The Impact of Lean Practices On Mass Customization and Competitive Performance of Mass-Customizing Plants
The Impact of Lean Practices On Mass Customization and Competitive Performance of Mass-Customizing Plants
The Impact of Lean Practices On Mass Customization and Competitive Performance of Mass-Customizing Plants
Proceedings of the 20th Annual Production and Operations Management Society (POMS) Conference,
Orlando, FL, USA; 05/2009
Winning paper of “Emerging Economies Young Researcher Award (EEYRA)”, the 20th Annual
Production and Operations Management Society (POMS) Conference, Orlando, FL, USA; 05/2009
Abstract
In this study we use multi-item scales to measure mass customization and seven lean
practices- just-in-time production, total quality management, total productive
maintenance, human resource management, manufacturing strategy, supplier
relationship management, and customer relationship management. We examine the
impact of lean practices on mass customization for machinery, electrical & electronics
and automobile companies for six countries- Japan, Korea, USA, Germany, Austria,
and Finland. We also examine the impact mass customization and lean practices on
competitive performance of the plant.
The results show that four lean practices, just-in-time production, manufacturing
strategy, supplier relationship management, and customer relationship management
positively affect mass customization implementation level. The results also show that
mass customization and lean practices positively affect competitive performance of
the plant. Plants that have high levels of both mass customization and lean practices
show higher competitive performance compared to plants that have high mass
customization and low lean practices levels.
Key words: Mass customization; lean production; Empirical research
1. Introduction
Since the publication of the book The Machine that Changed the World written by
Womack et al. (1990), the concept lean production has received a considerable
attention from western researchers, and many western manufacturers have
successfully replaced mass production with lean production. Although just-in-time
production and total quality management are the most prominent dimensions of lean
production; however, other lean practices include human resource management, total
productive maintenance, supplier and customer relationship management, and
manufacturing strategy (Matsui, 2007; Shah and ward, 2003; Sohel et al., 2003;
Sakakibara et al., 1997; Ramarapu et al., 1995; Mehra and Inman, 1992). There is an
agreement among researchers that lean production is expected to eliminate waste and
non-value added activities, reduce cost while improving quality, and improve
flexibility and customer responsiveness.
Mass customization has appeared as a new way of competitiveness in the era of
globalization, open markets, and short products life cycles. It has even been
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postulated that mass customization is the single way to competitiveness in today’s
dynamic business environment (Blecker and Friedrich, 2006). Mass customization is
the ability of the firm to quickly design, produce, and deliver products that meet
specific customer requirements at close to mass production prices (Tu et al., 2001).
The real challenge for manufacturers has been how to maintain low operational cost
and short lead times in a high demand uncertainty environment resulting from
offering mass customized products (Skipworth and Harrison, 2006).
While reviewing the literature, we found some contradiction concerning the linkages
between lean production and mass customization. On one hand, Pine et al. (1993)
asserted that lean production, which they referred to as continuous improvement, and
mass customization require different organizational structures, values, management
roles and systems, learning methods, and ways of relating to customers. They further
indicated that a company that has mastered continuous improvement must change radically
the way it is run to become a successful mass customizer. Christiansen et al. (2004) using
data from 75 Danish manufacturing companies found that there are no direct
relationships between lean manufacturing and mass customization practices and there
are only weak relationships between the two concepts. On the other hand, other
authors have indicated that lean production is expected to facilitate and support mass
customization (e.g. Anderson, 2004; Chandra and Grabis, 2004a; Tu et al., 2001). We
could find a very limited number of papers that have attempted to empirically
investigate the linkages between lean production, or some of its dimensions, and mass
customization; therefore, in this paper, we use an empirical data gathered from six
countries and three industries in an attempt to fill this gap and shed more light on their
linkages. We also use the empirical data to examine whether or not lean production
practices affect competitive performance of mass customizing firms.
2. Literature review
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engineering hours to develop a new product in half the time. Also, it requires keeping
far less than half the needed inventory on site, results in many fewer defects, and
produces a greater and ever growing variety of products”.
Shah and Ward (2007) defined lean production as: “an integrated socio-technical
system whose main objective is to eliminate waste by concurrently reducing or
minimizing supplier, customer, and internal variability”.
