Influence of Lean Supply Chain Management Practices
Influence of Lean Supply Chain Management Practices
Lean Supply Chain Management is key for enhancing organizational performance in manufacturing
firms. Despite many efforts to address lean supply chain management practices in manufacturing
firms, there exist limited literature on the influence of lean supply chain management practices on the
performance of manufacturing firms. Manufacturing companies face performance challenges which
include an inadequate volume of sales, low profitability, uncompetitive market share, poor customer
satisfaction associated with lean supply chain management practices. To fill this gap, the study sought
to study the influence of lean supply chain management practices on the performance of
manufacturing firms. In specific, the study aimed to assess the influence of just-in-time procurement
on performance, to examine the influence of Sigma Six on performance, and to establish the influence
of Total quality management on performance. The study used a descriptive research design. The
target population was 400 employees from five departments which forms the internal supply chain
of Unilever Kenya Limited. A stratified random sampling technique was employed in attaining a
representative sample from the target population. The study used a 20% sample size from the target
population which is represented by 80 respondents. Data collection was done using structured open
and closed-ended questionnaires. To test the validity and reliability of the research instruments a pilot
test was conducted which involved a pilot sample of 16 staff who were excluded from the actual
research study. The data were analyzed by use of descriptive statistics and inferential analysis through
statistical package for social sciences (SPSS) version 21 software. Regression analysis results revealed
that Just in Time Procurement had an insignificant negative influence on performance, Six Sigma lean
supply chain practice had a significant positive influence on performance and Total quality
management had an insignificant positive influence on performance. The study concluded that Just
in Time Procurement, Total quality management have no notable influence on performance. However,
Six Sigma is a good driver of organizational performance. The study recommends that manufacturing
companies should deploy more resources towards the implementation of Just in Time Procurement
policies. For Total quality management study recommends that manufacturing firms should adopt a
continuous quality improvement strategy across all functions within the organization. Generally,
resources (e.g. finances, system-process integration infrastructure, operational staff involvement,
1 Masters of Science student, Jomo Kenyatta University of Agriculture and Technology, Department of Procurement and Logistics, School of
Entrepreneurship, Procurement and Management.
2 Lecturer, Jomo Kenyatta University of Agriculture and Technology, Department of Procurement and Logistics, School of Entrepreneurship,
Procurement and Management.
and top management support, etc.) are key from implementation to adoption and success of lean
supply chain practices for contribution to the performance of manufacturing firms.
Keywords: Just In Time (JIT), Six Sigma, Total Quality Management (TQM), Lean Supply Chain (LSC).
This is an open access article under Creative Commons Attribution 4.0 License, 2018.
1. Introduction
The lean supply chain management concept is widely turning into a viable practice for supply
chain management businesses worldwide. Value addition is a key driver for manufacturing firms
strategizing on lean supply chain systems (Tersine & Hummingbird, 1995). The system is described as the
entire logistical chain from inbound, outbound and to final product consumption. the effectiveness of a
company's response to swiftly changing marketplace conditions is be largely determined through the
competencies of its buying and selling partners. Lean philosophy, which commenced with the Toyota
production system (TPS) is one of the frameworks that makes use of few resources. TPS guarantees a
clear output from alike a large scale manufacturing framework while contributing supported
assortments for the end user (Womack, Jones& Ross, 1990). The revolution of Supply Chain Management
(SCM) in the last decade is an advancement to strategic market positioning towards enhancement of
manufacturing firms’ performance past their competitors (Skjoett-Larsen, 2013). A lean manufacturing
company understands consumer concern and centers its key importance to constantly improve it.
According to Liker (2014). As long as it minimizes costs at the functional level, lean supply chain
management is key element of firms’ performance. Lean supply chain management practices target
waste, errors, defects from all processes while also improving information flow along the value chain
(McManus, 2012).
