The retrospective determination of process improvement's economic value at the individual manufacturing firm level: Literature review and proposed measurement framework

Abstract

Even a cursory reading of the literature on process improvement shows that there are many accounts proposing that operational as well as financial gains can be made using methodologies like JIT, TQM, Six Sigma, and Lean. While some studies have investigated the statistical links between process improvement practices and corporate financial outcomes in large populations of firms, documentations of how individual firms can determine economic value derived from their own process improvement projects are scarce. We reviewed the literature, first ad hoc then systematically, to investigate the extent to which studies have covered the determination of process improvements' economic value in manufacturing companies postimplementation, and how such assessments are conducted. The results suggest that retrospective value determinations at the plant level are exceedingly rare. In fact, only 0.09% of 35,968 scholarly articles produced on process improvement in the period 1980–2020 have that focus. Since expenditures on process improvement have alternative uses, organizations should have at their disposal benefit determination frameworks so that financially efficient decisions can be made. Building on literature reviews and additional sources, this study proposes a set of principles and a model for cost–benefit determination that make up such a framework in the context of process improvement.

The role of management in lean implementation: evidence from the pharmaceutical industry

“…, 2019; Moyano-Fuentes and Sacristán-Díaz, 2012; Netland et al. , 2015), but there are still reports of no effects or even negative ones (Wemmerlöv, 2021). Put simply, many companies struggle to implement lean.…”

Is lean a theory? Viewpoints and outlook

“…Theorizing on the organizational learning concept has, in itself, taken scholars many decades (Argote, 2011;Crossan et al, 2011). Others state that lean requires actors to have a customer-orientation and to continuously streamline operational processes by reducing constraints (Gupta and Boyd, 2008;Watson et al, 2007) towards swift and even flow (Schmenner and Swink, 1998), while closely engaging suppliers as part of the extended lean enterprise (Bortolotti et al, 2016;Powell and Coughlan, 2020), integrating smart technology (Tortorella et al, 2019), and adopting transformational leadership behaviours and values (Balzer et al, 2019;Van Dun et al, 2017;Van Dun & Wilderom, 2012;2021). The majority of these theories are not restricted to explaining the lean phenomenon.…”

What is the evidence of how hospitals capture financial benefits of process improvement and does it impact hospital financial performance?: A systematic review

“…process performance and clinical performance…" of PI initiatives (17). This is not unique to hospitals with a literature review conducted in nonhealthcare industries nding that information on how companies determine the economic value or nancial bene ts derived from PI initiatives is scarce (13).…”

“…Process improvement methodologies in any form are the mechanism by which hospitals can control increasing hospital costs through attention to waste, non-value adding processes of care and low levels of high value care (2,(11)(12)(13). Hallam and Contreras (14) note that the cost to hospitals of the care provided to patients and its associated quality is dependent on the processes for delivering care and PI (Lean) contributes to a reduction in costs and an increase in e ciency in hospitals (14).…”