International Journal of Lean Six SigmaMeasuring and building lean thinking for value creation in supply chainsRania A.M. Shamah

Article information:To cite this document:Rania A.M. Shamah, (2013),"Measuring and building lean thinking for value creation in supply chains",International Journal of Lean Six Sigma, Vol. 4 Iss 1 pp. 17 - 35Permanent link to this document:http://dx.doi.org/10.1108/20401461311310490

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Users who downloaded this article also downloaded:Peter Hines, Matthias Holweg, Nick Rich, (2004),"Learning to evolve: A review of contemporary leanthinking", International Journal of Operations & Production Management, Vol. 24 Iss 10 pp. 994-1011http://dx.doi.org/10.1108/01443570410558049Rania A.M. Shamah, (2013),"A model for applying lean thinking to value creation", International Journal ofLean Six Sigma, Vol. 4 Iss 2 pp. 204-224 http://dx.doi.org/10.1108/20401461311319365Malihe Manzouri, Mohd Nizam Ab Rahman, Nizaroyani Saibani, Che Rosmawati Che Mohd Zain,(2013),"Lean supply chain practices in the Halal food", International Journal of Lean Six Sigma, Vol. 4 Iss 4pp. 389-408 http://dx.doi.org/10.1108/IJLSS-10-2012-0011

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Measuring and building leanthinking for value creation

in supply chainsRania A.M. Shamah

Business Administration Department, Arab Open University, Cairo, Egypt

Abstract

Purpose – This study aims to develop a standardised instrument to measure the impact of leanthinking on supply chain value. This tool can be used to examine supply chain readiness and thusenhance overall value. It can also observe the potential role of customers, competitors and suppliers inincreasing supply chain performance.

Design/methodology/approach – A survey of previous studies is undertaken in the Egyptianindustrial sector. The study also uses a questionnaire provided across all managerial levels ofEgyptian firms. This questionnaire is divided into two main sections: the first section is considered tobe about lean thinking stages for waste elimination, namely muri, mura and muda, while the secondsection relates to the value creation dimensions.

Findings – The developed instrument accesses and analyses different types of lean thinking foridentifying lean degree in supply chains. Consequently, it could lead to enhancing value creation in supplychains. This explorative study also indicates that the Egyptian industrial sector is willing to go lean.

Research limitations/implications – Some limitations exist in this study. First, the survey wasconducted on the Egyptian industrial sector. The applicability of the proposed scale should thus befurther tested in different countries and service mixtures.

Practical implications – Internal resistance is more of a barrier than external (customers, suppliersor competitors) resistance to lean thinking. Thus, organisations should focus first on internal(functional) integration and then move on to interorganisational integration. Further, people are morecritical than technology in implementing lean thinking.

Originality/value – There is little empirical research on the implementation of lean thinking.Practitioners and researchers should find value in this unique instrument.

Keywords Lean thinking, Value creation, Supply chain management, Lean production

Paper type Research paper

IntroductionEnterprises create value when they implement strategies that respond to marketopportunities by exploiting their internal resources and capabilities (Penrose, 1959;Andrews, 1971; Marr and Neely, 2004) and by integrating strategic relationships withinkey suppliers.

Therefore, the relationships between an enterprise and its suppliers have changedradically during the past few years. Firms are increasingly concentrating on theircore competencies and externalising conventionally important activities such asmanufacturing, design and logistics. This externalisation of value activities relies onthe creation of strong supplier partnerships in areas that have high strategic relevancefor the enterprise’s customer and thus leads to hierarchical supply chain networkscomprising several layers of suppliers.

The management of hierarchical supply systems covering industrial componentsand parts has been studied within both logistics, or supply chain management, and

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International Journal of Lean SixSigma

Vol. 4 No. 1, 2013pp. 17-35

q Emerald Group Publishing Limited2040-4166

DOI 10.1108/20401461311310490

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business marketing. However, the more complex collaborations necessary whengenerating innovative products, services or system solutions through a joint valuecreation process are not clearly understood (Christopher, 1998; Ford et al., 1998; Cooper et al.,1997; Sheth and Sharma, 1997; Moller and Torronen, 2003) between all supply chain parties.

Consequently, both product provider and supplier often have to make substantialadaptations and commit vast resources in the development of collaborating supplierrelationships (Brennan and Turnbull, 1999; Ford and McDowell, 1999; Brassard & Ritter,2001; Spekman et al., 2000) such as productivity, TQM and BPM. These efforts reflectthe investment character of partnership establishment. Moller and Torronen (2003)address the impact of strategic supplier value creation. Thus, the strategic nature ofkey supplier relationships makes it essential for the buyer to be able to assess the valuecreation potential of available suppliers. Hence, lean thinking is a core competence thatcan reform the supply chain structure, firm positions and organisational functionswithin the industry.

