Lean manufacturing and business performance: testing the S-curve theory

Abstract

This article makes a case for the importance of exploring patterns in the relationship between the adoption of lean manufacturing practices and business performance. This relationship has been described as ambiguous, because it has variously appeared to be positive, insignificant, and negative. Accordingly, this article tests this relationship for non-linearity and shows that it follows the S-Curve theory. A survey of manufacturing companies in an industrial cluster in Brazil was undertaken. This region faces infrastructural challenges, such as geographic distance between purchasers and suppliers and a shortage of skilled labor. Despite the conditions, these companies have significantly improved their operational, financial, and environmental performance through the adoption of lean practices. Thus, this article contributes to the literature on lean manufacturing by: (a) furthering the debate on the relationship between lean practices and business performance, and testing its adherence to the S-curve theory (Netland et al., 2015;Netland and Ferdows, 2016) by means of survey research; and (b) simultaneously testing operational, financial and environmental performance as a result of the adoption of lean manufacturing practices. As a consequence of the S-shaped relationship demonstrated, managers need to be aware of the presence of inertial and saturation points in the adoption of lean manufacturing practices, so they can correctly allocate resources for improving the adoption of lean practices.

A systematic literature review regarding the influence of lean manufacturing on firms' financial performance

“…In contrast, more than half of the studies considered different time spans ranging from 1 to 5 years to observe the financial performance variation of companies. The authors who do not consider a time interval for their analyses, acknowledge the cross-sectional nature of their studies as a limitation and suggest the development of longitudinal studies in order to gain more insights (Sahoo and Yadav, 2018;Shrafat and Ismail, 2019) and analyse causal factors (Negrão et al, 2019;Sahoo, 2019). In this sense, it is important to understand that the lean transformation process usually lasts more than a year since it represents a strategic-changing activity (Saad et al, 2006).…”

“…In addition, the HRM and TPM lean bundles did not present a high number of publications relating them to financial performance goals. The literature demonstrates that these lean practices may not negatively affect financial performance (Negrão et al, 2019;Sahoo, 2019;Yang et al, 2011). Nevertheless, practices from both dimensions are increasingly being included in firms' lean implementation strategies since their deployment influences other practices.…”

“…Previous studies have already approached the topic and demonstrated that lean implementation may have a positive impact on financial measures of manufacturing organizations (Fullerton and Wempe, 2009;Hofer et al, 2012;Negrão et al, 2019), and, moreover, researchers suggest that to reach its potential, lean must be adopted as a holistic business strategy, instead of single isolated activities in operations (Fullerton et al, 2014). However, as suggested by Bhasin (2012), the lean benefits on financial performance are not always obvious since the connection between financial and non-financial measures is fragile.…”

Analysing the influence of organisational culture and leadership styles on the implementation of lean manufacturing

“…Although the relevance of leadership for LM is already acknowledged (Womack and Jones, 2003;Liker, 2004;Negrão et al, 2020), its behavioral analysis is rarely embraced in research related to LM (Tortorella et al, 2016;Lleo et al, 2017). Few recent empirical studies are exceptions.…”

“…However, as pointed out by Liker (2004), Emiliani (2008), and Kull et al (2014), LM requires a long-term commitment; to view LM as a short-term strategic approach is mistaken. Most failures related to LM implementation are attributed to the fact that time required to develop a proper organizational culture is not aligned with short-term expectations (Dahlgaard and Dahlgaard-Park, 2006;Paro and Gerolamo, 2017;Negrão et al, 2020).…”