from Table III that all estimated paths have significance at 1 per cent,
then accept paths which do not equal zero. However, it is clear from Table IV that the
estimated paths have significance at 1 percent.
Model fit: goodness-of-fit tests determine if the model being tested should be
accepted or rejected. These overall fit tests do not establish whether particular paths
within the model are significant. If the model is accepted, the researcher will then go on
to interpret the path coefficients in the model (“significant” path coefficients in poor fit
models are not meaningful).
Additionally, the goodness of fit should be less than or equal to 1. A value of 1
indicates a perfect fit (Hipp and Bollen, 2003).
Indeed, the values indicated in this model shows a relatively good fit such as:
goodness-of-fit index (GFI) ¼ 87.9 per cent, the adjusted GFI (AGFI) ¼ 85.5 percent,
comparative-of-fit index (CGFI) ¼ 93.2 per cent, and the root mean square error of
approximation (RMSEA) ¼ 0.067. Therefore, from pervious results: H2 is accepted.

Research limitations
This study has a number of limitations. First, the survey was conducted entirely within
the Egyptian industrial sector. The applicability of the proposed model could be
further tested in different countries and service mixtures.

Path Cov. SE CR p-value Corr.

L3 $ L4 0.670 0.088 7.638 0.000 0.617

L 2 $ L4 0.490 0.074 6.597 0.000 0.509
L 2 $ L3 0.786 0.090 8.687 0.000 0.749 Table IV.
Q2 $ Q3 0.375 0.054 6.947 0.000 0.544 Covariance’s (cov.)
L3 $ Q2 0.012 0.029 0.402 0.688 0.011 and correlations (corr.)
L4 $ Q3 0.067 0.039 1.720 0.085 0.079 of the model
IJLSS Also, the internal resistance is more of a barrier than the external (customer, supplier; or
4,2 competitors) resistance to lean thinking. Thus, organizations should focus first on
internal (functional) integration, and then move on to inter-organizational integration.
Furthermore, people can be particularly critical in implementing lean thinking.

Results and recommendations

216 Based on the above research study, it may be considered that the most relevant factors
for a successful implementation of lean thinking and sustenance of momentum for
value creation initiatives involve creating a match between the business provider, the
suppliers and the consumer service receiver through a trusted atmosphere, and joint
productivity between suppliers and main organizations.
The success of the initiative is ultimately determined by a sufficient combination of
the above-mentioned factors and their incorporation within the line organization. To
examine the hypothesis, a field study technique was employed. The following are the
main results of this study:
.
Lean thinking is a vital problem, especially food industry. It is not easy to get
people out of their work area to allow them to be able to change their
performance and to share knowledge. Executive commitment is required to hold
dedicated lean thinking sessions with a specific objective/goal.
.
There are, and still will be, employees who do not have a solid grasp of their
duties regarding thinking and knowledge transfers or knowledge sharing. These
had a negative effect on joint productivity.
.
Regarding initiating lean thinking initiatives, one can expect an increased
workload, with a decrease in the number of staff.
.
Lean thinking and joint productivity efficiency is related to value creation.

Conclusion
The purpose of “A model for applying lean thinking for value creation” is to gain a
better understanding of how we can apply lean thinking to enhance the overall supply
chain value creation between different parties.
To conclude, leanness in supply chains is a process that helps organizations find,
select, organize, disseminate, and control their resources in order to gain a business
advantage through controlling environmental phenomena. Consequently, managers
need to perform suitable actions in order to improve or to maintain specific aspects of
lean thinking. For academics, this model may be a potential starting point for comparing
various examples of research into lean thinking and value creation in the workplace.

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Appendix. Population and sample size

The industrial sector in Egypt can be divided into five main categories: petroleum; technology;
medicine; food and automobiles. This study has focused on the last four categories. Therefore;
the population of this study consists of those working for the technology companies – electronic,
AC, and refrigeration – along with employees of food, medicine, and automobile companies in
private sector.
The study methodology; a survey of extant studies in the Egyptian industrial sector is
undertaken here, involving a questionnaire which was distributed to all managerial levels in all
departments of a number of companies. This questionnaire is divided to two main sections. The
first section considers the question of value creation, while the second is related to lean thinking.
Then, a stratum random sample was carried as follows.
Table AI provides the main industry sectors working in Egypt and the number of companies
working in each segment.
Finally; determining study sample through: for calculating sample size, an easy sample size
program (ver.1) was used, as Figure A1 shows. This program used the following attribute
sample formula for calculating sample size.

No. Industrial segment Companies no.

1 Technology segment is divided to three main

categories
1.1 Electronic companies 12
1.2 Air conditioner (AC) 12 Table AI.
1.3 Refrigerator (Ref.) 9 Number of companies
2 Food companies 40 working in each
3 Medicine companies 31 industrial segment
4 Automobiles companies 26 in Egypt
IJLSS
4,2

224

Figure A1.
Estimation sample size

About the author

Rania A.M. Shamah is an Associate Professor of Business Administration at Helwan University
(Part-Time) and at the Arab Open University, Faculty of Business Administration, (Part-Time).
She is also a Consultant/Lecturer of Business Administration at several Training Centers in
the Middle East, especially in the Gulf Area and is a member of the Crisis Research Unit.
She is a Referee Editor for the International Journal of Knowledge Management & Culture
Change, an Associate Editor for the Disaster Report of Egypt (Crisis Research Unit Press) and is
on the organizing committee of the Annual Crisis Conference, run by the Crisis Research Unit.
Rania A.M. Shamah can be contacted at: [email protected]

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