Ohno (1988) indicated that two pillars are needed to support TPS, JIT production and
autonomation. He explained that autonomation, or automation with human touch,
means transferring human intelligence to a machine. It prevents the production of
defective products, eliminates overproduction, and automatically stops abnormalities
on the production line allowing the situation to be investigated.
One main difference between mass production and lean production lies on their
ultimate goals. The goal of mass producers is to be “good enough” which could be
translated as acceptable number of defects, inventories, and narrow standardization.
The goal of lean producers is perfection which means declining costs, almost zero
defects and inventories, and more product variety (Womack et al., 1990). Liker (2003)
indicated that though mass producers gain some advantages such as economies of
scale and flexibility in scheduling by having similar machines and similarly skilled
workers together, it is difficult for them to move materials as well as information
between departments, and they would need to create material handling department.
On the other hand, one piece flow which is a fundamental rule of lean production
brings different benefits such as improved quality, flexibility, productivity, safety,
morale, and reduced cost.
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manufacturing strategy, organizational characteristics, and product design. Sohel et al.
(2003) also used the term infrastructure practices to describe operational practices that
contribute to JIT production. They defined infrastructure practices as “activities and
mechanisms that provide support for JIT practices to be effective in a plant”. The
infrastructure practices in their research included quality management, manufacturing
strategy, product technology, work integration system, and HRM policies. Shah and
ward (2003) viewed lean manufacturing as consists of four bundles, JIT bundle, TQM
bundle, TPM bundle, and HRM bundle. Sanchez and Perez (2001) viewed lean
indicators as zero-value activities elimination, continuous improvement, multi-
functional teams, JIT production and delivery, suppliers’ integration, and flexible
information systems. Spear and Bowen (1999) indicated that the main elements of
TPS included standardization of work, direct links between suppliers and customers,
uninterrupted work flows, and continuous improvement based on the scientific
method.
Another stream of research papers investigated the relationship between two or more
lean dimensions, mainly JIT production and some other practices. For instance, Flynn
et al. (1995) investigated the relationship between JIT production and total quality
management. Cua et al. (2001) investigated the relationship between JIT, TQM, and
TPM. Kannan and Tan (2005) investigated the linkages among JIT, TQM, and supply
chain management.
Our literature review revealed that in the early research papers concerning JIT
production, TPS, or lean manufacturing, it was common to include elements from
other operational practices as dimensions of JIT production. More recent papers tend
to distinguish between JIT production and other operational practices and regard the
latter as independent but related practices. Shah and Ward (2007) attributed this
tendency to the fact that those operational practices were established as an
independent constructs and are used to predict operational performance of the plant.
Our approach in this paper is to view lean production from its comprehensive
perspective. Therefore, we selected the following practices from the published
literature and defined them as lean production elements:
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Lean production dimensions
JIT
TQM
HRM Mass customization
TPM
MS
SRM
CRM
Competitive performance
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are expected to be highly facilitated by JIT techniques such as JIT delivery of
materials, cellular layout, reduced set up time, and one piece flow. In addition to that,
JIT plants are usually equipped with flexible technologies which are one of the major
requirements for MC processes (Lei et al. 1996; Lau, 1995).
We measure JIT production along the following dimensions:
3.1.1 Equipment Layout: use of manufacturing cells, elimination of forklifts and long
conveyers, and use of smaller equipment designed for flexible floor layout, all
associated with JIT.
3.1.2 JIT delivery by suppliers: assesses whether vendors have been integrated into
production in terms of using Kanban containers, making frequent (or just-in-time)
delivery and quality certification.
3.1.3 Kanban/Pull system: assesses whether or not the plant has implemented the
physical elements of a Kanban system.
3.1.4 Setup Time Reduction: assesses whether the plant is taking measures to reduce
setup times and lower lot sizes in order to facilitate JIT.
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3.2.1 Continuous Improvement and Learning: assesses employee’s commitment to
continuous quality improvement.
3.2.2 Feedback: assesses whether the plant provides shop floor personnel with
information regarding their performance in a timely and useful manner. The scale
measures feedback about performance in both chart and verbal form which are used in
facilitating and supporting quality and productivity improvements.
3.2.3 Process control: Measures use of statistical process in production and in office
support functions, in designing ways to “fool proof” processes, and self inspection.
3.2.4 Cleanliness and Organization: Assesses whether plant management has taken
steps to organize the work place and maintain it in order to help employees
accomplish their jobs faster and install a sense of pride in their work place.
