The Relationship between Lean Operations and Sustainability Among the Different Production Systems in Small and Medium Enterprises (SMES)

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1 The Relationship between Lean Operations and Sustainability Among the Different Production Systems in Small and Medium Enterprises (SMES) Sajan M P Dept of Mechanical Engineering Govt. Engineering college Thrissur Thrissur Shalij P R Dept of Production Engineering Govt.Engineering College, Thrissur, Thrissur Abstract Lean manufacturing has been emerged as the new means for the sustainable performance improvement of the small and medium enterprises (SMEs). Sustainable growth of the manufacturing SMEs is the new requirement of the current industrial world. The researchers are now focused to link the lean operations to the sustainability of the manufacturing firms. Type of production system following in the firm is a contextual variable which influences the lean implementation. This paper is trying to identify the new areas of linkage between lean and sustainability relevant to Indian SMEs and investigate into the statistical divergence due to contextual variable. Keywords Lean manufacturing; sustainability; production system I. INTRODUCTION Latest research in the areas of operations management has been looking at the integration of lean manufacturing to the concept of the sustainable development of the firms. In the past, the performance studies of lean operations mainly concentrate on waste reduction concepts and the consequential operational, financial environmental performances [1]. The most of the authors defined the lean manufacturing as waste reduction technique. Studies have proved that lean manufacturing has significant effects on the operational performances like cost, quality, flexibility, and delivery speed [2]. Several other studies have focused on the effects of lean manufacturing on financial performances as well as market performances. In recent time some of the researchers have conducted studies about the integration of lean and sustainability. But most of these studies have been concentrated on large scale and multinational companies and a rare attention to 239 the micro, small and medium sectors of industries [3]. It is recognized that SMEs are the backbone of the industrial and economic growth of the most of the economies. SMEs are providing the major share of the industrial production, revenue, and job opportunities, This importance of the SMEs are evident from the various literatures published in the studies from different countries [4]. In India, Government authorities have been giving attention on Micro small and Medium Enterprises (MSMEs) and have introduced various schemes for the development of MSMEs. Lean manufacturing Competitiviness scheme for MSMes is one of the scheme introduced by the Government of India, for the sustainable growth of the MSMEs. This scheme has been offering funds and technical advices for the implementation of lean manufacturing, which in turn generated wide popularity for lean manufacturing among the MSMEs in India. Sustainability has three pillars, namely, economic, environmental and social aspects. The new studies are also focused on the effect on lean manufacturing in these three areas of sustainability. Recent studies focused on wider scopes of the sustainability and different areas of linkage between lean an sustainability. This identified areas have a broader scope of lean beyond environmental area, including supply monitoring, transparency, workforce treatment, and community engagement [5]. This particular study has identified 16 areas of linkage between lean and sustainability relevant to MSMEs, mentioned from the various literatures. These areas include waste reduction, environmental

2 management, supply chain management, worker environment, quality, health and safety, value maximization, energy minimization, resource management, optimum design, cost reduction, performance improvement, transparency, continuous improvement, community strategy and governance. Even though there is a strong linkage between lean manufacturing practices and sustainability benefits in SMEs, the effect of contextual factors in these areas of linkage is unknown. Demand variability and product customization are such contextual factors which effecting the lean performance [5]. The SMES are following the different production systems like make to order or stock and assemble to order or stock. The effect of this contextual factor, production system for the integration of areas of linkage between lean and sustainability is unknown and to be examined.the objective the study is to investigate the identified areas of linkages between lean and sustainability are statically divergent among the different production systems II. LITERATURE REVIEW The laws and regulations in the current global industry and economic framework insists changes in the manufacturing operations [6]. The stakeholders demand the sustainable growth of the firms on the basis of the laws and regulations [7]. This situation, forced to integrate the proven manufacturing techniques and practices in the manufacturing operations [8] to make sure that there is continuity in improving the manufacturing operations, as well as increasing the level of competitiveness. Hence the authorities and policy makers are focusing on the integration of lean manufacturing practices to sustainable performance of the industrial firms. Lean, means manufacturing without waste. Waste is anything that does not contribute value to the system. In lean manufacturing seven forms of wastes are defined which are overproduction, waiting time, transportation, inventory, over processing, waste of motion, and waste from product defects. Lean manufacturing targeting on the elimination of all these forms of the wastes also known as Muda from the system and thus improves the performances of the organization. There are several prior studies on the lean 240 manufacturing and their effects on performance improvement of the manufacturing firms [9] [10]. The current research in the area of lean manufacturing is linking lean manufacturing to green and sustainable manufacturing. Sustainability is the one of the main concerns of government authorities and industrial organizations in business policies. Sustainability is defined by Brundl commission as the growth that meets the needs of the present without compromising the ability of future generations to meet their needs." Sustainability focuses on the triple bottom line (3BL) of people, profit and planet [11] which considers the social and environmental values of business assessments along with their economic significance. The business concerns are focusing more on profit compared to environmental and social aspects of the sustainability. This situation makes conflict of interest among the entities of sustainability. Hence some researchers defined the term business sustainability as "increase in productivity and reduction of consumption of resources without compromising product or service quality, competitiveness, or profitability while helping to save the environment. The researchers have been seeking the ways to achieve business sustainability, which is one the main challenges in front of the industrialists and policy makers. The outcome of researches in this direction reveals that flattering leaner in the operations by eliminating the all non value added activities is an efficient means to accomplish business sustainability [12]. So the areas in which lean manufacturing and sustainability are related or linked are important concerns in current research. The lean operations are linked to sustainability to the area of environmental management by considering lean as green. The lean operations lead to environmental benefits by the saving of materials wasted in production, reduction of rework, scrap, power/water consumption, and pollution costs [13] [14]. These researchers have identified that lean have a broader scope of sustainability beyond the waste reduction and environmental management. The areas identified by prior researchers included supply monitoring, transparency, workforce treatment, and community engagement. [15] considered broader sustainability

