Analysis on the Effectiveness of Lean Manufacturing and Outsourcing among International Business Organizations in the Electronics Industry
Introduction and Problem Statement
Globalization has been the current characteristics among business organizations. Geographic boundaries as well as time have been successfully overcome through innovations and advancements in technology as a result of globalization. Profit-seeking organizations across the world are continuously expanding operations in order to extend the reach of marketing and promotion agenda all in the effort to increase the share in consumer base. Business operations at present are capable of delivering the needs and demands of the consumers and clients both in the local and international markets through incessant business reengineering processes. Aggressive market competition across the world is evident among the existing industries in terms of the information management, physical resources allocation, human capital reserves, financial strategies, procurement and logistics concerns, supply chains, sales and marketing objectives, performance goals, social and corporate responsibilities, and levels of customer satisfaction.
The emergence of a global community has been the result of internationalization trends and initiatives among varying political beliefs, cultural orientations, economic characteristics, and environmental consciousness (Kim and Weaver, 2003). According to Steeple (2000) profit accumulation among business organizations has undergone a shift from the national level to the supranational global setting where information and capital resources flow more ceaseless and relentless. As people become more and more conveniently connected, produced goods and services are likewise becoming more and more available in every possible market place in different localities marked with more frequent international travels and the commonness of virtual communication (Porter, 2004). Moreover, the acquisition of basic knowledge, resources, investments, technology, and ethical beliefs became more fluent across different locations where sharing has been the normal and best practice (Lazarus, 1998).
The end result of the popularity of globalization principles as well as practices led to varying emotional appeals and implications among different individuals as its definitions are associated with various meanings. Changes in the social settings have been witnessed which piloted diverse perceptions, attitudes and beliefs regarding globalization impacts within the continuum of the positive and the negative extremities. People have different emotive inclinations when asked regarding the concept and impact of globalization. There are those who believe in the in the benefits that globalization brings to existing social communities such as the inevitable and irreversible progress and development of the economy while others welcomed it with hostility as brought about by fears on worse social inequalities within and between existing nations and organizations. But nevertheless, it can not be denied that globalization initiated the trends towards greater international movements in terms of commodity, money, information, and people along with the growth and improvements of technology, organizations, legal systems, and infrastructures.
According to (1998) the literal meaning of globalization rests on the social changes that characterize it particularly when it comes to forms and channels of social interconnection between people along with other cultural, economic, political, and social activities. In this regard, the contextual meanings of globalization range from (1) the communication and social contacts between distant places that creates mutual understanding, (2) freer trade practices across different market economies between and among commercial industries, and (3) exploitative aspects such as prevarication of legal policies and regulations as well as moral norms and principles ( 1998). In this respect, globalization characterizes the new world order in terms of more liberal principles and practices, increased innovation in technologies, and large-scale transnational integration (, 2002).
Within the context of the electronics manufacturing industry, globalization trends resulted to excessive competition between and among business organizations that cater to the needs and demands on electronics products and services. The multi-level and large-scale operations among electronics manufacturing companies led to the formation of new business strategies that concern the entirety of the traditional business processes. The search for continuous and sustainable developments, increased customer satisfaction, and faster return on investments as well as the issues and considerations regarding shorter product life cycle, innovation, unpredictable economic trends, and more sophisticated customer specifications necessitated the call for extensive reformulation of business goals and performance objectives in order to endure the demands of the existing market economies along with aims to gain competitive advantage over industry competitors.
At present, business organizations that belong to the international electronics manufacturing industry deal with the implications of globalization through intensive reforms and reengineering initiatives on business processes. The aggressive competition that characterize internationally operating electronics manufacturing companies led to the utilization of various business operation strategies that will best serve the intentions of the business organizations. These include the implementation and application of contemporary operations management schemes and techniques that can improve the efficiency and effectiveness of the manufacturing and production processes. Due to globalization trends and the need to produce and manufacture at voluminous levels, quality control issues as well as effective resource utilization plan systems confronts modern operations management approaches. Among the popularly applied operations strategies within the international electronics manufacturing industry include the use of lean manufacturing and outsourcing principles and practices.