Lean thinking is accepted as a key part of an enterprise’s strategy for long-termmanufacturing survival based on removing the waste in current systems, concentratingon adding value that customers pay for and improving product flow in order to increaseproductivity and reduce lead times (Lee-Mortimer, 2006). Moreover, lean practices focuson a reduction in variability, especially that stemming from improper operatingconditions or policies (Gliatis et al., 2012). Nevertheless, lean is seen as representing a clearway to face the increasing challenge posed by low-cost economies (Lee-Mortimer, 2006).

In this study, I see lean as a strategic philosophy that leads to added perceived valuefor all supply chain parties (i.e. stakeholders), while, at the same time, eliminatingwaste based on the 1950s Toyota Production System (TPS). This system classifiedthree types of waste:

(1) Muri. Focuses on what work can be avoided proactively by design.

(2) Mura. Focuses on implementation and the elimination of fluctuations inscheduling or preparation level.

(3) Muda. Discovered after the process is in place and which deals with reactivityvariation in output (Shamah, 2008a, b).

Therefore, lean can be conceptualised as a driver for developing supply chain corecompetence through allocating whole resources that would help in creating value tostakeholders; in other words, increasing the level of performance and enhancingcompetitiveness. Moreover, I reproduce the co-operation relationship between supplychain parties by seeing lean as a firm’s belief in receiving value creation within itspartner’s reliability and integrity, which leads to positive outcomes.

Literature reviewThis section sheds light on lean thinking and value creation and highlights the impactof lean thinking on value creation.

First, lean thinking; leanness originated from the Japanese manufacturer Toyotain the 1950s (Monden, 1983; Ohon, 1988a, b; Shingo, 1988). Lean got its name fromWomack et al. (1990) who chronicle the movement of automobile manufacturing fromcraft production to mass production to lean production. Womack and Jones (1996a, b)developed the lean tool to cover the following “lean principles”:

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. identifying customer value;

. managing the value stream;

. developing the capacity to flow production;

. applying a pull system to support the flow of materials to constrained operations;and

. detecting excellence by eliminating all forms of waste in the production system.

In the 1990s, lean production was treated as a fashion (Bjorkman, 1997; Sturdy, 2004)alongside BPM and TQM. Nowadays, lean is not only popular in manufacturing.However, it has progressed from the operational level to the strategic level (Hines et al.,2004) as well as to the empirical area beyond manufacturing to areas such as shoemanufacturers (Gati-Wechsler and Torres, 2008), the supply chain for personal computers(Ben et al., 1999), the food and farming supply chain (Cox and Chicksand, 2005) andhealthcare (Waring and Bishop, 2010; Wang and Huzzard, 2011). According to Corbett(2007), “the lean approach percolates into ever wider circles of operations; it ceases to beabout best practice and starts to become a part of the fabric of doing business”.

The lean concept has many spots for practitioners, for example, it aggregates relatedprinciples of improvement via TQM; synchronicity and coordination via JIT; andintegration via computer-aided processes to the areas of design, factory management,supply and distribution (Forrester et al., 1996).

Lewis (2000) illustrates lean as:

[. . .] a reduced level of input resources in the system for a given level of output. This isachieved through removing waste (Muda) from the system. This is primarily waste in theform of resources (raw materials, WIP etc) that are transformed in manufacturing howeveralso includes transforming resources such as people, process technology, facilities, etc.

Consequently, Womack and Jones (2003) define waste as “any human activity whichabsorbs resources without creating value” and classify seven waste activities:

1) Overproduction; 2) Waiting time (for the next process step); 3) Transportation (unnecessarymovement of materials); 4) Over Processing (rework and reprocessing); 5) Inventory (excessinventory not directly required for current orders); 6) Movements (unnecessary movementsby employees during course of their work); and finally; 7) Defects.

Ohno (1988a, b) and Emiliani (1998) address another waste behaviour. Nevertheless, leanis considered to be about controlling resources in accordance with customers’ needs andreducing unnecessary waste “including the waste of time” (Andersson et al., 2006).

