Lean Production and Market Orientation: Evidence from Ardabil Province Industrial Companies

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1 Lean Production and Market Orientation: Evidence from Ardabil Province Industrial Companies Mehdi Fathollahzadeh 1, Mohammad Feizi Department of Management, Meshkin Branch, Islamic Azad University, Meshkin, Iran Abstract The purpose of this paper is investigation the effect of lean production (just in time practices, total quality management, human resource management relationships with suppliers, customer relations, transmission of human intelligence, employee participation, standardization of processes, and comprehensive repairs management) on market orientation at Industrial companies in Ardabil Province. Statistical population was managers of Industrial companies in Ardabil Province. Through Cochran statistical sample include 140 people, which are selected by random sampling method. Data collection is done through field method by means of questionnaire. For data collection by questionnaires which include 27 inquiries. In order to analyze the information obtained from the questionnaires collected data were analyzed using SPSS. For data analysis, descriptive statistics (measures of central tendency and dispersion) and inferential statistics in Pearson correlation coefficients and regression were used. Findings show that there is significantly positive relationship between lean production and market orientation at Keywords: Market orientation, lean production, Lean. 1 Correspondence author Page 2089

2 1- Introduction Market orientation has attracted a lot of interest with both academics and practitioners and for many years research on market orientation has shaped marketing thinking. Most studies have supported the view that market-oriented firms have higher innovation and corporate success. At the same time marketing research has highlighted the importance of inter-organizational relationships for firms survival. It has been argued that relationships are a firm s most valuable resources (Helfert, Ritter, Walter, 2001). The concept of market orientation is a classical concept in marketing (Urde, Baumgarth, Merrilees, 2013). Urde (1999 believe that Market orientation is on a more uncomplicated, shortterm, and fundamental level. If an organization is only market oriented, then it's still in the discussion about products and markets. Brand orientation is an additional degree of sophistication. To be brand oriented is market orientation plus. ( Urde, et al, 2013). Also, market orientation is the organization-wide generation of market intelligence, dissemination of the intelligence across departments and organization-wide responsiveness to it (Kohli and Jaworski, 1990). Kohli and Jaworski (1990) consider market orientation to be an organizational culture consisting of three behavioral components, namely, i) customer orientation, ii) competitor orientation and iii) inter-functional coordination. Empirical study found that among all three behavioral components, inter-functional coordination, especially those between R&D and marketing has the most significant influence on new product success (Wong and Tong, 2012). There are two most widely used scales in Market orientation. MARKOR that developed by Kohli et al (1993) and MKTOR that developed by Narver and Slater (1990). Kumar, Subramanian, Strandholm (2011) modified scales suit the hospital environment. In this research we used those scales. Such as: Customer Orientation Competitor Orientation Inter-functional Coordination Long-Term Focus Survival and Growth/Profit Emphasis Differentiation Strategy Low-Cost Strategy. Parker (2003) states that the multitude of interpretations on what lean really is makes it harder to make claims towards the effects of lean, thus increasing the requirements that researchers specify exactly what they are researching (Pettersen, 2009). Lean manufacturing is one of these initiatives that focus on cost reduction by eliminating non-value added activities. These tools and techniques of lean manufacturing have been widely used in the discrete industry starting with the introduction of the original Toyota Production System. Tools including just in time, cellular manufacturing, total productive maintenance, single-minute exchange of dies, and production Page 2090

3 smoothing have been widely used in discrete parts manufacturing sectors such as automotive, electronics and appliance manufacturing (Abdullah, 2003). Lean production typically represents a paradigm shift from conventional batch and queue, functionally aligned mass production to one-piece flow, product-aligned pull production. This shift requires highly controlled processes operated in a well maintained, ordered, and clean operational setting that incorporates principles of just-in-time production and employee-involved, system-wide, continual improvement (Sun, 2011).Table 1 shows how lean approaches differ from traditional production paradigms. Table 1: How Craft, Mass Production, and Lean Thinking Compare Craft Production Mass Production Lean Production Focus Task Product Customer Operations Single items Batch and queue Synchronized flow and pull Overall Aim Mastery of craft Reduce cost and increase efficiency Eliminate waste and add value Quality Integration (part of the craft) Inspection (a second stage, after production) Prevention (built in by design and methods) Business Customization Economies of scale and Flexibility and adaptability Strategy automation Improvement Master-driven continuous improvement Expert-driven periodic improvement Workforce-driven continuous improvement (Source: The Lean Aerospace Initiative, 2002; Sun, 2011) When companies implement several or all of these lean methods, several outcomes consistently result: Reduced inventory levels (raw material, work-in-progress, finished product) along with associated carrying costs and loss due to damage, spoilage, off-specification, etc; Decreased material usage (product inputs, including energy, water, metals, chemicals, etc.) by reducing material requirements and creating less material waste during manufacturing; Optimized equipment (capital equipment utilized for direct production and support purposes) using lower capital and resource-intensive machines to drive down costs; Reduced need for factory facilities (physical infrastructure primarily in the form of buildings and associated material demands) by driving down the space required for product production; Increased production velocity (the time required to process a product from initial raw material to delivery to a consumer) by eliminating process steps, movement, wait times, and downtime; Enhanced production flexibility (the ability to alter or reconfigure products and processes rapidly to adjust to customer needs and changing market circumstances) enabling the implementation of a pull production, just-in-time oriented system which lowers inventory and capital requirements; and Reduced complexity (complicated products and processes that increase opportunities for variation and error) by reducing the number of parts and material types in products, and by eliminating unnecessary process steps and equipment with unneeded features (Ross & Associates Environmental Consulting, 2003). Page 2091