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3.4 Human resource management
MC depends heavily on having the necessary human skills and abilities that can
respond effectively to design and produce products to specific customer requirements;
therefore, Human resource modifications should be undertaken prior to MC
implementation.
Pine (1993) indicated that successful mass customization requires an integrated
organization in which every function and person is focused on the individual customer,
all have eliminated waste, and each contributes to develop, produce, market, and
deliver low-cost customized products. Pine et al. (1993) pointed to the crucial role of
work force which is expected to handle an increasingly complex of tasks, such as
assembling a variety of products by expanding its range of skills. Flynn et al. (1994)
further argued that team work and group problem solving allow decision making to be
decentralized and therefore variance and uncertainty are easier to manage.
Kakati (2002) described three types of human flexibility relevant for mass
customization among which numerical and functional flexibility –Numerical
flexibility concerns the readiness to adjust the number of employees to fluctuation in
demand; functional flexibility concerns the readiness to change the tasks performed
by workers in response to varying business demands.
Pine et al. (1993) described workers in a mass customization environment as
independent, capable individuals, with efficient linkage system. This implies the need
for employee involvement, job re-design, and cross training, which allow according to
Monden (1983) greater control of processes and better communication.
Employee involvement will be enhanced by encouraging employee suggestions,
cooperation and coordination both vertically and horizontally (Forza, 1996; Aggrawal
and Aggrawal, 1985).
We measure human resource management along the following dimensions:
3.4.1 Employee suggestion- Implementation and feedback: assesses employee
perceptions regarding management’s implementation and feedback on employee
suggestions.
3.4.2 Multi-functional employees: This scale is used to determine if employees are
trained in multiple tasks/areas; that is, receive cross training so that they can perform
multiple tasks or jobs.
3.4.3 Small group problem solving: This scale is designed to assess the effective use
of teams on the shop floor for continuous improvement.
3.4.4 Training for Employees: This scale is used to determine if employees’ skill and
knowledge are being upgraded in order to maintain a work-force with cutting edge
skills and abilities.
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producing, marketing, and delivering products, and new forms of organization better
suites to turbulent times.
MS should be seen as one major enabler to acquire the required innovations, resources
and capabilities that facilitate the shift towards MC environment. MS is the blueprint
for the manufacturing function that frames the acquisition, development and
elimination of manufacturing capabilities far into the future (Bates et al., 1995). Da
Siveria et al. (2001) pointed to technologies and methodologies that support the
development of the system as enablers of MC. Chandra and Grabis (2004a) further
indicated that MC methodologies address organizational and cultural perspectives of
implementation, while process technologies address manufacturing perspectives.
Hart (1995) identified four key factors for success of a MC system among which
organizational readiness. Sohel et al. (2003) suggested that plants with a well defined
manufacturing strategy are expected to be more focused than plants without a
manufacturing strategy. Therefore, MS will provide support to achieve organizational
change and readiness. This includes the adaptation of attitudes, culture and resources
of the firm to suit MC environment as well as the enhancement of leadership
capability which must be open to new ideas and aggressive in the pursuit of
competitive advantage (Chandra and Grabis, 2004a; Hart 1995).
Manufacturing firms adopt MC strategies in order to improve, or at least maintain,
their competitive position in today’s dynamic and competitive business environment.
To achieve this objective, manufacturing managers must be able to combine constant
improvement of existing manufacturing processes with judicious investment in new
processes, utilizing both human and capital resources (Schroeder and Flynn, 2001).
In addition to that, manufacturing strategy is used to coordinate manufacturing
decision making, including selection of technologies, suppliers, production planning
and control systems, work force, and qualitative practices (Bates et al., 1995).
We measure manufacturing strategy along the following dimensions:
3.5.1 Achievement of Functional Integration: Functional integration measures
whether or not the different functional areas of the company are integrated in terms of
goals, decisions made, and knowledge of one another’s areas.
3.5.2 Manufacturing-Business Strategy Linkage: Measures the consistency between
the manufacturing strategy and the business strategy and whether or not
manufacturing strategy supports the business strategy.
3.5.3 Formal Strategic Planning: Plant management involvement in strategic
planning and frequently updated strategic plans indicate a world class orientation.