Second, value creation; the literature distinguishes value creation as a core objectivefor enterprises. Numerous authors state that an enterprise’s obligation is to createvalue for shareholders, while others insist that value must be created not just forshareholders, but for stakeholders since it is morally the right thing to do. Othersinsist that a corporation’s only moral obligation is to make a profit. It is obvious thatthere is a lack of attention in the management literature to the main concept of valueitself. Some researchers pay more attention to the meaning and discussion of “value”.Moreover, presented models fail to describe how an organisation creates value(Haksever et al., 2004).

Value creation cuts across two dimensions. The first is the magnitude of returnsin excess of the cost of capital that a company can, or will, generate. The second

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dimension is how long a business can earn returns in excess of the cost ofcapital (Mauboussin and Bartholdson, 2002).

Porter (1985) defines value as “what buyers are willing to pay” and adds that superiorvalue results when a firm offers lower prices than competitors for equivalent benefitsor when it provides unique benefits that more than offset a higher price. Mosteconomists, however, make a clear distinction between the value and price of a good orservice. Cengiz et al. (2004) define value as “the capacity of a good, service, or an activity, oractivities of an organisation to satisfy a need, or provide a benefit to a person or legalentity”. In this study, I rely on this definition.

Thus, value creation relies on three parties: customers, employees and investors(O’Malley, 1998). Therefore, matching customer and provider practices requires not onlythe recognition of what value means but also the process of value creation (Alderson,1957; Ramirez, 1999; Normann, 2001; Sheth and Uslay, 2007; Gronroos, 2008; Lusch et al.,2008; Shamah, 2012). Therefore, to be able to co-create a unique customer experienceenterprises must co-create an empowered employee experience “inside” the supply chain(Ramaswamy, 2009) and match productivity and quality between all parties in thesupply chain.

Finally, we should note the impact of lean thinking on value creation. Lean thinkingcan be used as a framework for improvement for in recurring manufacturing activitiesand upstream in non-recurring processes such as product development (Mascitelli,2000). Womack et al. (1990) argue that lean manufacturing has greatly improvedproduction efficiency.

One of the main objectives of strategy formulation and implementation is the creationof sustainable advantages for firms (Forrester et al., 2010). Therefore, firms need torecognise why some companies perform better than others even though they operate insimilar markets and competitive situations (De Oliveira and Fensterseifer, 2003). Thesedifferences in performance may be attributed to a differentiation in internal factorssuch as knowledge and other strategic assets that influence firm performance. Thisphilosophy is personified in the resource-based view approach, which supposes firmsare different mixtures of productive and strategic resources and capabilities that leadthem to different performance potentials. The resource-based view gained prominencein the strategy literature by emphasising the firm’s internal resources as the maindeterminants for improved performance (Forrester et al., 2010).

At the beginning of lean implementation, it was limited to tool-based manufacturingapproaches that aimed to provide qualitative products within lower costs in discretemanufacturing processes (Wang and Huzzard, 2011). In the 1990s, the lean concept wasextended from the “shop-floor” operational level to the strategic level (Hines et al.,2004). Lean is now applied across a broad range of industries and it has moved from apurely “shop-floor” focus on waste and cost reduction to an approach that enhancescustomer perceived value by adding product or service features and/or removingwasteful activities (Hines et al., 2004). In other words, lean means adding value tostakeholders.

Hence, supply chains focus on achieving efficient value creation. According toWomack and Jones (1996a, b) and Mascitelli (2000), there are five principles that firmsshould follow to attain overall value creation:

(1) Define the value of their products as perceived by their customers; the goal isto deliver products that precisely match the customer’s needs without waste.

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(2) Understand the value stream within the company, a value stream is thesequence of activities and process steps that is essential for creating anddelivering a product. Although it may seem as though everything that goeson in a company is part of the value stream, in reality much effort is wasted onnon-value-adding tasks. Mapping the organisation’s value stream enables it tocategorise activities into value-added (those tasks that transform the product insome measurable way) and non-value-adding tasks (wasted effort that could beeliminated without any impact on the customer).

(3) Eliminate barriers to the flow of value. These barriers can take the form of largebatches of inventory or capacity bottlenecks in the factory, or it could be in theform of excessive meetings, approvals, documentation, etc. during the productdevelopment process.

(4) Illustrated by the pull, a firm is free to allow its customers to “pull” value,meaning that all production activities are triggered by real demand from themarketplace.

(5) Continuous repentance of the previous steps to ensure that methods andsystems are constantly being purged of waste.

Purpose and theoretical approachThis study develops a standardised instrument to measure the degree of leanness infirms and determines the relationship between lean thinking and enterprise value creation,which can be used to scrutinise supply chain willingness to go lean. Further, observingthe potential role of customers, competitors and suppliers can increase supply chainperformance.