Simply put, lean manufacturing quality control system was designed to minimize if not eliminate the material wastes associated with production. The system involves enhancement on the value system of the manufacturing processes in order to create more efficient production practices through minimal waste of resources, labor, and time. Lean manufacturing are most utilized by large-scale manufacturing companies which are concerned with mass production operations (1999). On the other hand, outsourcing is a strategic operation approach that involves the mediation and support of another company in completing business operations through singed contract agreements. Also known as contract manufacturing, outsourcing aims to deliver quality products to customers that at the same time enables the reduction of the amount of incurred expenditures from material purchasing and labor costs. It is a strategic alliance between two companies committed to the execution of collaborative models and techniques (1998).
In this light, this academic research activity aims to compare and contrast the level of effectiveness of lean manufacturing and outsourcing among mass production operations of large-scale and transnational business organizations. More specifically, the research study is geared towards the provision of comprehensive and holistic assessment and evaluation of lean manufacturing and outsourcing practices within the context of business organizations belonging to the international electronics manufacturing industry. The entirety of the research paper focuses on the discussions that will determine which of the two operations approaches is most appropriate within the context of the international electronics manufacturing industry. The research argues that full implementation of the lean manufacturing value system is more effective than the principles and practices of outsourcing in the electronics manufacturing industry.
Literature Review
A lot of factors have influenced the ever-increasing pressures that resulted to intense competition in the global manufacturing industry. New trends in the business operations strategies, more interactive business relations among different market players as well as the customers’ increased involvement in maintaining the quality of products and services continue to demand efficient and productive measures among service providers. Companies were able to answer and meet the specifications of their customer-base by utilizing the current technological advancements in the past decades. Innovations in computer features, networking strategies, and telecommunication products facilitated business organizations to invest on market researches, company development, and effective re-engineering measures to create quality products and provide efficient services. As a result, outsourcing strategies have been widely accepted in order to reduce expenses, improve productivity, operations management, and delivery, and concentrate on upgrading the company’s technological expertise.
In today’s fast and technological modern world, the challenge that the Information Man faces is time’s nature of putting things in order and in place in the best and most effective way. Life has changed since the invention of the computer which dictated man to deal with things in the most efficient way possible. In the world of big international business industries where transactions and other business operations are governed by law, cultural differences and mutual trust, efficiency counts largely as a common entrepreneurial aim. In this study, it is interesting to know how big business organizations who depend highly on efficient delivery and distribution procedures gain their success in a competitive market environment.
Competitive Advantage and Customer Satisfaction
Most companies find it impossible to create any kind of sustainable competitive advantage based on product alone as successful companies sought and found a precise understanding of how it could create a customer-cantered competitive advantage ( 2001). Along with the changing business world, customers change as well, becoming more demanding and knowledgeable than before. In this light, reliance to the internal resources of the organization will not do if environmental considerations of the company are not likewise taken into account. These include the significant market characteristics that directly and indirectly influence and dictate the strategic business implementation and sound decision-making from the options available. The forecast of subsequent political, economic, and social implications that change will result to also needs to be identified and enumerated to ensure the success and development of the organization as well as the welfare of the general public.
Ma (2004) focused his study on the creation of integrative framework that provides understanding on the determinants of competitive advantage in the global setting. He conducted article reviews that discussed competitive advantage in the aspects of international management and strategic management. The resulting framework collaborated four general categories of factors such as (a) creation and innovation, (b) competition, (c) cooperation, and (d) co-option with the three generic types of competitive advantages in the international setting which include (a) ownership-based, (b) access-based, and (c) proficiency-based. The framework aims to provide an enhanced understanding of global competition and the inherent means of gaining advantage among competitors.
Companies employ detailed business plans and strategies in order to gain several benefits from its competitors such as increased profits and enhanced customer relations as company objectives (2002). The application of strategies directed towards the achievement of these objectives naturally requires the allocation of financial resources. However, while the company is capable of providing a budget, the outcomes should be able to recover these allocations in order to prevent capital losses. Thus, the company employs strategies and creates objectives that are compatible to the capacity of the company and what it intends to achieve.
(1996) emphasized the idea to take advantage of the competitive situation not just by being better in how that product gets sold, serviced, and marketed at the customer interface. It requires that companies create breakthroughs in how they interact with customers, and design a way of interacting that makes an indelible impression on customers, one that so utterly distinguishes them from others that it becomes a brand in itself (p. 14). Organizations that capitalize on customers’ active participation in organizational activities can gain competitive advantage through greater sales volume, enhanced operating efficiencies, positive word-of-mouth publicity, reduced marketing expenses, and enhanced customer loyalty (1990). As such, business firms invest on researches that will define their target customer groups that they believed they could serve best.