Multinational companies (MNC) performs their businesses in global structures that have growing
complexities due to interconnected tactics of globalization and internationalization of firms (Ball et al.,
2008 & Boschman, 2006). Therefore increased competition compels the companies to adapt to new
supply management techniques to survive in their economic sectors (Ogutu & Samuel, 2011). For many
manufacturing companies round the globe, lean supply chain remains a leading hub in organizational
performance (Naylor, 1999). Many western countries have experienced a relative decline in the
performance of the manufacturing industry. For instance, manufacturing industry in Australian has
contributed a GDP value of less than half of what it did in the last four years (Anthony, 2014). This was
attributed to poor strategic supply chain leading to rise in costs of manufacturing resulting in the gross
running income margin for the manufacturing firms to fall from 9.5% within the year 2013 to 7.8% in the
year 2014.
In Africa, manufacturing firm performance in the manufacturing sector has been poor over the
past decade. A decline in performance of the manufacturing companies in Nigeria resulted to a decline
in GDP from 9.6% in the year 2006 to 5.0% in the 12 months 2013.This in turn attributed to the high cost of
manufacturing especially in the oil and gasoline sector and beside the point investment in system and
machinery because of negative supply chain management (Nigerian Manufacturing Enterprises Survey-
NMES, 2013).Decline in manufacturing firm performance resulted to a decline in the worldwide Gross
Domestic Product (GDP) from 5% in the year 2010 to 3.08 % within the 12 months 2011. As per KNBS (2012),
Kenya’s manufacturing enterprise has declined its value addition to the country’s GDP. Some of the
reasons for such a decline include poor stock control and decreased customer powerful demand due to
poor techniques in supply chains. Some statistics show that the terrible manufacturing firm performance
of the manufacturing companies in Kenya contributed to a decline in GDP. The country’s GDP value
declined from 7.0 % performed in the year 2007to 1.5 % in the 12 months 2008 (Ondiek, 2012). The GDP
rose to 2.7 % in the year 2009 and a similarly 5.8 % within the year 2010. However, this growth declined to
4.4% in the year 2011. This attributed to poor resources utilization, decreased purchasing power, delays in
fulfilling customer's orders and lack of proper supply chain strategies.
According to Farole and Mukim (2013), the manufacturing sector in Kenya has a growing number
of firms that competes globally but has derailed due to ineffective supply chain network for many years.
The issues which hinder supply chain network includes waste of resources, low capital budget, old
technology, high costs and non-value adding activities. Kenya's holds an approximate 0.02% share of
manufacturing to the global market compared with rest COMESA (Ministry of trade and organizations,
2011).The manufacturing industry in Kenya reported an increase of 3.8% in 2018 in comparison to 3.6% in
2017 (Ministry of trade and organizations, 2011). The increase was fueled by reduced cost of production,
increased production of goods and minimized waste of resources (Kenya Institute for Public Policy
Research and Analysis, 2013). According to Kovac (2013), lean supply chain (LSC) in any business
effectively and continuously aims at reducing costs and wastes. Additionally, the LSC practices like
kanban, Sigma Six, JIT, poka yoke and Total quality management are primary for organizations that need
to undertake changes (Nightingale, 2005). As a key tool, LSC makes use of partnerships and strategic
alliances as its primary key feature related to a spectrum of collaborative relationships and coordination
mechanisms. Although lean supply chain management is not well implemented in Kenya, the use of lean
supply chain principles and concepts are experienced through minimized costs of production, increased
sales, maximized resources and reduced wastes in most firms. Kenyan manufacturing firms are thus
faced with competition in the growing market, as they try to come up with tight practices of coping with
competitive supply chains in a bid to enhance performance.
4. Theoretical review
Theoretical review advances background understanding of theories and models that have been
explored by scholars to give insight to lean supply chain management practices (Evenett and Hoekman,
2005).
maximize utilization of resources along value chain network by adopting lean supply chain management
practices.
