Investing in lean to improve basic capabilities: A strategy for system supply?

Abstract

Abstract:Purpose: This paper describes the perceived effects of implementing lean production in a Swedish SME contract manufacturer. Especially focused are the effects on, and possible tradeoffs between, cost-efficiency and flexibility.Design/methodology/approach: SME suppliers need basic capabilities of qualitative production performance as stepping-stones to develop more system supplier capabilities for added customer value. Development of stable production processes is seen as a way to reach stable basic performance, efficient and with higher resource utilization. Quality is a precursor to delivery performance as well as to cost reduction and flexibility. This is a longitudinal single case study of a SME supplier striving to become a system supplier. Two main sources of data collection are used: interviews and the main author's presence as employee and business developer, participating in and following up the ongoing change process.Findings: Analyzing the development over time illustrated the importance of context and content for the change process. Two specific findings appeared: (1) An initial effect was an important "eye-opener" for the balance between cost efficiency and flexibility in the organization.(2) Process orientation, as the basis of both lean and agile approaches, allows many improvements without any conflicts or trade-offs between these two goals. Stability in the production leads to -28-Journal of Industrial Engineering and Management -https://doi.org/10.3926/jiem.2163 increased controllability, initially resulting in both higher cost-efficiency and higher flexibility. As the organization develops however, strategic considerations relating to the chosen market strategy might occur: cost leadership or differentiation. Research limitations/implications:These results reflect the experiences of one SME supplier and further studies are needed for generalizability. Originality/value:The study increases the understanding of how a SME may develop stable processes in its different supplier-customer contexts. The study points at some necessary basic components of this process approach as a first step for the transition to system supplier.

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