3.5.4Anticipation of New Technologies: Measures whether the plant is prepared in
advance of technological breakthroughs to engage in the implementation of new
technologies when such technologies become available.
3.5.5Proprietary Equipment: Measures whether or not the plant is pursuing
development of in-house equipment as a source of competitive advantage.
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products makes it difficult for a mass customizing firm seeking efficiency and low
cost to hold large quantity of inventories, thus, demand uncertainty results in supply
uncertainty. Therefore supply chain management has been described as a glue binding
together activities performed to ensure mass customization success (Gooley,
1998).Timely contact with suppliers after the customer orders are received is
potentially an ideal solution for such situation. This situation implies that
manufacturers utilizing MC policies will highly depend upon their suppliers regarding
delivery promptness, quantities, quality, etc. therefore, comprehensive supplier
selection models are necessary (Chandra and Grabis, 2004b), and managing
relationship with suppliers should be given first priority in order to avoid potential
pitfalls associated with supply uncertainty.
Yang et al. (2005) pointed to Postponement as an appropriate strategy to intentionally
delay activities, rather than starting them with incomplete information about the actual
demands. Although postponement enables company to keep its options open prior to
availability of adequate information, incorporating the flexibility to cope with risk and
uncertainty, he found that supplier delivery performance was the most significant
barrier to postponement.
As a common response to potential challenges in supply chain, Anderson (2004) and
Pine (1993) pointed to supplier lead time reduction as an effective way to reduce risks
associated with product shipments and to shorten the respond time to customer
demand. Salvador et al. (2002) and Alford et al. (2000) emphasized that mass
customizers have to coordinate activities with their suppliers at the product design
face and to involve suppliers in the design and development. Lui (2007) asserted that
informal, trust-based relationship with suppliers is expected to ensure reliable and
flexible supply of raw materials for the mass customizing firm at low cost. Salvador et
al. (2001) pointed to supplier quality improvement as an effective way to improve
internal operations control capability.
We measure supplier relation management along the following dimensions:
3.6.1 Supplier quality improvement: assesses the amount and type of interaction
which occurs with suppliers regarding quality concerns.
3.6.2 Trust based relationship with suppliers: assesses the cooperation level with
suppliers, problem-sharing, and openness of communications with them.
3.6.3 Supplier lead time reduction: assesses whether supplier lead time is given more
priority than cost, and the efforts done by the firm to encourage and assist suppliers to
reduce their lead time.
3.6.4 Supplier partnership: assesses the cooperative relations with suppliers and to
what extent suppliers are involved in NPD.
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system that allows the firm to work closely with its customers. Such a system is
expected to assure that customers could be involved at any stage of the production
process starting from the design and ending with the post production customization.
The required level of customization by customers is the basis to select the stage of
production customers can alter. Piller et al. (2000) argued that to be successful mass
customizers, companies have to “build an integrated information flow that not only
covers one transaction but improves the knowledge base of the whole company by
information gathered during the fulfillment of a customer-specific order”.
Broekhuizen and Alsem (2002) indicated that customer involvement is a success
factor that positively affects the probability of success in mass customization. In
addition, the degree of customer involvement is one key element in defining the
configuration of processes and technologies that must be used to produce the mass
customized product (Lampel and Mintzberg, 1996; Chandra and Grabis, 2004a).
Zipkin (2001) pointed to elicitation (a mechanism for interacting with the customer
and obtaining specific information) as one of the key capabilities of Mass-
customization systems; therefore mass customization requires an elaborate system for
eliciting customers' wants and needs in addition to a strong direct-to-customer
logistics system.
The primary objective of mass customization is to maximize customer satisfaction by
providing tailor-made solutions with near mass production efficiency (Blecker and
Friedrich, 2006), therefore, from both the customer’s and the producer’s perspectives,
customer satisfaction is the most important criteria for evaluating mass customization
success. Moreover, Da Silveira et al. (2001) argued that for a successful
implementation of a mass customization system, it is essential to define value based
on the customer.
The more customers are involved in the different production stages, the better they
perceive the uniqueness of the products designed and produced upon their
requirements.