Scales and measurement tools in this studyThis instrument is divided into two main sections. The first section is considered to beabout lean thinking. It is based on Karlsson and Ahlstrom’s (1996) framework andSoriano-Meier and Forrester’s (2002) leanness scale, which are modified to meet theresearch purpose, as I argue in this study that the core leanness dimensions are leanthinking concepts; improvement program; waste elimination; and lean culture.The second section concerns the value creation scale. This is generated based on theprevious literature review, and I argue in this study that the core value creationdimensions are reducing operational cost & achieving customer satisfaction; productmix; knowledge accumulation; joint productivity; and perceived quality (PQ). In addition,this study is based on data collected from an in-depth survey and interviews in theEgyptian industrial sector that can be deployed in future studies for testing the leannessof manufacturing firms. For both instrument sections, five-point Likert scales were usedto instruct respondents.

The aim of the survey was to identify the degree of leanness in the Egyptianindustrial sector and the managerial commitment towards lean production and then toexamine the relationship between leanness and value creation. Because the relevantdata were not available in secondary form, primary data collection was necessary. Thisinstrument thus offers a generic tool for measuring the degree of leanness and degreeof managerial commitment and subsequent business performance. The data generatedalso enabled the testing of a number of research hypotheses.

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Research questionsThis research asks the following questions:

RQ1. Which dimensions affect the progression of lean thinking in supply chains?

RQ2. What is the degree of leanness in the Egyptian industrial sector?

RQ3. What is the impact of lean thinking on value creation?

Research methodologyThis research generates an instrument to access and analyse the degree ofleanness for enhancing supply chain value creation. Consequently, this could lead toelevated customer satisfaction, increasing internal-customer performance and leadingto continues improvement. This explorative study also tests the ability of the Egyptianindustrial sector to go lean.

A total of 400 questionnaires were distributed across all managerial levels ofthe Egyptian industrial sector – on technology companies, such as electronics firms,air conditioner and refrigerator manufacturers and food, medicine, and automobilecompanies, across all managerial levels, 350 valid and complete questionnaires werereturned. The questionnaires were distributed by email and through field visits tocompanies over a one-year period. For the purpose of this study, the study hypothesis is:

H1. An interdependent relationship exists between lean thinking and valuecreation.

H2. There is significance relation between value creation and lean thinkingdimensions.

Generating the lean thinking instrument used in this studyBased on the previous literature review, lean thinking is all about adding value, wherevalue is defined by the customer (Julien and Tjahjono, 2009). Throughout value creation,various participants contribute at different stages of the co-production process(Eichentopf et al., 2011). Therefore, this study argues that lean thinking is the mosteffective at influencing enterprise value creation. For evaluating changes towards leanness,it is important to distinguish between the determinants and the performance of leanness.The ultimate goal of implementing leanness in an operation is to increase productivity,enhance quality, shorten lead times and reduce costs (Karlsson and Ahlstrom, 1996).At the strategic level, it is about enhancing perceived value for stakeholders.

Hence, supply chains are value creation networks composed of people, technologyand organisations (Maglio et al., 2006). These networks rely on three main parties,namely the provider, suppliers and consumers, by focusing on how to match andmerge the received value for each party. Moreover, supply chains need to developcreative ways to address fiscal restraints while fulfilling customer demand for efficientproduct delivery. Providers see the value creation process as an integrated process ofmatching different perspectives, namely those of the main organisation, suppliers andcustomers. Therefore, applying lean thinking leads to efficient value creation, as thecore idea is when the product provider focuses on value creation, it affects allsupply chain parties. Thus, the appliance of leanness by a product provider is a coreconstituent.

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Applying lean thinking within provider value creationIts applicability and diffusion in industry has become so pervasive that some haveeven suggested that lean may soon become a “qualifier” (Boyle et al., 2011; Hill, 1991)rather than a source of competitive advantage (Boyle et al., 2011; Crute et al., 2003).

Hence, provider value creation core activities are:. Increasing the benefits and use of products through improved quality, function

or imaging.. Lowering costs through production, efficiency and other means in order to

change attitude and thinking (Sumarna, 2010; Myelin, 2002, 2010).

Nevertheless, lean makes optimal use of the skills of the workforce by giving workersmore than one task, by integrating direct and indirect work and by encouragingcontinuous improvement activities. As a result, lean production is able to produce alarger variety of products and services, at lower costs and higher quality, with less ofevery input, compared with traditional mass production: less human effort, less space,less investment and less development time (Dankbaar, 1997).