As such, business initiate efforts in order to have a regular customer base because customers dictate profits and how the customer is treated will reflect on whether the customers will remain loyal with the company or not. Gaining customer loyalty is also a key corporate challenge today especially in this increasingly competitive and crowded marketplace because of the eventual profitability it will provide (1997). At present, business firms invest on researches that will define their target customer groups that they believed they could serve best. Every business person is determined to know what kind of work they would and would not do for their customers and, in turn, they carefully learn how to fulfill the needs of each kind of customer in their target markets.
However, Earl (1998) emphasized the relevance of the search for global efficiency, local responsiveness, transfer learning and external alliances through proper information management in a particular business organization. The search for global efficiency implies that the organization must be able to coordinate and consolidate its activity within each relevant function to achieve available immediate economic opportunities. There should be a collection of comparative performance information from different locations around the world to support decisions on how effectively allocate resources and source requirements which may be facilitated by building a global data network.
Achieving local responsiveness implies limits to standardization wherein the expectation is that organizations will want to identify some level of standard/core product, but also provide a variety of optional features which may be present or absent in the delivered product depending on local, legal, or market conditions. The co-ordination required for transfer of learning would seem to be along functional dimensions, across multiple locations involved in research and development, marketing, service, and so on. Meanwhile, inter-organizational information systems can provide new opportunities through vertical and horizontal information exchange for organizations to extend its economies of scope through external alliances between companies with different skills and cultures (Earl, 1998).
Finally, in business industries where transactions and other business operations are governed by law, cultural differences and mutual trust, efficiency counts largely as a common entrepreneurial aim. Suppliers are vital parts of the manufacturing business from whom a business organization agrees to get components or raw materials for their products. Good relationships between the supplier and the manufacturer should be maintained in order so as to ensure adequate and timely flow of materials and products to the consumers. Rather than going after every potential source of revenue, companies eliminate useless assets that do not add value for customers’ satisfaction. Business organizations implement bureaucratic policies and procedures for the benefit of the staff, customers and the company in general. In this light, every business person is determined to know what kind of work they would and would not do for their customers and, in turn, they carefully learn how to fulfill the needs of each kind of customer in their target markets.
As it appears comprehensive strategy the most important key to the successful implementation of customer relationship management. As such, customers should also feel that the companies and businesses they support and patronize give due importance, essentiality and vitality to their operations (Cohen & Moore, 2000). In order to bring out exceptional customer services within the company operations, the management must realize that, either directly or indirectly, the achievement of its goals contributes much to the customers’ general experience with the company. Employing fine-tuned organizational restructuring through effective incorporation of people, process and technology is probably the most efficient strategy in customer relationship management (CRM) implementation. These include the planning, organizing, directing and controlling procedures, which are all geared towards the customers to ensure the balance between enhanced company processes and renewed objectives (Lowenstein, 1997).
Supply Chain and Logistics Management
Supply chain management (SCM) is a modern management concept, the goal of which is to improve the efficiency and effectiveness of a company’s entire supply chain operations. The supply chain runs from raw material suppliers at one end, right through all the intermediate processing stages, to the customer at the other. The term supply chain management has been used to denote the integration of logistics and physical distribution activities by wholesalers and retailers and manufacturers’ efforts to effectively integrate purchasing and supply with other functions in the firm. The focus of SCM, or logistics management as it is often called, is on adding value and eliminating inefficiencies at each stage of a company’s supply chain.
SCM is a strategy based on using a company’s supply processes as a competitive tool. Logistics is part of the supply chain process that plans, implements, and controls the efficient, effective flow and storage of goods, services, and related information from product manufacturing to delivery and consumption in order to meet customers’ requirements (Hyland, 2002). The chain, itself, is a connected series of companies and organizations, resources, and activities involved in the creation and delivery of value in the form of both finished products and services to end customers. The strategy involves integrating all decisions that affect the design and flow of purchased items/materials/services into and through the value chain to finished products and service in a way that makes the company competitive. (2002, p. 12) explains that “The fundamental goal of SCM is to get the right product to the right customer at the right time at the right place and at the right price.”