Kratochvil and Carson (2005) argued that the improved order processes that allow
better customer involvement associated with mass customization result in lower costs,
by automating or eliminating steps in a business process and by minimizing losses by
eradicating misunderstanding and misinterpretations in the order process. As a result,
better quality products are expected to be delivered and subsequently increased
loyalty and life-cycle revenue due to an improved dialog with customers. In addition
to that, more customer involvement will justify, from the customer’s perspective, any
extra cost they may occur due to customizing their products.
We measure customer relationship management along the following dimensions:
3.7.1 Customer involvement: This scale assesses the level of customer contact/
orientation/ responsiveness.
3.7.2 TQM link with customers: This scale measures whether the plant has been
integrated into customer production in terms of quality.
3.7.3 Customer focus: assesses the willingness of the plant to involve customers the
design, and the anticipation of customers’ needs, requirements, and expectations.
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4. Methodology
Table 1
Number of sample plants classified by country and industry
Country Industry Total
Machinery Electronics Transportation
Japan 10 12 13 35
USA 9 11 9 29
Germany 13 9 19 41
Korea 10 10 11 31
Finland 6 14 10 30
Austria 7 10 4 21
Total 55 66 66 187
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4.2. Measurement analysis and research variables
We have used multi-item scales to measure mass customization and lean production
practices. The respondents were asked to indicate their agreement or disagreement
with the statements provided using seven-point Likert scales, where 7 indicates strong
agreement and 1 indicates strong disagreement. The measurement scales can be found
in appendices A.
To ensure that the scales are reliable indicators of their constructs, factor analysis was
carried out, with principal components analysis (PCA) as the extraction method. We
selected PCA as it is preferred for purposes of data reduction, whereas the other type
of factor analysis, principal factor analysis (PFA), is preferred when the research
purpose is the detection of data structure or casual modeling. The objective of PCA is
to extract maximum variance from the data set with each component (Tabachnick and
Fidell, 2001). Our purpose was to perform within-scale factor analysis to verify that
all items loaded onto one factor. Only the items that had a factor loading of at least
0.40 and eigenvalue of at least 1 were retained.
Cronbach’s α-coefficient was used to evaluate the reliability of the scales. The
majority of the measurement scales has met the recommended standard of α ≥ 0.70
and has been considered to be internally consistent (Nunnally, 1967). The reliability
of the other scales was higher than 0.60. Nunnally recommends a minimum standard
of 0.60 for newly developed scales; therefore, we decided to retain these scales.
Cronbach’s α-coefficient for each measurement scale can be found in appendix A.
We also carried out factor analysis for the super scales of JIT, HRM, MS, TQM, TPM,
SRM, CRM, and competitive performance. All factor loadings were higher than 0.40
with eigenvalues higher than 1. Cronbach’s α-coefficient for all the super scales was
higher than 0.70 as shown in table 2.
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Table 2
Validity and reliability of the super scales
Scale JIT HRM TPM
Alpha 0.752 0.852 0.830
coefficient
Factor loading Factor 1 Factor Factor Factor 1 Factor Factor Factor 1 Factor Factor
2 1 2 1 2 1
Scale 1 .813 .828 .690
Scale 2 .836 .814 .885
Scale 3 .735 .807 .847
Scale 4 .688 .881 .834
Eigenvalue 2.373 2.776 2.674
Proportion 59.329% 69.409% 66.839%
No. of factors 1 1 1
Table 3 shows correlation matrix and summary of statistics of the research measures.
Table 3
Means, standard deviations, and correlations among variablesª
Mean S.D. 1 2 3 4 5 6 7 8
1. MC 5.09 .620 1
2. JIT 4.58 .549 .224*** 1
3. HRM 5.20 .526 .206*** .546*** 1
4. MS 5.06 .547 .384*** .406*** .539*** 1
5. TQM 5.19 .557 .186** .470*** .719*** .526*** 1
6. TPM 4.93 .547 .196*** .595*** .707*** .679*** .651*** 1
7. SRM 5.10 .405 .190*** .668*** .648*** .450*** .660*** .616*** 1
8. CRM 5.43 .370 .297*** .272*** .559*** .443*** .721*** .474*** .618*** 1
9. Competitive
3.73 .547 .235*** .371*** .370*** .526*** .342*** .328*** .245*** .291***
performance
ªN=187
***P ≤ 0.01
**P≤ 0.05
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5. Results and discussion
We start our analysis by testing hypotheses H1a, H2a, H3a, H4a, H5a, H6a, and H7a,
which stated that lean practices significantly contribute to mass customization
implementation level. These hypotheses were tested by hierarchical regression
analysis using MC as a dependent variable (Table 4). In the first equation, we entered
plant size, country and industry control variables; Finland, USA, Germany, Korea,
Austria, Electronics, and Machinery. In the second equation we entered the control
variables and lean production practices. The first equation shows that the control
variables alone significantly contribute to the explanation of the variance in the level
of MC implementation (R²adj = 0.065, P < 0.05). This explanation was attributed to
the country effect as Germany (P< 0.01), USA (P< 0.1), and Austria (P< 0.1) have
significantly higher levels of MC implementation than Japan.
