INVESTIGATING LEAN CRITERIA USING STRUCTURAL

MODELLING
Tushar Agarwal1, Pulkeshian Daruka2
1-2B.tech 4th Year Mechanical Mechatronics Engineering,

The LNM Institute of Information Technology, Jaipur, India

Rupa ki Nangal, Post Sumel via Jamdoli 302031

ABSTRACT
The classical method of manufacturing has witness the adaptation of lean implementation. Lean
manufacturing is an industry driven concept used to effectively manage the resources and
products. A structural model needs to be developed to clarify the interrelationships among
factors influencing lean remanufacturing practices. Using Interpretive Structural Modelling we
drive the interrelationship among lean criteria and predict the dominant and least dominant
factors. 23 are being identified based on around 135 responses from 300 expert opinion. The
identified most dominant factors include a strong top management commitment with proper
strategy selection, long-term vision and participation and a strong understanding of the current
product and process designs.

I. INTRODUCTION
The industries are developing with a steep rate in terms of incorporation of lean and academic
community is contributing for it but recent study has shown that lean is not able to pass desired
results (Conti et al., 2006). In the similar manner, there has been concern over mixing of lean
performance with the business. In UK, not more than 10% of the companies have been reported
to be successful in adopting lean (Longoni et al., 2013) and all over the globe this figure stands
to only 3%. Recent research has shown issues related to lean implementation quoting lean as just
a enhancement tool for production. Shah and Ward (2007)s influential work aimed at analysing
10 underlying components measuring lean implementation, but the study sample constituted
United States manufacturing industry only which pretended to be an apparent limitation because
of the conceptual difficulties in defining services operational measures (Malmbrandt and
Ahlstrom, 2013, Alsmadi et al., 2012, Ahlstrom, 2004, Bonaccorsi et al., 2011). The propagation
of lean thinking into services facilitates the development of a measure of lean implementation
that can simultaneously deal with both the services and the manufacturing. Moreover, a lack of
empirical research and lack of testing and validation of lean frameworks/models have been
reported (Jasti and Kodali, 2015). Alsmadi et al. (2012) experimented for the empirical analyses
of lean adoption in the UK manufacturing and services sectors but the attention was on a
comparison. No attempts are made to understand the coalescence of the underlying factors with
advanced empirical analyses such as structural equation modelling.

2. LITERATURE REVIEW
At the core of lean methodology is the concept of systematic elimination of waste or non-value
adding activities that are not desired or are not necessary to fulfil a customer request. The typical
manifestations of waste are overproduction, waiting, conveyance, over processing, excess
inventory, unnecessary movement and defects. An accurate description of the customer value is
key to bifurcating the product flow into value and non-value adding activities; value-adding
activities transform materials and information into something the customer wants whereas the
nonvalue-adding activities consume resources and do not directly contribute to the end result
desired by the customer. Lean optimizes value and non-value adding activities which can have a
dramatic effect on productivity, cost and quality.

Although an important facet of Toyota Production System, waste minimization is just a means
towards the larger aim of Continuous Improvement in an organization which has been
categorized one of the two pillars of the Lean Thinking along with the Respect for People
(Badurdeen and Gregory, 2012, Halling, 2013, Larman and Vodde, 2009, Liker and Hoseus, 2010,
Osono et al., 2008, Liker and Hoseus, 2008).The two pillars of this Lean House are Respect for
People and Continuous Improvement supporting the objective of quickly delivering things of
value (to the customer and society) in shorter and shorter cycle times of all processes, while still
achieving highest quality and morale levels.
2.1 Lean Constructs
The studies reviewed above infers that sustained success of lean can be achieved if it isnt
viewed just as a set of tools. Bhasin and Burcher (2006) resonated the same view that pointed out
that rather than embracing few tools of lean system firms must try to adopt an integrated set of
cultural and technical activities such as continuous improvement, cellular manufacturing,
Kanban, single piece flow, single minute exchange, step change, supplier development, supplier
base reduction, total productive management, visual management, value stream mapping, worker
empowerment, clarity of vision, communication of goals, allocation of responsibility, supplier-
customer relationship, work environment, stability and management commitment. Shah and
Ward (2007)s seminal work empirically identified external aspects of supplier and customer
management along with internal practices such as pull, flow, setup, process control, preventive
maintenance and employee involvement representing lean in the manufacturing industry. The
study sample constituted United States manufacturing industry only which seems to be an
apparent limitation because of the
Conceptual difficulties in defining services operational measures (Malmbrandt and Ahlstrom,
2013, Alsmadi et al., 2012, Ahlstrom, 2004, Bonaccorsi et al., 2011). Sim and Rogers (2008)
argues that in order to implement continuous improvement in an organization communication
between the managers and shop floor level employees is important to maintain its effectiveness..
Scherrer-Rathje et al. (2009) investigated companies that re-implemented lean and identified that
managements commitment and employees attitude were critical to getting lean right. The study
also highlighted the resistance to change from employees when things were introduced
differently in the organization. Marodin and Saurin (2013) presented the same idea after
reviewing 102 studies that 55% of the studies approved that management support plays an
important role in lean project failure/success. Malmbrandt and Ahlstrom (2013) emphasized the
importance of management commitment and employee training by terming these as lean
enablers and identified Identification of waste, Customer value, Standardization, Visualization,
Pull, Multi-functional work force and continuous improvement as the key lean practices.