4 The purpose of this paper is investigation the effect of lean production on market orientation at Industrial companies in Ardabil Province. 2- Methodology A) Research method: This research is applied by goal, which is conducted through descriptivesurveying method of correlational kind. B) Statistical population: Statistical population were managers of Industrial companies in Ardabil Province (N=220). C) Sample volume and sampling method: Through Cochran statistical sample include 140 people, which are selected by random sampling method. D) Data collection tool: Data collection is done through field method by means of questionnaire. For data collection by questionnaires which include 27 inquiries. E) Validity and reliability: Validity means measuring tool measures what is supposed to measure. Content validity of the questionnaire was confirmed by scholars and related authorities in the field of management and behavioral sciences. Reliability of the questionnaire with Cronbach alpha coefficient was calculated for dependent variable and for independent variables in which alpha was obtained bigger than 0.92 for all of the variables. F) Method of data analysis: In order to analyze the information obtained from the questionnaires collected data were analyzed using SPSS. For data analysis, descriptive statistics (measures of central tendency and dispersion) and inferential statistics in Pearson correlation coefficients were used. 3- RESULTS In this paper we have nine main hypotheses. The statistical way of analysis of hypotheses is two ways, H 1 is acceptance of hypothesis and H 0 is rejecting of hypothesis. In other words, it means that H 1 has positive meaning and H 0 has negative meaning. Null: There is not relationship between lean production and market orientation at Alternate: There is relationship between lean production and market orientation at 1. There is a relationship between just in time practices and market orientation at industrial companies in Ardabil province. 2. There is a relationship between total quality management and market orientation at 3. There is a relationship between human resource management and market orientation at 4. There is a relationship between relationships with suppliers and market orientation at 5. There is a relationship between customer relations and market orientation at industrial companies in Ardabil province. Page 2092

5 6. There is a relationship between transmission of human intelligence and market orientation at 7. There is a relationship between employee participation and market orientation at 8. There is a relationship between standardization of processes and market orientation at industrial companies in Ardabil province 9. There is a relationship between comprehensive repairs management and market orientation at industrial companies in Ardabil province Kolmogorov-Smirnov test has been used for normality of the data. Findings show that Test distribution is Normal. So, we can use Pearson correlation and liner regression test. Table 2: Kolmogorov-Smirnov test results Normal Parametersa Most Extreme Differences lean production market orientation 140 Mean Std. Deviation Absolute Positive Negative Kolmogorov-Smirnov Z Asymp. Sig. (2-tailed) Table 3 show that correlation between lean production dimensions and market orientation. The results show that lean production significantly and highly related with market orientation. Strong positive correlation was found between this variable and Correlation is significant at the 0.01 level (2-tailed). So, we can confirm H 1, and say "There is significantly positive relationship between lean production and market orientation at industrial companies in Ardabil province". Table 3: correlation between lean production dimensions and market orientation market orientation Just in time practices Pearson Correlation.533 ** Total Quality Management Pearson Correlation.418 ** Human Resource Management Pearson Correlation.647 ** Page 2093

6 Relationships with suppliers Pearson Correlation.451 ** Customer Relations Pearson Correlation.464 ** Transmission of human intelligence Pearson Correlation.635 ** Employee participation Pearson Correlation.479 ** Standardization of processes Comprehensive repairs management Pearson Correlation.706 ** Pearson Correlation.737 ** In the multiple regression equation to determine the coefficient of determination (R2) and the weight of each variable (Beta) a collection of independent variables in the equation are used. Moreover, in order to determine the contribution of each variable in explaining the dependent variable we used the multiple regressions. In this method, the independent variables were entered simultaneously and their effects on the dependent variable analyzed and determined. The independent variables were simultaneously entered into multiple regression equations are; learning relaxation. Table 4: Model Summary and Durbin-Watson Model R R Square Adjusted R Square Std. Error of the Estimate Durbin-Watson a a. Predictors: lean production; Just in time practices Total Quality Management Human Resource Management Relationships with suppliers Customer Relations Transmission of human intelligence Employee participation Standardization of processes Comprehensive repairs management b. Dependent Variable: market orientation According to The results of the regression analysis table (4), the correlation coefficient R is equal to 0/852 and the coefficient of determination (R2) is roughly 0/725 therefore, we can say with Page 2094

