Advantages And Disadvantages Of Lean Management In Improving Efficiency And Productivity: A Case Study Of CNEEC Pakistan

Lean Management in Organizational Approach

Discuss about the Analysis of Lean Management and Its Implementation.

The contemporary global business scenario has developed with time and has become more inclusive, integrated as well as complex, much of which can be attributed to the phenomena like Globalisation, trade liberalisation and technological as well as infrastructural innovations. With more companies and businesses going global and exploring new markets and geographical domains, the number of demand as well as supply side players in each industry has increased considerably, thereby increasing the level of competition in almost all industries across the globe (Liker & Convis 2011).

In this context, the management of the different companies play a crucial role of designing, implementing and monitoring strategies and operations which enhance the productivity and operational superiority (Barney & Hesterly 2010). Of these policies, one of the methods which are commonly and frequently implemented by the organizations across the globe is that of the lean method. The term refers to the organizational approach of continuous and long-term improvements which are done by small and incremental efficiency as well as quality augmenting processes.

The concept of lean management, mainly consisting of differentiating and eliminating the non-value-adding process, being first introduced by Toyota, has become extensively popular over the years and has also shown results for those companies implementing the same in their operational framework. Keeping this into consideration, the concerned research proposes to assess the advantages and disadvantages of this method, specifically emphasizing on whether the implementation of the same can help to improve the efficiency and productivity of the China National Electric Engineering Company (CNEEC) in their operation base in Pakistan. The company, having its base in China and projects in Pakistan, often faces inefficiencies due to cultural and communicational barriers as well as employee diversities, which in turn indicates that there remain scopes for improvements in their operational framework, provided the right management methods are utilised. This in turn, makes the concerned study arena crucial for the potential improvement of the company taken into consideration.

The company studied by the concerned research, that is CNEEC, is a state owned and professional engineering company, which is listed by the ENR USA among the 225 topmost international contractors. The company is known for proving one-stop engineering services which include financing, consultation, engineering, construction, rehabilitation, operational maintenance, procurement and others. Apart from the above services, the company is also active involved in the following activities:

• EPC contracting
• Design and consultation for engineering
• Supply of complete equipment
• Management and supervision of projects
• Technical services
• Maintenance and operation of power plants
• Commissioning and Installation

China National Electric Engineering Company (CNEEC) in Pakistan

The company also specialises in provision of trainings, both in the home country as well as in other geographical regions, in the fields of power transmission, thermal and hydro-power plant, clean and integrated energy solutions, protection and conservation of environmental resources, mining engineering, factory, harbour and transport engineering and similar aspects (Cneec.com.cn 2018).

CNEEC Pakistan, being a wholly owned subsidiary of the China National Electric Engineering Company, Limited started its operations in Pakistan from 2012. The company has now become one of the most well-known professional contractors in the country, especially in the electrical sector and has also become an experienced one in the field of power transmission and transformation, transportation, clear energy, hydro power generation in Pakistan as well as in the Afghanistan and Iran (Brecorder.com 2018). The company, in its operational base in Pakistan, employs huge number of local residents for various posts, including managerial ones, senior engineers and also engineering experts and also actively involves in social welfare increasing activities. However, the company being a multinational one, with many projects running simultaneously in different geographical domains, can be seen to be facing problems in their efficiencies and productive activities in Pakistan, in the contemporary period, much of which can be attributed to the cultural differences of the company with its local employees.

This, in turn, has led to the creation of productive and operational activities, with high wastage and also lower cost effectiveness, for which the company needs to train their employees in such a way that the unnecessary operations and wastage are minimized and the productivity efficiencies of the employees as well as of the other resources of the company are maximised (Kakharov 2012). Thus, implementations of small improvements, especially those of removal of waste and unwanted operations can help the company in gaining efficiency in its operational framework as a whole. The concerned research thus, aims to venture in these aspects, keeping into consideration, the operations of CNEEC Pakistan. 

As discussed in the above section, the concept and the method of lean management has gained immense popularity in the contemporary global business framework, with its potential to increase efficiencies in operations and production, which in turn has led to its increased implementation in the operational processes of increasing number of businesses in the global framework. Over the years, much have been researched and much work has been done in this field, in the aspects of the meaning, method, implementation and pros and cons of lean management in the global business frameworks. Keeping this into consideration, this section conducts an extensive review of the existing literary works and empirical evidences which are present in the global framework regarding the aspects of lean management in the companies.

Review of Existing Literary Works on Lean Management

The term “Lean Management” being a broad and multidimensional notion in the business scenario and has been defined by different scholars from different point of views. In this context, one of the most comprehensive definitions is provided by Handel (2014), according to whom, the method of lean management in an organization is that approach of operating an organization, which incorporates the provisions of continuous and small cost improvements in the organization. This assertion is augmented by different scholarly works, which define lean approach in the operation management to be the systematic process where waste production is minimised within the manufacturing system, without any trade-off or sacrifice in the level of productivity, which in turn contributes towards the increase in the overall efficiency in the production process of the organizations (Hajmohammad et al. 2013, pp. 86-93). However, the authors also assert that the notion of lean management is much more than just waste or cost minimization, and also includes aspects of creating more value for the clients by using as few resources as possible.