Once again, Womack and Jones (1996a, b) describe five principles to create a leanmanufacturing system:

1) Specify value (what makes the customer happy?; 2) Identify value stream (what is thesequence of processes from supplier to customer?; 3) Create flow (make the value flow andnever delay a value-adding activity; do not batch production but make “one-at-a-time”; 4) Pullproducts through the system (only make what is required by the customer, when it is required;and finally; 5) Perfect the system (continuously improve the system by reducing waste).

Therefore, value creation requires unique activity configuration frameworks accordingto Normann (2001). These need to be:

. Long-linked. Transforming inputs into saleable outputs. For example, anautomobile manufacturer uses long-linked technology to create value.

. Mediating. Linking customers within a network. The key role of the customerand the network leads us to label these firms “network service firms”.

. Intensive. Solving clients’ problems using experts and the application ofexpertise. The key role of experts and expertise leads us to label these firms“knowledge-intensive firms”.

Moreover, lean is used to accelerate the velocity and reduce the cost of any process byremoving waste. Therefore, this study argues the following lean fundamentals forachieving continues improvement:

. plan for change;

. design suitable strategies and procedures to support lean;

. implement the suggested plans;

. measure employee, department and/or organisational performance;

. analyse defects; and

. learn from leaders and/or from feedback to create a knowledge base to achieveoptimum performance by eliminating waste, exceeding customer expectationsand adding value to stakeholders.

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Furthermore, the philosophy of lean considers the interrelationships of these practicesin order to improve overall levels of quality, productivity, integration and wastereduction in manufacturing, over functional areas (e.g. R&D, accounting) and along thesupply chain (Boyle et al., 2011). Indeed, applying lean in organisations increasescompetitive advantage by achieving the following benefits: reduced work-in-process;increased inventory turns; increased capacity; cycle-time reduction; and improvedcustomer satisfaction (Andersson et al., 2006; Deming, 1994). Liker (2004) states that:

[. . .] to be a lean manufacturer requires a way of thinking that focuses on making the productflow through value adding processes without interruption (one piece flow), a “pull” systemthat cascades back from customer demand by replenishing only what the next operationtakes away at short intervals, and a culture to improve.

Consequently, firms should benchmark their activities against those of competitors toensure efficiency after applying leanness. Kaplan and Norton (1992) suggest an effectivemeasurement for benchmarking that should be an integral part of the managementprocess. Using the balanced scorecard approach measures organisational performance.A balanced scorecard consists of:

(1) Customer perspective. How do customers view the enterprise?

(2) Internal perspective. What does the enterprise excel at? How can it maintaincompetitive advantage?

(3) People. The focus is on innovation and learning. Can our people continue toimprove and create value?

(4) Financial perspective. How does the enterprise look to its stakeholders (gifts,grants, endowments)?

Discussions and findingsTo emphasise, the proposed instrument offers a generic tool for measuring the degreeof leanness and the degree of managerial commitment and linking these to businessperformance. I thus measured the validity and reliability of the suggested measurementdimensions using a confirmatory factor analysis (CFA) before examining the relativeimportance of each factor. Finally, a correlation analysis was used to determine theinitial dimensions.

Validity and reliabilityIdentifying the validity of the used dimensions in this study was a major consideration.Therefore, a pilot study was applied using 30 participants randomly picked from theMultinational Automobiles Assembly Companies. This pilot study showed flaws insome of the questionnaire questions. These questions were amended to improve thereliability of the questionnaire and to make sure that the questions were well understood.Further, interviews were conducted with some participants before distributing the finalquestionnaire.

Reliability refers to the property of a measurement instrument (in this study, thesurvey) that provides similar results for similar inputs. Reliability examines whetherthe results are consistent, i.e. repeatable. Would similar observations be made orsimilar results reached by a different researcher?

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In social sciences, it is difficult or even impossible to establish absolute standards forhuman responses to a survey. However, the scales I use should be reasonably consistent.Therefore, reliability analysis was used to determine the accuracy of constructingquestions that measure a person’s opinion (Cronbach, 2004). A reliability of 0.6 or higheris sufficient for this study. The Cronbach’sa from the analysis show that the output of thesurvey is reliable and consistent as presented in Table I.