3 benefits of lean beyond environmental and waste reduction. This study looks into supplier screening governance, labour standards, local supply issues and corruption as the integration ares of lean and sustainability. According to the statement by [16], state that lean thinking is a process-based method that considers the interactions across the whole supply chain. While to [17], lean system is a concept, a process and a set of tools, techniques and methodologies that can be used to attain and maintain effective resource allocation. III. RESEARCH METHODOLOGY A combination of research methodology approaches was adopted in this research. This comprises a thorough literature review, survey using a structured questionnaire and face to face interviews with the respondents. The attributes of the study, which are the different areas of linkage between lean and sustainability relevant to SMES are identified from the exhaustive literature review. Then a structured questionnaire was prepared and conducted the pre-testing and pilot survey of the draft questionnaire among the academic experts and industrialists in the relevant area. Based on the feedback from the pilot survey, the questionnaire was finalized. In the first part of the questionnaire, the questions related to the demographic details of the firm were included. This part of the questionnaire was included the question about the number of employees, manufacturing sector, level of investment and production system of their firms. The production system was categorized into four categories, as make to stock (1), make to order (2), grouping variables were significant. The Kruskal Wallis test is a non-parametric test to test the difference among groups having no normal distribution. Analysis of data was done using IBM SPSS 20 software. Conclusions were derived from the analysis based on the significance level of p value obtained from the test. The attributes of areas of linkage between lean and sustainability were selected from prior literature. There are 16 areas of linkages between lean and suatinability which were relevant to the assemble to make (3) and assemble to order (4). In the second part of the questionnaire, the respondents were requested to respond on a five point Likert scale, whether they strongly disagree (1) to strongly agree (5) about the importance of each attribute as an area of linkage respect to their firm. The five point division of Likert scale was selected to get a high response rate as a Likert scale with five divisions is simple to answer and not confusing [18]. The sample population of this study selected was the manufacturing SMES in Keraka, India A list of 600 SMEs was randomly selected from the directories of Association of Small and medium enterprises in the state. Then the questionnaire was sent through the post to the selected SMEs. The follow up action by taken by personally contacting them in their firms and by conducting face to face interview. A total 252 responses were collected with a response rate of Ten different manufacturing sectors were selected for the study included Chemical, Electrical & Electronics, Machinery, Metal/Mechanical, Food, wood, Paper & products, Plastic & Polymers. As the maximum different sectors of SMEs were included in the study, the findings of the study can be generalized to all manufacturing sectors of the SMEs. The null hypothesis of the study states that there is no statistical divergence among the various SMEs with respect to different production systems like make to stock, make to order, assemble to stock and assemble to order, regarding the areas of linkage between lean and sustainability. The Kruskal Wallis Chi-square test was used to examine whether the difference according to the Indian SMEs. The respondents were requested to answer the questions on a five point Likert scale whether they strongly disagree (1) to strongly agree (5) about each attribute as an important area of linkage between lean and sustainability with respect to their firm. The descriptive statistics are calculated for mean and standard deviation of the each variable was calculated 241

4 Area of linkage Mean Standard Deviation x2 df Asymp. sig Waste reduction Environment Management Supply chain Management Worker Empowerment Better Quality Health and Safety Management Value Maximization Energy Minimization Resource Management Optimum Design Cost Reduction Performance Improvement Transperancy Continuous Improvement Community Strategy Governance IV. RESULTS AND DISCUSSION Grouping Variable: Product Category. The deciding variable selected is the type of production system. Kruskal Wallis- chi square test was applied to the collected data to test the statistical divergence of important areas of linkage, among the different production systems. The degree of freedom observed for the test is equal to three. The asymptotic significances of the attributes are found to be for the attribute environment management and for the attribute value References [1] Bonavia, T.M. and Marin, A.J. (2006), An empirical study of lean production in the ceramic tile industry in Spain, International Journal of Operations and Production Management, Vol. 26 No.5, pp [2] Khanchanapong, T., Prajogo, D., Sohal, A.S., Cooper, B.K., Yeung, A.C.L. and Cheng, T.C.E. (2014), The unique and complementary effects of manufacturing technologies and lean practices on manufacturing operational performance, maximization. For all other attributes the value of asymptotic significance is above The asymptotic significance (P Value) is greater than 0.05 indicates null hypothesis cannot be accepted. This implies that there is no statistical divergence among the different production systems In SMEs except the attributes environmental management and value maximization. International Journal of Production Economics, Vol.153, No. 1, pp [3] R.Shah, and P. T. Ward. Lean manufacturing: context, practice bundles, and performance, Journal of Operations Management, vol. 21, pp , March [4] Mathur, A., Mittal, M.L. and Dangayach, G. S. (2012), Improving productivity in Indian SMEs, Production Planning & Control: The Management of Operations, Vol. 23 No ,pp [5] T. Bortolotti, P. Danese, B. B. Flynn, and P. Romano, Leveraging fitness and lean bundles to build the cumulative performance sand cone model, Int. J. Prod. Econ., pp. 1 15, model, Int. J. Prod. Econ., pp. 1 15,

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