The supply chain is traditionally characterized as a stable system in which components and goods move smoothly from supplier to assembly customers. In addition, supply chain refers to the suppliers, distributors, wholesalers and retailers that involved in manufacturing a product and getting it to consumers ( 1995). Supply chain is also defined as a network of independent or semi-independent corporation bodies collectively accountable for procurement, developing and or manufacturing and distribution scheme connected with one or more groups of related products (1996). With the advent of technological innovations, logistical decisions about delivery operations, stockholding, warehousing and economies of scale get more complex solutions in today’s business environment.
SCM is the management of upstream and downstream relationships with suppliers and customers to deliver superior customer values at less cost. Its focus is on the management of relationships in order to achieve a more profitable outcome for all parties in the chain (2005) which results to a collaborative-based strategy to link inter-organizational business operations to achieve a shared market opportunity. The goal of an integrated supply chain is to enhance end-customer value and at the same time, identify cost-efficiency targets throughout the whole supply chain. Evidently, the scope is not restricted to a single value chain in one company, but also covers a number of value chains within a value system that makes up the inter-organizational supply chain for the end-customer.
According to (2004), supply chain management is considered as one of the most important strategic aspects of any business enterprise where decisions about coordinating of production of goods and services, store inventory, list of suppliers, and cost-effective and timely distribution are made. Supply chain management strategies design and manage the processes, assets and flows of material and information to answer the needs and demands of the customers and clients.
According to (2001), the SCM concept as a management philosophy has the following characteristics:
l A systems approach to reviewing the supply chain as a whole, and to managing the total flow of goods inventory from the supplier to the ultimate customer.
l A strategic orientation toward co-operative efforts to synchronies convergence of intra-firm and inter-firm operational and strategic capabilities into a unified whole.
l A customer focuses to create unique and individualized sources of customer value, leading to customer satisfaction.
The goal of an integrated supply chain is primarily to enhance the value for end-customers but adding customer value through supply chain management is not that straightforward, because it includes different dimensions or perspectives.
The development of e-business provided an innovation way for enhancing the SCM process. E-business tools helps companies reach a wider range of customers and reduce costs by cutting transaction time as well as overhead through optimized communication and information sharing. If a firm intends to outperform in its industry, scope of supply chain integration needs to move towards inter-supply chain strategic competencies with objective directing to web-enabled/electric strategic collaboration. To improve its long-run competitiveness, e-supply chain interoperability is one of the prerequisites among manufacturers and suppliers (2004).
In this regard, since business organizations want to initiate a management system and strategy that could maintain the companies’ capability, strength and competitiveness, it is important for the management to be open to changes that may be encountered in order to cope and adapt to the latest development that are happening within and outside their environment. (1998, p. 3) claimed that the latest emphasis in supply chain management focus on forecasting particularly in the areas of scheduling and logistics. Saran (1998) supported the claim stating that, “Forecast horizons can impact a host of functional areas in the supply chain” (pp. 23-28). As such, an accurate sales forecast can have numerous advantageous results in the process of SCM since effective forecasts provide the company with more accurate data, improve efficiencies in product distribution, reduce supply chain inventories, and enhance customer service (1999).
The major objective of change management is the introduction of innovative means and systems in the work organization. Hence, businesses must normally undergo change in order to evolve to a higher level of for instance, stability, management or production. In general, forecasting helps businesses serve their customers more efficiently, without the constant fear of excess inventory. Furthermore, the companies also determine appropriate cost management strategies as external purchases of products and services account for more than 50 percent of total costs (1999). Without sacrificing quality, services must create a reliable, cost effective supply chain or operational system to be competitive in the marketplace. Technology has increased the reliability of cost management systems through the use of computer packages designed for specific companies.
Moreover, “Partnership” and “Collaboration” are also the key aspects of SCM. (1999) stated that collaboration and strategic alliance allows supply chain members (e.g. OEMs and EMS providers) to share business information plan together for the business and marketing strategies. Once strategic alliance is established, supply chain members can work for common goals and at the same time, share the risk of the business. Information should not be limited to historical or sales data, but should also include production planning and even future activities like promotion and sales forecasting. These allow supply chain members to develop effective logistics strategies. The full adoption of SCM is the practical tool to increase the company competitiveness, it helps manufacturers and suppliers to enhance their partnership and improve the logistics and supply chain performance by integrating, synchronizing and collaborating the complex links in its supply chain. As such it is important to explore the avenues of business operations in order to identify the means of providing company needs and supplies in the specified time required at the lowest cost possible.