CFAIn CFA, it is assumed that certain variables correctly measure a certain factor. Based ona hypothesis test, CFA may then be used to find out to which degree the different assumedvariables truly measure that certain factor. Therefore, after having conducted anexploratory factor analysis, CFA is conducted by specifying the variables (dimensions) thatdefine each construct or factor. Separate CFAs were carried out because of the large numberof variables involved in the study. Moreover, it is accepted practice to carry out separateCFAs for exogenous and endogenous constructs, because in CFA each construct is allowedto be correlated to other constructs included in the CFA (Hair et al., 2010). In addition,this study used CFA for the first order using the maximum likelihood estimation methodin the AMOS21 program. Thus, the next section discusses the CFAs for each construct.The dimensions used for measuring this model are represented in Table II.

All models’ fitness were evaluated using several criteria, including the x 2

goodness-of-fit test statistic, degree of freedom, x 2/df, goodness-of-fit index (GFI),adjusted goodness-of-fit index (AGFI), comparative fit index (CFI), root mean squareerror of approximation (RMSEA) and Tucker-Lewis Index (TLI). The dimensions ofall constructs were initially incorporated into the model testing. Several criteria wereused to evaluate the items and their dimensions, including unidimensionality, whichmeans that a set of variables only has one underlying dimension in common, such asthe reliability of the item and the reliability of the whole construct. According toJanssens et al. (2008) and Hair et al. (2010), to evaluate unidimensionality, the variablemeasures must all have a high loading (.0.50) on the factor and must be significant

Dimensions Cronbach’s a No. of items

Part 1: lean thinking (LE) 0.895 541.1 Lean thinking concepts (LPC) 0.890 91.2 Improvement program (IP) 0.850 131.3 Waste elimination (WE) 0.890 11

1.3.1 Identify the Muda “nonvalue added work”: 0.840 41.3.2 Identify the Muri “overburden” 0.850 31.3.3 Identify the Mura “unevenness” 0.845 4

1.4 Lean culture 0.900 21Part 2: value creation (VC) 0.940 442.1 Reducing operational cost & achieving customersatisfaction (ROC&ACS)

0.900 11

2.2 Product mix (PMix) 0.936 52.3 Knowledge accumulation (KA) 0.850 92.4 Joint productivity ( JP) 0.890 122.5 Perceived quality (PQ) 0.744 7All items 0.978 98

Table I.Total reliability statistics

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(critical ratio ¼ C.R. ¼ t-value . 1.96). Table III and Figure 1 show the initial outputsfor the first order CFA model of technical quality using the AMOS21 program.

Table III shows that the results clearly reproduce the initial model of the technicalquality, as the CFA fits well across all three fit measures, except the probability of thex 2, GFI, AGFI and CFI. Moreover, most factors have a loading (,0.70) on the factorand are significant.

Reliability analysis was performed to test internal consistency. This must alwaysbe verified after convergent validity, because a model may be reliable without beingconvergent ( Janssens et al., 2008). Cronbach’s as were chosen, as suggested byHair et al. (2010) as the most commonly accepted approach for assessing the reliabilityof a multi-item scale. Hair et al. (2010) recommend a level of 0.70 as the minimumacceptance standard of internal consistency reliability, while Kline (2005) states that0.60 is generally viewed as the minimum acceptance level. In general, the acceptance

1. Observed, exogenous variables (standardised)LP Lean thinking conceptsIP Improvement programMuda Identify the Muda “non-value added work”Muri Identify the Muri “overburden”Mura Identify the Mura “unevenness”LC Lean cultureROC& ACS Reducing operational cost & achieving customer satisfactionPMix Product mixKA Knowledge accumulationJP Joint productivityPQ Perceived quality2. Unobserved, endogenous variablesLP Lean thinking requirementsWE Waste eliminationVC Value creation3. Unobserved, exogenous variables (errors)E1 to E11

Table II.Study dimensions

Path Estimatea Standardised SE CR p-value

LP ˆ LPC 1.000 0.501LP ˆ IP 2.123 0.992 0.356 5.965 0.000LP ˆ LC 2.000 0.890 0.344 5.867 0.000WE ˆ Muda 1.328 0.753 0.154 8.622 0.000WE ˆ Mura 1.000 0.963WE ˆ Muri 1.177 0.948 0.050 23.578 0.000VC ˆ ROC&ACS 1.000 0.500VC ˆ PMix 0.916 0.899 0.058 15.904 0.000VC ˆ KA 0.720 0.706 0.061 11.714 0.000VC ˆ JP 1.916 0.923 0.070 14.850 0.000VC ˆ PQ 1.720 0.967 0.265 13.755 0.000

Notes: aInitial value to start the solution; over fit measures: absolute fit measures: CMIN ¼ 47.856,df ¼ 12, p ¼ 0.000, CMIN/df ¼ 1.439, GFI ¼ 0.842, RMR ¼ 0.016, RMSEA ¼ 0.057; incremental fitmeasures: IFI ¼ 0.932, TLI ¼ 0.838, CFI ¼ 0.931

Table III.Summary of AMOSoutput for measuringinstrument

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of reliability coefficients as equal to or greater than 0.60 has been used as the referencepoint for most research. Table IV shows that all components are over 0.70 and that theoverall alpha value is 0.726. Therefore, the reliability of LP, WE and VC were accepted.Thus, we can depend on the measurement model.