5. Conceptual framework
The framework highlights the study variables and illustrates the underlying relationships
(Thomas, 2010). The dependent variable in the study is performance and the independent variables are
JIT, Sigma Six and Total quality management.
This study engaged a conceptual framework to assess the influence of lean supply chain
management practices on performance of manufacturing firms in Kenya.
Supplier rationalization
Stockless purchasing
volume of sales
Process mapping Profitability
Standardization Market share
Customer satisfaction
Return on investment
Quality training
Defects/errors screening
considerably contributes to financial performance of firms (Yasin et.al., 1997). The main focus of just in
time is to eradicate stocks in a rotation to another point in the value chain. Inventories are minimized by
providing materials in real-time when wanted in manufacturing work. JIT should be integrated with other
systems like kanban to achieve effective leanness in supply chain management. Kanban is a system that
controls the supply of materials with the help of bin cards that are managed along the manufacturing
system. Kanban offers signaling for reorder or replenishment of stock as well as stock repurchase. Lean
manufacturing systems use the Kanban as a technique to keep inventory levels as low as possible. The
demand-pull system which
is opposite to push is technique that does not allow production from upstream until a demand is
identified from the downstream supply chain (Womack & Jones, 1996). Only real consumption triggers
production or delivery in small lots, as a way of reducing stocks. When Kanban is properly utilized,
businesses rarely run out of stocks. Kanban systems has a lot of benefits which include minimal,
decreased storage needs and reduced excess manufacturing, minimized costs tied up in work in progress
(WIP). According to McManus, (2012) the achievement of Kanban relies on Material requirement
planning (MRP). Material requirement system attempts to keep good enough stock levels to assure that
the required resources are available when required.
high sales, continuous buyer-supplier relationship and advanced coordination between functions.
Rexhepi and Shrestha (2011) listed the main lean practices that drive firms performance: They included
the Five S's (Sort, Set, Shine, Standardize and Sustain), Kanban, Kaizen, TQM, Six sigma, Value Stream
Mapping, Poka Yoke, Jidoka, Mura, Muri, Process mapping and Just-in-time practices in supply chain.
Bhasin and Burcher (2006) mapped these practices into components of the supply chain as lean supplier
practices, lean procurement practices, lean transportation practices, lean customer practices, and lean
manufacturing practices.
Lean manufacturing practices (LMP) represents a concept that contributes to firm’s growth
when integrated together. According to Richard et.al (2009) performance encompasses three vital
missions of company, financial overall performance, Product marketplace overall performance, and
shareholder return. Daft (2007) notes that using financial measures overlooks the fact that what enables
an enterprise to attain or deliver better financial results from its operations is the achievement of
strategic targets that improve its competitiveness and market power. The Lean supply chain system
outcomes are realized through financial profits and customer satisfaction (Harry, 2000). Regardless of
its impact in financial performance, lean supply chain effect varies throughout adopters of its new
paradigm (Nahm, et al., 2003). One source of the version is managers ‘piecemeal adoption of lean
philosophy.
6. Empirical review
There exists a study on lean supply chain practices implementation in Malaysia's electrical and
electronics enterprise and its impacts on enterprise performance. The study tested the implementation
of JIT and innovation use with the aid of interviewing senior managers. Azman (2010) found out that the
growth of performance in many firm are faced with low adoption of lean supply chain management
techniques. Another study on lean supply chain management in manufacturing companies in Kenya by
Wanjiku (2013) suggested that lean supply chain management adoption is slowly being consumed by
firms in Kenya through lean thinking at slow rate. Farah (2013) explored the interrelationship among lean
supply chain and firms performance in the many public water s firms in Kenya. He found out that there
are three symbiotic lean supply chain management practices namely waste control, standardization and
demand management that has great impact on performance. Ugochukwu (2012) studied on lean
practices within the supply chain management on previous studies of research articles. His study showed
that procurement practitioners and researchers study lean as a progression into lean management which
transforms into a competitive lean supply chain management.