3. RESEARCH METHODOLOGY
The empirical objective of this study is to identify the dimensional structure underlying lean
management and to develop reliable and valid scales to represent it, in addition to gauge the
relationship of lean practices with organizational performance. We used a comprehensive, multi-
step approach adopted from Cheng (2001).
3.1. Survey Instrument
Primary data is collected through a survey distributed to a sample of selected companies. The
survey instrument is divided into four sections with a total of 57 items. Section 1 deals with the
demographic questions with 5 items and remaining three sections are related to the 15 latent
constructs comprising 51 items as shown. The 15 latent constructs are selected with literature
support as explained in Section 2 and are measured by associated survey items. The survey
instrument is designed on a 15 Likert Scale. Before finalizing the questionnaire, the content
validity, face validity and pilot testing was performed for all the items contained in the
questionnaire. The initial version of the instrument was experimented for the content validity
through interviews and in person discussions with the senior operations managers and
academics. On the basis of their review, several items were rephrased. Some of the items were
excluded whereas some new items were added to reflect the practitioners feedback.

3.2. Sample Selection

The population of interest for this research was the managerial cadre of the project organizations.
Access to group of managers in these organizations was the principal reason for the selection of
potential respondents. This convenience sampling has been reported as an acceptable sampling
method with manager respondents (Holt and Ghobadian, 2009, Chien and Shih, 2007, Zhu et al.,
2007) and for the exploratory studies. A total of 300 questionnaires were floated to the above
stated target population and we were able to obtain 135 participants responses were sorted for
further analysis. Missing data were treated by using both the maximum estimates and Full
Information Maximum Likelihood algorithm. The demographic information of the respondents
to an extensively drawn questionnaire is presented in Table 1. The results showed participants
largely from the service sector (86.6%) and the remaining from manufacturing sector (13.4%).
The positions of the participants in the companies used in sampling were majorly First Line
Mangers and Middle Managers with (36.9%) in the service sector and comparatively low in
manufacturing sector (7.4%). Furthermore, the number of employees in most of the firms
investigated were more than 1000 (36.9%) followed by firms with less than 100 to 500
employees.
Table 1 : Descriptive Statistics
Type of Business (n=135)
Service 86.6%
Manufacturing 13.4%
Total 100%

Management Level Service Manufacturing

First Line Management 38.4% 31.2% 7.4%
Middle Management 36.9% 32.7% 4.4%
Top Management 24.7% 23.1% 1.2%
Total 100% 87% 13%

Number of Employees
Lessthan100 23.6%
Between100and499 29%
Between500and1000 10.3%
Morethan1000 37.1%
Total 100%
3.3. Sample Size Adequacy and Relevance
We were able to obtain 135 responses from the managerial cadre of the selected organization.
Beavers et al. (2013) reported various sample size requirements for factor analyses such as 51
more cases than the number of variables (Lawley and Maxwell, 1962) and a sample size of 100
when three to four strong items (loadings of .70 or greater) comprise a factor (Fabrigar et al.,
1999, MacCallum et al., 2001). All this cited work affirms the sample adequacy for this study
especially because the respondents were managers in their respective organization and their self-
reported evaluations are likely to be consistent with the objective observations since they occupy
an appropriate position in the organization to make such evaluations (Gowen et al., 2006).