Relative importance for each factorFrom the descriptive statistics and relative importance of dimensions test it was declaredthat: the mean, standard deviation and importance of each dimension within theconceptual framework. It is clear that the respondents gave 80.2, 73.9 and 76.3 per centfor LP, WE and VC, respectively.

Figure 1.Measuring instrument

Paths Loading (l) l2 1 2 l2

LE ˆ LEC 0.501 0.251 0.749LE ˆ IP 0.992 0.984 0.016LE ˆ LC 0.890 0.792 0.207WE ˆ Muda 0.753 0.567 0.433WE ˆ Muri 0.963 0.927 0.073WE ˆ Mura 0.948 0.898 0.102VC ˆ ROC&ACS 0.934 0.872 0.128VC ˆ PMix 0.899 0.808 0.192VC ˆ KA 0.706 0.498 0.511VC ˆ JP 0.923 0.851 0.149VC ˆ PQ 0.967 0.935 0.065Sum 7.678 2.625Ave 0.726

Table IV.Discriminant validity

using AVE

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Correlation analysisThis is used to describe the strength and direction of the linear relationship betweenthe dimensions in the conceptual model. It varies from 0 (random variable) to 1 (perfectlinear relationship) or 21 (perfect negative relationship). In addition, it varies in termsof strength as represented in Table V, shows Pearson correlation.

It is obvious from Table V that all correlations have positive relationships at asignificance level of 99 per cent between all dimensions. The correlation between anytwo dimensions ranges from moderate to very high. The strongest correlation betweenany two dimensions means there is a relationship between LP, WE and VC. Therefore,we can accept the hypothesis of this study. Therefore, H1 is accepted.

Regression test is used for the significance of the overall relation between leanthinking and value creation dimensions. As Table VI represents.

Since the p-value is less than 0.05, there is a statistically significant relationshipbetween value creation and lean thinking dimensions. The R 2 statistic indicates thatthe model as fitted explains 26.3 per cent of the variability in value creation by nineindependent variables. From those above table it is obvious that value creation couldbe explained by using the following model:

Value Creation ¼ 4:225 2 0:213 Lean Con:þ 0:135 Improve Programþ 0:082 Muda 2 0:160 Muri þ 0:074 Muraþ 0:070 Lean Culture þ 0:110 Perceived Quality2 0:188 Service environment Quality þ 0:067 Outcome Quality

Which means the there is a liner relation between lean thinking and value creation aregood relationship as Figures 2 and 3 show.

It is obvious from the previous figures that this model does not have problems of:normality; linearity; colloranity; hirosttisty; or outliers. Therefore, H2 is accepted.

Research limitationsThis study has some limitations. First, it was conducted on the Egyptian industrialsector. The applicability of the proposed scale should thus be further tested in differentcountries and service mixtures. Moreover, internal resistance is more of a barrierthan external (customers, suppliers or competitors) resistance to lean thinking. Thus,organisations should focus first on internal (functional) integration and then moveonto interorganisational integration. Further, people are more critical than technologyin implementing lean thinking.

RecommendationsAlmost every company can implement lean thinking, but to a limited extent (it is amatter of the degree of leanness). For supply chains in the process of applying orconsidering leanness, I would thus recommend the following:

(1) Supply chains can improve provider performance through the practice ofsupporting behaviours that increase collaboration between supply chainparties.

(2) Integrate external sources through the acceptance of external ideas and top-downtargeting in order to integrate a certain number of ideas and technologies fromexternal sources.

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Dim

ensi

ons

LE

CIP

LC

Mu

da

Mu

riM

ura

RO

C&

AC

SP

Mix

KA

JPP

QL

EW

E

LE

C1

IP0.

493

*1

LC

0.80

8*

0.76

9*

1M

ud

a0.

547

*0.

904

*0.

686

*1

Mu

ri0.

593

*0.

932

*0.

837

*0.

905

*1

Mu

ra0.