Kimani (2013) researched on lean supply chain management in production sector in Kenya and
concluded that organizations were at early stages of implementing lean supply chain concepts. He
attached existence of weak adoption of lean practices to high costs, bureaucratic, market rivalry and
protective maintenance. Rono (2013) made research study on lean supply manufacturing practices in
Kenyan cement manufacturing industry. He revealed that organizations base lean manufacturing
practices on systems and processes in place e.g. continuous development, standardization of labor,
poka-yoke, manufacturing smoothening, Total quality management and total efficient productive
maintenance. He drew conclusions that progressive manufacturing firm performance of a business,
multiskilling of workers, cost control, waste reduction, stakeholder's relationship, value addition in the
value chain accrue to benefits of lean manufacturing. The study did not attach lean supply chain practices
to performance of firms. Musyoka (2015) had researched on lean supply chain management practices
effect on performance of production companies in Kenya. His study related firm performance to lean
concepts and suggested that enterprises seek lean expecting elimination of costs, return on investments
and strategic positioning. Though the studies suggested the combination of lean practices in firm’s
improvement strategies, it did not deal with the influence of lean supply chain management practices on
performance of firms.
7. Research gap
Leans supply chain management practices have broadly been adopted in first world countries like
the United States, the United Kingdom among others. Developing countries especially in east and central
Africa are yet to realize the benefits lean supply chain management practices and thus adopt lean.
Macharia (2014) considers the acceptance of a lean supply chain as an essential technique in enabling
firms reduce operational waste and improve performance. Lean supply chain management practices
purpose at integrating the functional areas of any company by making sure that the business and its
suppliers have a shared system that allows them to work together. This enables organizations to supply
tailor-made products and services that particularly meet customer demands. In their associated research
on "Strategic and operational approach to evaluate the lean performance in radial Tire manufacturing in
India", Gupta et.al (2013) established that financial functionality of a company can support lean
manufacturing practices. Their study ventured into a lean performance approach and but did not
discover the influence of lean supply chain practices on performance. In another research lean
manufacturing and operational performance in the Brazil automotive supply chain, Marodin et.al. (2017)
stated that manufacturing firm performance of the lean concept implementation was not uniform
among firms.
Exploring lean operations on Chinese manufacturing firms may also provide insight into the
research gap by Shahram and Morosan (2011) who realized that lean manufacturing firm performance
factors are strongly related to operational practices and manufacturing system. Their findings, however,
were based on the lean operations on manufacturing companies in China which is not in Kenyan set up.
There exist few scholarly work addressing the influence of lean supply chain practices on the
performance of the manufacturing sector in Kenya. Many researchers have carried study on lean
management, agile and lean concept in the manufacturing sector. However the researchers were silent
on influence of lean supply chain management practices on performance of local manufacturing firms.
The rare scholarly studies on the influence of lean supply chain management practices on performance
prompted this study to fill in the study gap. This research study, hence explored to assess the influence
of lean supply chain management practices on performance of manufacturing sector in Kenya.
8.2 Population
The target population for this study incorporated 400 staff (procurement department- 30 staff,
production department- 170 staff, sales and marketing department- 60 staff, transport and logistics
department- 40 staff and warehousing department- 100 staff who formed an internal supply chain of
Unilever Kenya limited.
performance Part D examined the influence of Total quality management on performance and Part E
assessed the lean supply chain management practices.
response rate was considered appropriate to derive the inferences regarding the objectives of the
research.
explained by four predictors namely JIT, Six Sigma and TQM whereas remaining variation in
Organizational performance not explained could be contributed by other factors not covered in the
study.
9.3 Anovab
Below table present results for goodness of fit of the regression model.
Table 4.
Goodness of Fit.
Model Sum of Squares df Mean Square F Sig.
Regression 6.720 4 1.680 3.722 .008a
Residual 31.600 70 .451
Total 38.320 74
a. independent variables: (constant), X3TQM, X1JIT, X2Sixsigma,
b. Dependent variable: X4Performance.