4. DATA ANALYSIS AND RESULTS

4.1 Exploratory Factor Analyses (EFA)

Henson and Roberts (2006) advocated to conduct Exploratory Factor Analyses (EFA) at an
exploratory stage because the a priori expectations from the initial theoretical constructs might
be incorrect. Therefore, EFA was used as the first analyses method on the dataset (Nie et al.,
2011). The theoretical construct items were initially examined for their coalescence on factors
which is also known as the factorability of factors. The Kaiser-Meyer-Olkin (KMO) Measure of
Sampling Adequacy was used to evaluate the correlations and partial correlations to determine if
the data are likely to coalesce on factors. Williams et al. (2012) recommends a KMO value 0.5
for factor analyses. Kaiser (1974) gives a more categorized sampling adequacy measure with a
KMO > 0.6 as mediocre, 0.7 as middling, 0.8 as meritorious and 0.9 as marvellous. The KMO
measure of sampling adequacy for this data was recorded at 0.836 for the 135 responses well
above the recommended values of the aforementioned criteria (Table 2). Bartlett's test of
sphericity is a also recommended to test the appropriateness of factor analyses (Bartlett, 1950).
This tests the hypothesis that the correlation matrix is an identify matrix; i.e. all diagonal
elements are 1 and all off-diagonal elements are 0, implying that all of the variables are
uncorrelated. Since, there are correlations in our data implying data coalescing, therefore, this
test was significant as shown in the Table 2.

Table 2: KMO and Bartletts Test

Kaiser-Meyer-Olkin Measure of Sampling Adequacy. 0.836

Approx. Chi-Square 1392.059
Bartlett's Test of Sphericity
Df 253
Sig. .000

4.2 Confirmatory Factor Analyses

4.2.1 Validity and Reliability Testing

The degree of consistency of a measure is referred to as its reliability. The reliability coefficient,
Cronbachs (Cronbach, 1951) is generally used to test the reliability of a scale. Values of 0.70 or
greater are deemed to be indicative of good scale reliability (O'Leary-Kelly and Vokurka, 1998).
The reliability test was, therefore, applied to the collected data from the 135 responses resulting
in .942, .873, .726, .789, .729, which were all acceptable since they are all above the
recommended minimum of 0.7 (DeVellis, 2012, Spooren et al.,2007) indicating that the items
can be a measure of the underlying factors or variables (Table 3).

Table 3: Results of Reliability Test

No.of Cronbachs Alpha

Organizational Attitude(ORA)
Quality Practices(QLP)
Supplier Relationship(SUP)
Employee Empowerment(EME)
Customer Relationship(CUS),
Items
6 0.942
7 0.873
4 0.726
3 0.789
3 0.729

4.2.2 The Measurement Model

In order to carry out confirmatory factor analysis, a measurement model was then constructed
using AMOS version 19. We have also calculated the p-values for the regression weights and fit
indexes. All factors were kept in the model since they were all significantly different from zero,
at the 0.05 level (two-tailed). No attempt was used to improve the model fit using modification
of indices (Harrington, 2008). Overall goodness of fit was measured using different types of fit
measures ( Hoyle, 1995); namely 2/ degree of freedom ratio (CMIN/DF), Comparative Fit
Index (CFI), the Tucker Lewis Fit Index (TLI), the adjusted goodness of fit index (AGFI), and
root mean square error of approximation (RMSEA). The recommended values for CFI and TLI
should be higher than 0.9 and close to 1.00 (Kline and Santor, 1999). RMSEA values for good
model fit should be less than or equal to 0.06 (Hu and Bentler, 1999). A value of 0.05 or less is
considered low and indicates a close fit of the model in relation to the degrees of freedom (Hu
and Bentler, 1999). For CMIN/DF, a ratio of less than 1.5 is considered to be very good, while a
ratio of less than 2.00 is good (Kline and Santor, 1999). The analysis resulted in CMIN/DF =
1.352, TLI= .929, CFI=.938, and RMSEA =.057. This implies that the model offers a good
model fit and the five factors provide a good structure to continue with equation structure
modelling. Table 4 shows the regression weights for the final measurement model.

Table 4: Regression Weights

Estimate Sign

Q8 <--- SUP 0.658

Q9 <--- SUP 0.611 ***
Q7 <--- SUP 0.603 ***
Q6 <--- SUP 0.674 ***
Q12 <--- CUS 0.637
Q34 <--- CUS 0.659 ***
Q16 <--- CUS 0.758 ***
Q37 <--- EME 0.631
Q38 <--- EME 0.898 ***
Q39 <--- EME 0.714 ***
Q56 <--- ORA 0.859
Q55 <--- ORA 0.809 ***
Q54 <--- ORA 0.876 ***
 Q53 <--- ORA 0.851 ***
Q52 <--- ORA 0.872 ***
Q51 <--- ORA 0.875 ***
Q17 <--- QLP 0.653
Q18 <--- QLP 0.678 ***
Q19 <--- QLP 0.662 ***
Q20 <--- QLP 0.65 ***
Q28 <--- QLP 0.7 ***
Q29 <--- QLP 0.756 ***
Q30 <--- QLP 0.832 ***

A structural model needs to be developed to clarify the interrelationships among factors

influencing lean remanufacturing practices.