The origin of the process of lean manufacturing and the overall concept of lean management has its origin in the Toyota company and was first developed by Taiichi Ohno (1912-1990) in the operation framework of the company itself (Teich & Faddoul 2013). However, the authors also argue that the same has its roots in the automotive processes introduced by Henry Ford of the Ford Company, which brought forward the concept of flow manufacturing and assembly line to increase the efficiency of automobile manufacturing. It was then implemented and developed by the Toyota Company in their Toyota Production System (Stone 2012, pp. 112-132).

The five basic principles of “lean” and “lean thinking” in the operational framework of the commercial and productive organizations are put forward and discussed elaborately in the literary work of Womack & Jones (2015). Based on the lean management and waste minimization as well as value increasing TPS system of Toyota, these five values are discussed as follows:

1. Values- The primary principle of lean management in any company is that of understanding the perceptions of the customers regarding the values which the same impose on different products or services of the concerned companies. This in turn helps the companies to assess the willingness to pay of their clientele for the different products or services which the businesses offer (Dombrowski & Mielke 2013, pp. 569-574). This in turn, helps the companies to design the cost structure of the concerned products, which in turn helps the companies to minimize waste and eliminate unnecessary costs. This in turn is expected to help the company to achieve higher profits on part of the companies (Collar et al. 2012, pp. 928-936).
2. Value Stream- The term, “value-stream” refers to the entire life-cycle flow of the products or services produced and offered by a business, which starts from the inputs in the production process and ends in the cost of usage of the product or the service by the customers and the disposal of the same (Plenert 2011). According to the principles of lean management, the value stream needs to be taken into account by the companies in order to identify the arenas where wastes can be created while manufacturing and delivery of the product or service, which in turn may help in eradicating those possibilities, thereby reducing waste from the operational framework (Alves et al. 2011).
3. Flow- Stagnation in the production process and the value chain is one of the primary reason behind the increase in the waste creation in a company. Thus, for lean management, a continuous value system has to be created where the activities are lined up and carried out in a synchronised manner, thereby reducing redundant costs and creation of wastes (Salah, Rahim and Carretero 2010, pp. 249-274).
4. Pull- One of the primary aspects of lean management of the operations and productions of the businesses is that of ensuring that things are not made ahead of time as this may lead to the creation of work-in-process inventory, which in turn creates hurdles in the synchronisation of the production process (Begam, Swamynathan & Sekkizhar 2013, pp. 15-21). In the pull approach, as per the principles of lean management in the operational framework, things are only produced within the companies when there is a demand for the same from their customers (new or potential ones).

As per the assertions of Goetsch. & Davis (2014), for implementation of such a value chain system, the operational framework needs to be extremely abrupt and efficient and also huge flexibility is required in the aspects of short cycles in design, production and provision of the products or services to the targeted clientele. The communication and free flow of information between each step is also required for the purpose of the same (Zhou 2016, pp. 457-474).

Principles of "Lean" and "Lean Thinking"

Perfection- The primary target of the manufacturers, in the lean management system, is that of achieving perfection, for which total quality management is required (Ballard and Tommelein 2012, pp. 85-96). This includes the removal of the key factors contributing to the inferior quality of the production processes such that the company can move towards perfection.

In this context, the empirically evidenced work of Stanton et al. (2014), puts forward in a comprehensive manner, the guiding principles for implementation and consistent operation of lean management in the operational framework of the companies:

Different methods and tools have been devised for the purpose of lean management in the operational frameworks of global business scenario and these methods have been highlighted by the existing literatures and scholarly works. Some of these are discussed as follows:

As highlighted by Myerson (2012), the Kaizen 5S framework uses the method of Sorting, Straightening, Shining, Standardise and Sustaining, which can be seen as follows:

The concept of value chain mapping is discussed elaborately in the works of Keyte & Locher (2016), who describes the process of lean management as one which is used for analysis of the current stage and design of the further stages of the value chain, from the beginning (from inputs) to the usage of the product or service by the clients. This method has been implemented by Toyota. 

In general, this method uses standard symbols for representing the products or processes and provides a visual interpretation of the entire process, which in turn helps the company to identify the importance levels of different steps of the process, thereby eliminating any unnecessary stage and removing wastes from the operating and production process of the companies (Chen & Meng 2010, p. 203).

As per the assertions of Bhasin (2012), lean management process has been highly adopted by different companies in the United Kingdom, the adaptation of which, however, depends on the culture and the context. The same can also be seen to be already in action in different American companies and in the recent period the Asian countries (including Chine from the late seventies) can be seen to be using these techniques to improve the efficiencies of their commercial domain (Taleghani 2010). Several companies of India and Sri Lanka (food-processing ones especially) can be seen to be adhering to this framework.