Anova results tests whether the regression model achieve the goodness of fit. Table 03 shows
the total variance value 38.320 which is the difference between variance which can be explained by the
independent variables (Model) and the variance which was not explained by the independent variables
(Error). To the explained whether lean supply chain management practices influence performance, the
results in table indicate that the model had an F-ratio of 3.722, with significance P=0.008<0.05. These
results ascertain that the regression model adopted by the study was appropriate and the relationship
of the variables could not have occurred by chance.
10. Findings
According to the regression model in Table 04, holding all predictor variables constant the
organization performance was 8.569 units The regression results indicates that predictor JIT had a
negative and insignificant contribution to the Performance at β1= 0.114, P=0.540, t=0.616. This clearly
indicated that a unit change in JIT led to a decrease in Performance by 0.114. These could be due to
possible existence of discrepancies in stock levels, abrupt increase in demand by high production of fast
consumer goods without buffer stocks to support production. The results differed with Kimani (2013)
findings, that manufacturing industry implemented lean supply chain practices such as JIT thus reducing
time wastage and cost reduction hence increased profitability for sustainability of firms’ performance.
The findings were contrary to Yasin (1997) who argued that companies working towards JIT are related
to increased earnings.
From the regression results, predictor Six Sigma had a positive significant impact on Performance
at β1 =0.736, P=0.004, t=2.955. This indicated that a unit change in Six Sigma lean supply chain practice
would lead to increase in Performance by 0.736. The findings were supported by Martin (2007) that Six
Sigma turns out as an effective method that provides organization with tools to improve their business
operating capacity whose philosophy and practices organizations use to cast off defects and errors of
their products. The results also concurred with Martin (2007), that a blend of Lean practices and Sigma
Six is very critical because lean techniques and Sigma Six can improve system flow and minimize costs
towards return on investment.
Further regression results indicated that predictor TQM had a positive and insignificant influence
on Performance at β1 =0.156, P=0.639, t=0.471. This means a unit change in TQM will lead to a 0.156
increase in organization performance. The positive insignificant influence on performance would mean
that TQM was not fully utilized or was partially implemented. This means if TQM was well utilized it can
contribute to improvement of organizational performance. The results differed with Shahram (2011) that
TQM as a customer and procedure-oriented approach to do business renders to increased pleasure and
pride for both customers and employees. The results aligned to Deming (1986), who suggested that no
high quality management system can excel in absence of commitment to key quality drivers in all
organization sections.
However, at 5% level of significance and 95% level of confidence, sigma six had a significant
influence on the organizational performance with P-value and 0.004 and therefore the coefficient should
be retained in the final model. The P-values of 0.540 and 0.639 associated with the coefficient for JIT and
TQM respectively has an implication that their influence on organizational performance was insignificant
and so they may be dropped in reporting the final model. The results further infers that of all the
predictors considered in the study, six sigma contributes significantly to the organizational performance.
11. Conclusions
The study concluded that increase in JIT would lead to insignificant decrease in performance.
Deployment of JIT procurement practices did not empower the firm to benefit from vendor based
inventory, procure materials based on demand, rationalize supply base for effective cooperation, foster
suppliers attainment of ISO certified and did not result to remarkable reduction in stockholding costs.
Since JIT advocates for minimized inventory there is need to have buffer stock to produce the fast
moving consumer goods (FMCG) which requires raw materials readily available. With no buffer stocks
any FMCG supply chain can face acute backdrop in delivery delays and poor serviced orders for
customers. When there is disruptions in market supply chain the production will not be able to meet
demand and also will negatively affect the company’s performance.