Figure 1: Structural model with Performance and Competitiveness included

5. DISCUSSION AND CONCLUSION

This research builds on the lean manufacturing measurement of Shah and Ward (2007) and lean
services instrument of Malmbrandt and Ahlstrom (2013) by developing and empirically testing a
lean management implementation framework and to investigate leans influence on
organizational performance. To explain the empirical results, we follow Whetten1989) what,
how and why theory formulation framework. Having identified what constitutes as critical
factors for lean implementation and lean practices contribution to organizational performance in
Section 4, this Section discusses how and why the measurement/structure equation model (SEM)
model factors are related to each other by investigating the underlying psychological, economic,
or social dynamics that justify the selection of factors and the proposed causal relationships.

5.1 The Measurement Model

Following five critical factors are identified by the selected firms based managers to constitute
lean Philosophy:
1. Organizational Attitude (ORA)
2. Quality Practices(QLP)
3. Supplier Relationship (SUP)
4. Employee Empowerment (EME)
5. Customer Relationship (CUS)

Table 6 : Correlations for the Measurement Model

ORA QLP SUP CUS EME

ORA Pearson Correlation 1 ** * ** **

.496 .204 .333 .288
Sig.(2-tailed) .000 .033 .000 .002
N 135 135 135 135 135
QLP Pearson Correlation ** 1 ** ** **
.496 .331 .352 .266
Sig.(2-tailed) .000 .000 .000 .005
N 135 135 135 135 135
SUP Pearson Correlation * ** 1 ** .096
.204 .331 .384
Sig.(2-tailed) .033 .000 .000 .320
N 135 135 135 135 135
CUS Pearson Correlation ** ** ** 1 **
.333 .352 .384 .293
Sig.(2-tailed) .000 .000 .000 .002
N 135 135 135 135 135
EME Pearson Correlation ** ** .096 ** 1
.288 .266 .293
Sig.(2-tailed) .002 .005 .320 .002

N 135 135 135 135 135

**. Correlation is significant at the 0.01 level (2-tailed).

*. Correlation is significant at the 0.05 level (2-tailed).
The 5 factors derived during empirical analysis are positively and significantly correlated with
each other (Table 6) supporting the findings of Shah and Ward (2007) that lean is an integrated
set of related yet distinguishable activities. However, there are some difference in the critical
factors identified by earlier studies and our results which could be explained by the difference in
the populations of interest. The manufacturing focus by Shah and Ward (2007) led them to
operationalize measures such as total preventive maintenance and low setups which were not
part of our study. Alsmadi et al. (2012) also noted that that some manufacturing operational
measures for lean implementation supplier feedback, set up time reduction and total productive
maintenance could not be applied to lean services. We intentionally kept the survey items broad
for generalization to both manufacturing and services simultaneously. Nevertheless, we observed
similarities too such as leans focus on supplier development, customer involvement, employee
empowerment and some quality practices. Our study is also unique because it puts the
Organizational Attitude (ORA) at the centre stage for lean implementation. As discussed in the
literature review section, concepts such as managements commitment and employees
embracement of lean are critical to its success. The factors correlation (ranging from 0.496 to
0.096) suggests that practicing managers recognize the contribution of each individual factor and
their collective importance when implementing lean. Supplier Relationship (SUP) and Employee
Empowerment (EME) have the weakest association (0.096) which contrasts EME associations
with other factors such as with Customer Relationship (CUS) at 0.293, with Organizational
Attitude (ORA) at 0.288 and with Quality Practices (QLP) at 0.266. This pattern seems intuitive
as except for the procurement function, most managers are likely to relate less to the suppliers as
compared to the other factors. The highest association was obtained between the Quality
Practices (QLP) and Organizational Attitude (ORA) at 0.496 which also makes sense as lean is
mainly perceived as a waste elimination approach. QLP factor measured the perceptions of
managers on quality within their organization for defect prevention, emphasis on continuous
improvements and minimizations of motion and transportation wastes. The exhibited
interrelationships of critical factors are also in line with the lean enterprise concept of Womack
and Jones (1996); a strategic vision focusing the external links of the supply chain (suppliers and
customers) to linkup individual process improvement breakthroughs to form a continuous value.

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