Outsourcing
In the manufacturing industry, companies from all over have integrated outsourcing into various business operations. As such, research investigations have published documents noting significant aspects on the concept and activities that comprise the measure of the practice of outsourcing examining how companies apply it and why they should apply it. However, many critics have pointed out the downsides of outsourcing which resulted to opposing arguments and claims.
(2003) investigated the role of relational norms in the governance of relationships between the US manufacturer and an independent distributor in the export market across four industry sectors in which the use of foreign distributors is the norm: (a) heavy equipment and machinery, (b) appliances, (c) medical equipment, and (d) electronics. The study addressed the following:
· the manufacturer’s use of relational norms to enhance its competitiveness in the export market examining both the direct and the indirect effects of relational norms;
· the manufacturer’s use of relational norms as affected by (a) cultural distance, and (b) a manufacturer’s relative dependence on its foreign distributor; and
· the influence of hostility of the legal and institutional environment on the relative dependence of a manufacturer on its foreign distributor.
It particularly contributed to the understanding of governance structures in international distribution channels by considering relationships between organizations that operate in different cultural and legal/political environments and the uniqueness of relationship building in the international context in order to acquire competence in managing international channel partners ( (2003).
Similarly, (2002) focused their research on (a) international purchasing and provided (b) new accounts on the relationship of environmental volatility with opportunism in cross-cultural exchange relations at the same time (c) highlighting the importance of exporter cultural sensitivity in cultivating importer commitment among importing distributors purchasing directly from overseas manufacturers. These importers belong to five industry sectors, namely: (1) textile and textile products, (2) pulp, paper, and paper products, (3) chemicals and chemical products, (4) machinery and equipment (except electrical), and (5) electrical machinery and apparatus. The study presented (d) the significance of commitment in building successful cross-border interorganization relationships, (e) the drivers of interorganization commitment in an international context, and (f) the effects of current levels of commitment on performance attained one year later.
Meanwhile, (2001) determined the advantages of maintaining good business relations among OEMs and EMS providers and the factors that should be considered in maximizing the potential of the partnership focusing on the aspect of efficient transfer. The study indicated that the growth of a refined partnership between OEM and EMS can yield rewards for both parties wherein one successful transfer can lead to additional transfers. In the said successive transfers, the financial commitment needed to overcome the outsourcing learning curve is greatly reduced. Moreover, well-established relationships between OEMs and EMS providers both increase the efficiency of transfers and reduce risks for the OEM and EMS. The continuous expansion of OEMs utilization of their EMS partners’ resources, likewise expand their expectations. The authors also pointed out that it is critical to establish a well-defined process of transfer to meet these expectations as customer-focused EMS providers proactively support these transfer processes. However, their research activity indicated that success depends on securing a strong commitment from both the OEM and EMS to enable them to focus on their strengths and help each other succeed ( 2001).
The commissioned research activity by Group Sense (International) Ltd, Philips Electronics Hong Kong Ltd and Vetch Holdings Ltd (2004) regarding the initiatives of electronics companies in Hong Kong to shift from being OEM to ODOM investigated the use of knowledge management tools that enhance electronics manufacturers’ product design capabilities and speed up ODOM developments. The research activity found out that:
(2003) studied how research on outsourcing and development can be utilized in order to decrease the expenditures of the company along with the factors that lead to outsourcing initiatives of companies. The companies under investigation were examined in their decisions and options to outsource or to retain the production process within the company. Moreover, the researchers likewise looked into the considerations of companies when it comes to contract agreements to outsource specific company operations using performance as criterion of selection. It was found out that companies decide and select outsourcing partners through the performances of the contracted firm that improve and develop the company. Furthermore, there are company personnel who still choose outsourcing strategy despite the fact that information may leak within the industry through the facilitation of the contracted firm. Moreover, the design of contracts was likewise created in order to encourage leakage within the industry due to the fact that issues on leakage can not be directly monitored or verified. Collaboration in research and development initiatives between the company and the contracted firm may also prove detrimental particularly when the assessments that were undertaken did not consider the external environment of the company especially the impact of the outsourcing strategy to issues on market entry within the industry. lastly, the researchers found out that is best for contract agents and companies to preserve the privacy of data and information regarding the production process in order to foster intensive research and development activities among other companies for the sustained welfare of the industry they belong to.