577

*0.

743

*0.

574

*0.

875

*0.

789

*1

RO

C&

AC

S0.

613

*0.

848

*0.

692

*0.

870

*0.

816

*0.

836

*1

PM

ix0.

606

*0.

471

*0.

436

*0.

653

*0.

561

*0.

809

*0.

619

*1

KA

0.59

3*

0.93

2*

0.83

7*

0.90

5*

0.83

7*

0.90

5*

0.67

0*

0.60

7*

1JP

0.54

7*

0.90

4*

0.68

6*

0.84

8*

0.69

2*

0.87

0*

0.77

80.

789

*0.

769

*1

PQ

0.61

3*

0.84

8*

0.69

2*

0.87

0*

0.81

6*

0.83

6*

0.83

7*

0.90

5*

0.67

0*

0.60

7*

1L

E0.

857

*0.

855

*0.

960

*0.

808

*0.

888

*0.

717

*0.

813

*0.

607

*0.

570

*0.

769

*0.

870

*1

WE

0.58

5*

0.94

1*

0.78

6*

0.97

2*

0.98

0*

0.84

9*

0.86

1*

0.78

9*

0.61

8*

0.67

0*

0.65

3*

0.87

2*

1V

C0.

654

*0.

748

*0.

617

*0.

872

*0.

787

*0.

965

*0.

890

*0.

905

*0.

889

*0.

808

*0.

905

*0.

763

*0.

846

*

Note:

* Cor

rela

tion

issi

gn

ifica

nt

at:

0.01

lev

el(t

wo-

tail

ed)

Table V.Pearson correlationsbetween dimensions

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ConclusionThe development of leanness and value creation offers application possibilities forpractitioners and academic researchers. First, the use of this scale enables practitionersto track the degree of leanness for all supply chain parties. However, the cautious

Unstandardisedcoefficients

Standardisedcoefficients

Independent variables B SE b t Sig.

(Constant) 4.212 0.270 15.587 0.000Lean thinking concepts 20.213 0.030 20.257 27.130 0.000Improvement program 0.135 0.026 0.302 5.203 0.000Waste elimination identify the Muda 0.082 0.016 0.190 5.050 0.000Identify the Muri 20.160 0.029 20.207 25.556 0.000Identify the Mura 0.074 0.015 0.191 4.913 0.000Lean culture 20.070 0.017 20.150 24.082 0.000Perceived quality 0.110 0.025 0.251 4.450 0.000Service environment quality 20.188 0.059 20.237 23.208 0.001Outcome quality 0.067 0.022 0.115 3.042 0.002

Notes: p-value ¼ 0.000; R 2 ¼ 0.263; F ¼ 16.120Table VI.Regression test results

Figure 2.Normality of the model

60

80

40

20

0–3 –2 –1 0 1 2 3

Regression Standardized Residual

HistogramDependent Variable: A

Cases weighted by W

Freq

uen

cy

Mean = 5.84E-15Std. Dev. = 0.989

N = 600

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inspection of the different factors may show key weaknesses that prevent the deliveryof high employee performance. Consequently, managers must carry out suitableactions to improve or to maintain specific aspects of leanness. Second, for academics,this scale may be a potential starting point for comparing different research on leanthinking and value creation in the workplace.

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Further reading

Deming, E. (1993), The New Economics for Industry Government and Education, MIT Press,Cambridge, MA.

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Ritter, J.R. (1984), “Signaling and the valuation of unseasoned new issues: a comment”, Journal ofFinance, Vol. 39, pp. 1231-7.

Sanjay, B. (2012), “An appropriate change strategy for lean success”, Management Decision,Vol. 50 No. 3, pp. 439-58.

About the authorRania A.M. Shamah is an Associate Professor of Business Administration at Helwan University(part-time) and at the Arab Open University, Faculty of Business Administration (part-time).Shamah is also a consultant/lecturer in business administration at several training centers in theMiddle East, especially in the Gulf area, and is a member of the Crisis Research Unit. Shamahis a Referee Editor for the International Journal of Knowledge Management & Culture Change,an Associate Editor for the Disaster Report of Egypt, Crisis Research Unit Press, and is onthe organizing committee of the Annual Crisis Conference, run by the Crisis Research Unit.Rania A.M. Shamah can be contacted at: rania.shamah@gmail.com

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This article has been cited by:

1. Rania A.M. Shamah. 2013. A model for applying lean thinking to value creation. International Journalof Lean Six Sigma 4:2, 204-224. [Abstract] [Full Text] [PDF]

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