The study concluded that Six Sigma had a significant, positive influence on Performance. Six
Sigma's goals were to reduce defects and variation so that processes are more consistent and
predictable. Six Sigma practices enhanced supply chain processes standardization, minimized wastage
of resources, timely detected errors and defects along the supply, led to production of high quality
materials and fostered establishment of material requirement planning. Six Sigma thus influenced
performance by improving production which increased its profitability, return on investment, market
share and the customer experience as well as improvement in sale volumes.
The study concluded that Total quality management had an insignificant impact on performance.
This could have been contributed by insufficient staff awareness and training on TQM, lack of proper
employees' involvement, inadequate top management support, inadequate resources deployment
towards TQM empowerment, lack of leadership and coordination on TQM enrolment, lack of company
quality-oriented culture, inefficient TQM practices communication, weak change plan towards TQM
adoption, inadequate teamwork upon adoption; failure to develop employee participation, failure to
build a learning organization that enhances continuous quality improvement, Failure to incorporate
quality improvement initiatives in all departments, lack of quality improvement measurements and
access to data, Insufficient resource allocation to support TQM. Thus utilization of Total quality
management did not visibly lead to notable profitability, market share, sale volumes and return on
investment as well as improving customer satisfaction.
12. Recommendations
From the findings, the study would recommend that management of manufacturing companies
should embrace JIT as a supply chain management policy and also deploy more resources towards its
implementation as a lean supply chain management practice. That means every aspect of JIT production
must be synchronized with other practices and this requires investment in a good procurement system
to enable instant notification when orders are received and deliveries are made. Manufacturing
companies requires good system to handle; frequent orders that renders JIT system ineffective,
fluctuations in demand and products requirements, quality checker for products to avoid defects and
waste in production, system which can smoothen lengthy and erratic downtimes since JIT alone does
not eradicate variability or unpredictability in production. Unilever as an FMCG requires buffer stocks and
good supplier collaboration to ensure materials are always available and supplies are seamless. These
would eventually result into timely production and improved sales volumes, increased profitability and
return on investment from sales, improved market share and good customer satisfaction.
The study found out that Six Sigma contributed significantly to Performance. Six Sigma as a lean
supply chain practice has fostered supply chain processes standardization, experience minimal wastage
of resources, assisted to timely detect errors and defects along the supply network, influenced
production of high quality materials and fostered establishment of material requirement planning. Six
sigma can therefore improve organizational performance by reducing defects, errors and wastes, thus
it’s a viable contributor for consideration performance improvement. Sigma Six basically focuses on
methods of improving the performance of firms operations implying that manpower cannot solely be
relied on to deliver good quality products, hence requirement for Six sigma to eliminate the chances of
human error in the system. Companies therefore should focus more on eliminating defects and errors by
carefully designing and analyzing their processes. Six Sigma therefore helps to identify and remove
defects by reducing the inconsistencies in the manufacturing processes. Manufacturing firms should
therefore put more effort and resources in training staff and support implementation of sigma six. When
Six Sigma practice is well utilized, manufacturing companies can achieve powerful business improvement
strategy that maximizes return on investments, good quality and lasting customer experience, increase
in profitability, market share, customer satisfaction as well as improvement in sale volumes.
The management of manufacturing companies should invest more on fostering Total quality
management as a continuous improvement policy. This will enhance quality production as a key engine
for improving organizational performance. TQM envision an organization as a pool of processes and
therefore it should be enshrined in formation of business strategic plans. It ascertains that organizations
must endeavor to continuously improve processes by training and tapping the knowledge and
experiences of staff. The basic goal of TQM is “do the rightful things right, the first-time and every time
thereafter.” The management of manufacturing firms should therefore put more resources in training
staff from the initiation stage, create TQM training cycles, develop supervision and coordination of TQM
programs by top management, deploy more resources towards TQM system support, entrench a quality-
oriented culture in their strategy, empower and motivate staff towards quality achievement, build a
learning organization that promotes continuous quality improvement, incorporate quality standards in
all operations and also adopt tools for monitoring and measuring quality improvement e.g. pareto
principle, check lists, control charts etc.
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