In spite of the presence of extensive literatures, in the aspect of the concept, implementation, implications and outcomes of lean management in the hypothetical as well as different real-world scenarios, not much work can be seen to be done in the aspects of the implementation of the same by the companies operating in Pakistan and the factors, inherent to the country, which can affect the same. Little work has also been done in the aspects of development of proper lean management strategies for different types of business organizations. The concerned research tries to take this into account, by aiming to study the possible effects of the same on the efficiency and productivity of the concerned company, CNEEC.

Methods and Tools for Lean Management

The primary objective of the concerned study is to analyse and interpret the aspects of lean management and to discuss the positive as well as negative implications of the implementation of the same in the operational framework of the CNEEC in their Pakistan base. This main aim behind the study is to see whether the efficiency of the concerned company’s Pakistani base of operations (which is hurdled with inefficiencies due to cultural and diversity mismatch) can be improved by the implementation of this management method.

The primary research question for the concerned study is as follows:

How can lean management be adopted by CNEEC? What are the possible implications of implementation of lean management in operations of CNEEC in Pakistan?

The secondary research questions, based on the former are as follows:

1. What are the characteristics of lean management system?
2. What tools can be used for implementing lean management?
3. Why is lean management required in CNEEC, Pakistan?
4. What can be the advantages and disadvantages of implementation of lean management in CNEEC, Pakistan?

The entire life-span of the concerned study will provide project deliverables and at the end a comprehensive report will be prepared based on the findings which can help for further research. A database will also be created and maintained by the project regarding the opinions collected in the concerned aspect from the relevant professionals.

For carrying out the research the following hypothesis are formed, which are proposed to be tested with the help of evidences collected:

H1: Lean management method increases the efficiency of the companies

H2: Lean management method contributes in increasing the productivity of the companies

H3: Lean management leads to increased satisfaction of the customers

H4: Lean management increases the profitability of the companies

These hypotheses are proposed to be tested on the empirical evidences collected with the help of relevant statistical tools.

For testing the above hypotheses, the concerned study proposes to conduct a field survey, with primarily people at the managerial levels of different production companies (engineering as well as non-engineering) operating in the economic domain of Pakistan. The companies which will be selected will include both CNEEC as well as other companies who have already implemented the lean management techniques in their operational system.

For the companies (other than CNEEC) which have implemented lean operations:

The different aspects of these concerned companies, will be assessed before and after the implementation of lean management techniques. These factors will mostly cover the following aspects:

• Average cost of production
• Average profitability
• Sustainability of the operations of the company
• The changes in the volumes of production in the company
• Customers’ satisfaction and perceptions about the company (To incorporate this, the customer reviews and the changes in the same, pre and post lean management techniques are implemented will be studied)

Studying these aspects, will help the researcher to assess the hypotheses formed and will also help in accepting or nullifying the same, which will in turn help to assess the benefits of implementing lean management in the operational framework of different companies.

Case Study of CNEEC Pakistan

Extensive in-depth interviews will be conducted with the management of the company, where the open-ended questions will aim to cover the following aspects:

• Problems faced in the operational framework of CNEEC, Pakistan
• How the problems affect the operations of CNEEC, Pakistan
• How lean management can potentially affect the operations of CNEEC, Pakistan
• What hurdles can the company face in implementing the same in their operations

The interviews will be collected with the help of the open-ended questions and will also be done and recorded only after getting consent from the respondents selected and interviewed. The data collected will be both quantitatively as well as qualitatively analysed. For analysis of the quantitative data, the statistical software platform, SPSS will be used and for analysis and interpretation of the qualitative and ordinal data, thematic analysis is proposed to be done.

For studying the possible impacts of lean management on those companies which have already adopted it, the dependent variables will be:

• Organizational Performance- Measured in terms of the growth in the sales, cost effectiveness and productivity after implementation of lean management
• Employee outcomes:
• Extrinsic Rewards- Whether there is increment in the fringe benefits
• Intrinsic Rewards- Whether the employees are included in decision-makings and changes in the levels of their task participation rate

The control variable, on the other side, will be the changes in the management and hierarchical structure of the organizations pre and post implementation of the lean management methods.

Apart from that, the hypotheses formed in the above section, will also be tested with the help of the data collected in the form of interviews of the selected respondents.

Conclusion

In the contemporary global business scenario, with an increasingly competitive framework, it becomes immensely important for the global business organizations to improve their efficiencies as well as productivities and enhance their cost effectiveness, so as to increase their competitiveness in the industrial sectors. Keeping this into consideration, the concerned study proposes to discuss the aspects of one of the popular management method of that of lean management, thereby emphasizing on the possible implications of the same, in the chosen company CNEEC, in the economic framework of Pakistan. The research aims to work with primary as well as secondary data, consisting of information regarding both CNEEC as well as other companies in Pakistan which have already implemented the same in their operational framework. The research is expected to fill up the gap which exists in terms of the observations regarding the implications of lean management in the business scenario of Pakistan and is also expected to provide an insightful view regarding the relevance of the same in CNEEC, thereby paving the way for future research in this particular domain.

References

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Ballard, G. & Tommelein, I. 2012, Lean management methods for complex projects, Engineering Project Organization Journal, 2(1-2), pp.85-96.

Conclusion

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