Do Lean Programs Pay Off?

Multinational companies roll out lean programs or XPSs. The objective is to improve the operational performance of all the factories in the global network. The party killer? It is documented that about 70 % of all general change programs fail [1], and similar figures has been suggested for lean [2]. So, do lean programs really pay off?

Practice says they do

For a start–looking at the continued growth of interest in lean around the globe–it is probable that lean programs provide positive return on investments. After all, managers seek to make rational choices and decisions based on existing evidence and proof of concepts. A quarter of a century after the term lean was introduced [3], it is as popular as ever, indicating that lean is not a one-hit wonder. Furthermore, thousands of company presentation, consultancy reports, and popular books show how implementing lean has helped companies save millions of dollars.

However, positivism in practice is not a sufficient evidence that lean pays off. First, these data are heavily biased and produced by people whose careers are dependent on positive figures. Second, institutional theory has taught us that many companies might just “follow the stream” and do lean because the market or senior managers expect it [4]. The proof of the pudding is in the eating, but we cannot just rely on the chef’s own taste… Let’s see what research has to say about the effect of lean programs.

The existing empirical literature says they do

There is abundance of research on the effect on performance of implementing lean production. The meta-reviews of the literature by Sousa and Voss [5] and Mackelprang and Nair [6], find that the majority of the empirical research–both case studies and quantitative surveys–report a positive association between implementing lean practices and factory performance. With the exception of a stream in the human resource literature that claim increased work stress in lean production, there is a broad consensus that lean has the potential to significantly improve the operational performance of firms. Clearly, the existing literature says that lean programs do pay off.

My own research says they do

Last (and least), my latest research finds that implementing lean in the global manufacturing network of Volvo AB has had a significant and strong impact on global quality performance. In the paper “Effects of a production improvement program on global quality performance: The case of the Volvo Production System”, published earlier this year in The TQM Journal, we found that factories that succeed with implementing Volvo’s lean program improved the quality performance by a typical figure of about 20% [7]. That is a lot. Imagine if this figure also holds for operational performance in general: 20 % shorter throughput time, 20 % lower scrap rate, 20 % lower production costs, 20 % improved on-time-delivery, or 20 % more flexibility. Figures like these can turn any haltering factory into a super-healthy manufacturing champion.

The effect on quality performance of implementing a Corporate Lean Program in Volvo AB [7, p. 194]

The effect on quality performance of implementing a  lean program in 45 factories in Volvo AB [7].

The conclusion?

Lean programs pay off abundantly…
but only if you succeed with implementing them!

References

  1. Kotter, J. P. (1995). Leading Change: Why Transformation Efforts Fail. Harvard Business Review, 73(2), 59-67.
  2. Pay, R. (2008). Everybody’s Jumping on the Lean Bandwagon, But Many Are Being Taken for a Ride, Industry Week, 01-03-2008.
  3. Krafcik, J. F. (1988). Triumph Of The Lean Production System. Sloan Management Review, 30(1), 41-51.
  4. Tolbert, P. S., & Zucker, L. G. (1983). Institutional sources of change in the formal structure of organizations: The diffusion of civil service reform, 1880-1935. Administrative Science Quarterly, 28(1), 22-39.
  5. Sousa, R., & Voss, C. A. (2002). Quality management re-visited: a reflective review and agenda for future research. Journal of Operations Management, 20(1), 91-109.
  6. Mackelprang, A. W., & Nair, A. (2010). Relationship between just-in-time manufacturing practices and performance: A meta-analytic investigation. Journal of Operations Management, 28(4), 283-302.
  7. Netland, T. H., & Sanchez, E. (2014). Effects of a production improvement programme on global quality performance: The case of the Volvo Production System. The TQM Journal, 26(2), 188-201.

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