Moreover, the subsequent risks involve in the fast-paced innovations of technological products fuelled by outsourcing strategies among electronics manufacturing companies resulted to difficulty in providing market forecasts that estimate the bulk of demands of the consumer market. The research study conducted by (2002) provided analysis of the forecast data obtained from a local contract manufacturer in order to better understand forecast variability and its existence in the electronics manufacturing industry. They found out that (a) cases of unmet demands that are pushed in the next production period can distort forecasts and result in unrealistic expectations highlighting the (b) difficulties in creating good production plans and materials requirements from very variable forecasts due to backlog, and the (c) importance of strong communication paths between the CAM and OEM in order to maximize the potential of the relationship for both parties (2002).
Meanwhile, (2002) found out that there is an existing issues and problems that confront the electronic manufacturers and their suppliers regarding industrial collaborations and the implications of outsourcing to the entirety of the electronics industry. Economic recession ahs been identified to contribute to problems and issues in utilizing outsourcing made worse by the effects of electronic transformation trends on the sides of both the manufacturers and the suppliers. These are based on the perspective of the manufacturing companies that form contract agreements with suppliers. As large manufacturers continue to exhaust the capacities of top suppliers in the industry, medium-sized electronics suppliers are continuously facing difficulty in finding corporations and companies that will need their services. It is likewise difficult for small electronics supplier companies to find niche markets in order to fully participate in the industrial activities in the international electronics market. In identifying the advantages, and disadvantages of the existing manufacturer-supplier relationship within the electronics industry,(2002) was able to suggest means of improving the current outsourcing strategies in the industry within the aspects of selection of contract companies, possible conflicts between the involved contract partners, effect of the strategy to customer satisfaction, and the growing business concentration migration among exiting suppliers in the electronics industry.
LEAN Manufacturing
LEAN production is based on the Toyota Production System which, when properly implemented, can dramatically improve productivity by as much as 95 percent when compared with traditional production systems. It was developed by Tahiti Ohio, Toyota’s production executive, in order to provide solution to Japan’s s system of high-variety production and meet the demands of the customers. Lean was designed specifically as an application to the mass-production system of Toyota because the company can not manufacture identical products in bulk. Lean manufacturing aims to minimize waste called mud so as to increase the value of the products and the production process. The wastes or mud include all the produced good that fall short behind the company’s quality standards as influenced and dictated by the elements of time, process, and raw materials (1999).
Among the solutions provided by the lean manufacturing system include (1) cost reduction in the production and manufacturing system of companies, (2) creative and innovative initiatives on the part of the employees in order to contribute to the success of the company, (3) control systems in the execution of the production plans and projects, (4) performance quality in terms of clear instructions, specifically defined objectives, as well as communicated and centered goals, (5) decrease in training expenditures, (6) implementation of alternative operations management framework, and (7) continuous and sustained development of the business organization (www.qiuality-control-plan.com). The lean machine is likewise known in the ease of its use and installation as well as its cost effectiveness in dealing with wastes in most quality systems thereby saving time and money for the software. It can integrate information, reports, graphs, and other tools that work together to simplify and deliver information for improved business operations which minimize the time spent on other software programs (www.theleanmachine.com).
Since production systems are dependent primarily on existing economies of scale, expensive costs incurred by the company in the production process are distributed evenly throughout the production stages because costly production are highly sensitive to depreciations in the market (Sullivan, 2002). With the trends and pressures towards globalization among the members of the manufacturing industry, companies are seeking means and ways to eradicate useless outputs in production that decrease the value and quality of the products and services offered to the customers. Manufacturing companies are constantly finding ways of reducing expenditures, in order to effectively compete with other companies and to eventually make profit. The use of lean manufacturing in the production systems of manufacturing companies have been gaining popularity and reputation for the advantages and benefits it offers in the industry (Phelps, 2004; Black, 1995). These include:
1. The various manufacturing techniques and concepts that have been incorporated to lean manufacturing system,
2. Applicability of the lean manufacturing system to different types and sizes of production companies,
3. Superior-quality product outputs that are produced within schedule and offered at the lowest possible cost, and
4. Flexible and efficient production standards resulting to increased product variation.
According to Black (1995) manufacturing companies are frequently faced with constraints in the production line in terms of existing manufacturing machines. Normally, companies are equipped with machines that are huge in order to meet the demands of the customers. Problems incorporated to production machines such as costly set-up expenditures and lack of versatility was provided solution through the lean manufacturing approach. In lean manufacturing, the use of flexible or versatile production machines is encouraged in order to increase their functionality to different manufacturing designs and objectives. Lean machines are most of the time characterized with not very huge mechanical infrastructures within the plant or operation house and are normally used for different types of product manufacturing thereby reducing the length of the cycle time. The reduction of cycle time aims to immediately deliver the customized products to the customers within a shorter period of time at high standards (Black, 1995).
Noah (2006) indicated that the utilization of lean manufacturing versatile machines and its integration with computerized manufacturing processes enabled flexible design, process planning, machining, quality control, inspection, and inventory among manufacturing companies. It has likewise introduced better financial controls and operations management techniques in its emphasis on waste eradication in the production processes. The lean manufacturing concept highlights the importance of avoiding overproduction as well as inclusion of unnecessary materials to the ordered products along with problem in idle time, logistics, inventory, warehousing, performance of the labor force, and production products that are below quality standards. The production concept of lean manufacturing involves assessment and evaluation of the entire production operation of companies in order to recommend means of improving the existing production systems. The system’s drive toward effective reduction of waste is likewise highly acclaimed for its environmental contributions thereby supporting sustainable developments.
Meanwhile, according to Tin ham (2001) lean manufacturing systems contribute to cost reduction efforts of companies in terms of supply chain and logistics concerns. The extreme competition in the global market environment necessitates the creation of production systems that will enhance the manufacturing as well as marketing capacities of companies. Through lean production approaches, manufacturing companies are provided with smooth supply chain and logistics process through the support and integration of information technologies, open communication with partner companies, and feasible production plans and targets. Mattresses (2001) likewise incorporated lean manufacturing approaches to the concept of “pull system” in which the rate of customer demand dictates the time completion of each production project.
Lean likewise contribute to the competitive concerns of the companies that use it since it provides solution to issues on cost and product quality which serve as the primary avenues of aggressive competition in the global market environment. Continuous competition in the market requires lean manufacturers to pursue innovative efforts of contributing to quality management approaches and practices (Chin, 2003). Among the additional enumerated benefits and advantages of lean manufacturing approach according to Sousa (2003) include:
1. improved production management approaches and practices,
2. improved product quality,
3. increased cycle time,
4. increased customer satisfaction,
5. improved supplier performance,
6. stronger employee relations, and
7. increased return on investments.
Noah (2006) further indicated that lean manufacturing systems highlights improvements in existing quality control systems of manufacturing companies since it enables a shift in quality control perspectives from inspection-oriented approach to defect-prevention practices which makes possible inspection at every stage of the production system. Through the lean manufacturing approach, companies are capable of inspecting the step by step procedures of production which includes evaluation during material purchase, delivery, inventory, and supply processing as compared to the traditional and conventional inspection practices that are undertaken at the beginning, during, and at the end of the production process (Noah, 2006).
But despite the promised production improvement and competitiveness to manufacturing companies, the lean manufacturing approaches are still merely evaluated by companies due to independent apprehensions with regards to its production principles. As a result, manufacturing companies are utilizing the lean concept as measures of performance in their production processes instead of full integration in their operations. Manufacturing systems like mass production, Just-in-Time, and custom manufacturing are characterized with specifically trained employees as compared to the lean manufacturing demand towards multi-tasking. This is one of the primary reasons why lean manufacturing approach proved some difficulty in terms of application. Issues and problems regarding turnover, retirement and other factors that may result to absenteeism from work is highly detrimental to production system following the principles of lean manufacturing (Elliot, 2004),
Another consideration in the application of lean manufacturing approaches to the company’s production system involves its objective towards zero inventory at all levels and stages of the manufacturing process. But such objective towards zero inventories may be impossible for large production houses in which inventory and warehousing contribute to the smooth production procedures and the eventual reduction of lead times and in increasing profitability (2004). While customer satisfaction defines existing indictors of competition in the global market, the overhead cost that could result from such initiative will be added to price of the finished products which could be detrimental to targeted sales (Owen, 2000).
Research Design and Methodology
Data Analysis and Interpretation
Conclusion and Opportunities
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