7 confidence: %72.5 changes of market orientation variable is related to the lean production, and in a sense we can say that as much as 11 percent of the changes to the market orientation is related to the lean production predictor variable. So, lean production dimension are able to predict for market orientation. It can be said that lean production has the impact on market orientation. Duhrbin Watson statistic for the final model is acceptable in the range of 1.5 to 2.5 and shows no residual autocorrelation. Table (5) the results of the analysis of regression variance Model Sum of Squares df Mean Square 1 Regression a Residual Total A) Predictors: lean production; Just in time practices Total Quality Management Human Resource Management Relationships with suppliers Customer Relations Transmission of human intelligence Employee participation Standardization of processes Comprehensive repairs management Dependent Variable: market orientation Also based on the analysis of variance table (5) regression calculated for F are equal to13 /985. Therefore, due to the significant level of error which is smaller than the value of the result of a Sig =0 /000>0/ 01 regression equation is approved. Thus, the coefficient of determination was found to be statistically significant in the regression equation. The resulting model was significant at the 0.01and therefore the hypothesis H 0 is rejected with 99% confidence and H 1 hypothesis is confirmed and we can say that lean production has impact on market orientation. ANOVA tables due to the significant level test and verify the adequacy of the model and shows regression model is linear. Table 6: Coefficients test Model Unstandardized Coefficients B Std. Error Standardi zed Coefficien ts 1 (Constant) Just in time practices Beta t F Sig. Sig. Page 2095

8 Total Quality Management Human Resource Management Relationships with suppliers Customer Relations Transmission of human intelligence Employee participation Standardization of processes Comprehensive repairs management a. Dependent Variable: market orientation To check the fit of the regression model we use of the data table (6). Using a simple regression model, the relationship between the nine predictor variables to fit the criteria of the hypotheses was examined. The results and coefficients of fitted model are given in the following table; the t- test lean production component has impact on market orientation. All parameters in the model are significant. And due to the significant level is smaller than the error the result is thus confirmed the regression coefficients were determined to be statistically significant in the regression equation. 4- Conclusion The purpose of this paper is investigation the effect of lean production (just in time practices, total quality management, human resource management relationships with suppliers, customer relations, transmission of human intelligence, employee participation, standardization of processes, and comprehensive repairs management) on market orientation at Industrial companies in Ardabil Province. Findings show that there is significantly positive relationship between lean production and market orientation at Result in details as below: There is a relationship between just in time practices and market orientation at industrial companies in Ardabil province. There is a relationship between total quality management and market orientation at There is a relationship between human resource management and market orientation at There is a relationship between relationships with suppliers and market orientation at There is a relationship between customer relations and market orientation at industrial companies in Ardabil province. There is a relationship between transmission of human intelligence and market orientation at Page 2096

9 There is a relationship between employee participation and market orientation at There is a relationship between standardization of processes and market orientation at industrial companies in Ardabil province There is a relationship between comprehensive repairs management and market orientation at industrial companies in Ardabil province Page 2097

10 References 1. Abdullah F., (2003), Lean Manufacturing Tools And Techniques In The Process Industry With A Focus On Steel, Graduate Faculty of School of Engineering in partial fulfillment of the requirements for the degree of Doctor of Philosophy, University of Pittsburgh 2. Helfert G., Ritter Th., Walter A., (2001), How Does Market Orientation Affect Business Relationships?, the 17th IMP conference in Oslo Norway 3. Kohli, A.K. & Jaworski, B.J. (1990). Market Orientation: The Construct, Research Propositions, and Managerial Implications. The Journal of Marketing, 54(2), Kohli, A.K.; Jaworski B.J. & Kumar A.(1993). MARKOR: A measure of market Orientation. Journal of Marketing Research, 30(4), Kumar K., Subramanian R., Strandholm K., (2011), Market Orientation And Performance: Does Organizational Strategy Matter?, Journal of Applied Business Research Volume 18, Number 1 6. Narver, J.C. & Slater, S.F. (1990). The effect of a market orientation on business profitability. Journal of Marketing, 54(4), Pettersen J.,(2009), Defining lean production: some conceptual and practical issues, The TQM Journal, Emerald Group Publishing Limited, Vol. 21 No. 2, pp Ross & Associates Environmental Consulting (2003), Lean Manufacturing and the Environment: Research on Advanced Manufacturing Systems and the Environment and Recommendations for Leveraging Better Environmental Performance, U.S. Environmental Protection Agency's Office of Solid Waste and Emergency Response (OSWER) and Office of Policy, Economics, and Innovation (OPEI). October 2003, 9. Sun Sh., (2011), The Strategic Role of Lean Production in SOE s Development, International Journal of Business and Management Vol. 6, No. 2, p Urde M., Baumgarth C., Merrilees B., (2013), Brand orientation and market orientation From alternatives to synergy, Journal of Business Research 66, Wong, S.K.S. and Tong, C. (2012), "The influence of market orientation on new product success", European Journal of Innovation Management, Vol. 15 No. 1, pp Page 2098