A systematic literature review regarding the influence of lean manufacturing on firms' financial performance

Abstract

PurposeThe lean philosophy has demonstrated its effectiveness to improve firms' operational performance. However, the impact of lean practices on financial performance is still unclear due to the poor understanding of the link between operational and financial measures and the conflictive results obtained by previous research. The purpose of this paper is to conduct a systematic literature review to understand whether lean companies have improved their financial performance. Moreover, this article aims to uncover research gaps in the literature and examine which time spans of research have been considered to analyse both the degree of lean implementation and the measurement of financial outcomes.Design/methodology/approachA systematic literature review has been conducted to identify peer-reviewed articles that analyse the effect of the lean production paradigm on the financial performance measures of manufacturing companies. Then, the identified articles were processed using a combination of descriptive and content analyses methods to draw new conclusions, uncover gaps and find novel paths for research.FindingsVarious authors indicate that lean initiatives lead to an enhancement of financial performance measures. JIT and TQM lean practice bundles are suggested as the best enablers of financial performance in terms of sales and profit. In contrast, according to some scholars, lean does not necessarily improve companies' financial results if it is not properly implemented.Originality/valueSeveral studies have focused on analysing the effects of lean on performance. However, only a small part of the literature has addressed the study of the effects of lean practices on financial performance metrics. The originality of this study lies in the investigation of the connections between lean practices and financial performance measures found in the literature. The outcome is the identification of various possible positive impacts of some lean practices on financial metrics.

Comparing viewpoints of top management, consultants and employees about Lean Six Sigma

“…Dieste et al. (2021) in their review of the performances of Lean implementing organisations found that Lean is not a guarantee of improved performance.…”

“…(2) Managerial (for top management/owners/employees): Dieste et al (2021) in their review of the performances of Lean implementing organisations found that Lean is not a guarantee of improved performance. Financial gains, which are a main driver of LSS use in organisations, do not happen when LSS is poorly implemented.…”

Key Factors to Increasing Free Cash Flow for Manufacturers Utilizing Lean Production: An AHP-DEMATEL Approach

“…The Just in Time (JIT) supply chain has attracted increasing interest from operations management scholars (Tseng, Wee, Reong & Wu, 2019;Chung, Talluri, Kovács, 2018;Yao & Hsu, 2018). JIT provides companies with numerous advantages, including reduced costs, reduced inventory, improved product quality, shorter lead times, increased responsiveness, reduced waste, increased customer satisfaction, and superior competitive advantage (Heizer, Render & Munson, 2016;Mas'udin & Kamara, 2018;Dieste, Panizzolo & Garza-Reyes, 2021). Finally, the fulfillment of the promise to the customer, the customer value proposition (CVP) is a strategic tool that companies use to communicate how they aim to deliver value to their customers as one of the most widely used terms in business (Payne, Frow and Eggert, 2017;Hao, Liu & Goh, 2021).…”

“…Financial Management: Lean concepts have proven their effectiveness in improving the operational performance of companies, and lean programs can improve financial performance indicators. A bundle of JIT and TQM lean practices is recommended as the best enabler of financial performance in terms of sales and profitability, manufacturing and the operational and financial performance of the company (Kim, Montreuil & Klibi, 2022, (Dieste, Panizzolo & Garza-Reyes, 2021. Lean bundles (just-in-time, total quality management, and human resource management practices) and manufacturing servitization have independent and complementary effects on sustainable performance (Hao Liu & Goh, 2021).…”

Business Process Reengineering – Process Optimization of Boutique Production SME

“…TQM is considered as a thorough management approach, which consists of intertwined system of improvement practices, tools, and training in desire to manage a business in ever-changing environment with objective to ensure reduced challenges, increased success, and customer satisfaction through quality (Ali & Johl, 2021;Bhamra et al, 2020;de Souza et al, 2021;Dieste et al, 2021;Haffar et al, 2021;Hsu et al, 2021;Jasti et al, 2021;Jevanesan et al, 2021;Karamouz et al, 2020;Kulenovic et al, 2021;Niñerola et al, 2021;Permana et al, 2021;Sader et al, 2021;Tsou et al, 2021;van Kemenade, 2021;Wemmerlöv, 2021;Zhang et al, 2021). TQM is premised on four paradigms (van Kemenade, 2021): (a) empirical; (b) reflective; (c) reference; and (d) emergence.…”