The second equation shows that the addition of lean practices explained a significant
portion (13.6%) of the variance in MC implementation level and development. Only
one lean practice, manufacturing strategy proved to be significant (P< 0.01) and
positively related to MC implementation level. The other practices were not
significantly related. In multiple regression analysis, multicollinearity is a potential
problem that occurs when independent variables are highly correlated (Tabachnick
and Fidell, 2001) and usually leads to unreliable estimates of the individual regression
coefficients. The correlation matrix in table 3 shows that lean practices have positive
and significant correlations with each other ranging between 0.272— 0.721. In order
to deal with this problem in our regression models, we used the variance inflation
factor (VIF) which measures the impact of collinearity among the variables in a
regression model. VIF for the seven lean practices in the second model ranged
between 2.66 and 4.73 indicating that about 75% of the variance of each practice can
be explained by other practices and the control variables (Lui et al. 2006), implying
the existing of multicollinearity in the second model of our regression.
Table 4
Hierarchical regression analysis of mass customization
Variables Model (1) Model (2)
Coefficient Coefficient
(Constant) 4.624*** 2.352***
Ln. Size .047 -.070
FIN .099 .052
USA .160* .139
GER .400*** .327***
KOR .119 .084
AUT .179* .075
ELEC .146 .169*
MACH .050 .066
JIT .162
TPM -.090
HRM -.001
TQM -.244
MS .400***
SRM -.005
CRM .187
R² .114 .250
Adj. R² .065 .168
F 2.321** 3.051***
Change in R² .136
F change 3.556***
* P≤ 0.1; ** P≤ 0.05; *** P≤ 0.01.
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Lui et al. (2006) faced similar situation and pointed to MANOVA as an appropriate
statistical techniques that is unaffected by multicollinearity and able to assess the
individual contribution of each independent variable.
We use one-way ANOVA to continue our analysis, and have classified the plants into
three groups of high, medium, and low MC plants. In order to account for the effect of
the control variables, we have used the standardized residuals from the first regression
model to classify the three groups. The results of ANOVA test (Table 5) show that the
three groups of MC plants differ significantly concerning JIT (P≤ 0.05), MS (P≤ 0.01),
SRM (P≤ 0.05), and marginally differ concerning CRM (P≤ 0.1). As for the other
three lean practices: HRM, TPM, and TQM, significant differences among the three
groups were not found. Clearly, based on these results, we cannot conclude that the
three insignificant lean practices should be ignored by mass customizers because they
did not show significant differences among the three groups of mass customization.
The possible explanation for this result is that mass customization requires different
way to manage human resource than lean production firms. It seems that the
traditional way of lean plants of having multi-functional employees and establishing
small groups to solve common problems doesn’t suit mass customization environment.
Highly skilled, but specialized workers could yield better results for a mass
customizing firm. The possible large variety of customer requirements and
specifications entails specialized workers and, as opposed to lean production where
the level of customization is very low, applying lean HRM practices to a mass
customizing firm may reduce the ability of workers to respond effectively to customer
requirements. Pine II (1993) asserted that mass customization requires different
organizational structures, management roles and systems, values, learning methods,
and approaches of relating to customers. The results also suggest that the traditional
lean methods of managing quality and TPM do not suit mass customizing firms. It
seems that MC requires specific approaches to quality that ensures the delivery of
highest possible levels of quality products according to customer specifications that
justify extra cost paid by the customer. Such levels of quality are usually not targeted
by traditional lean plants.
We also have conducted Scheffe pairwise comparison tests of mean differences to
further understand the differences among the three groups. The results show that
plants with high mass customization level have significantly higher levels than the
plants with low mass customization level concerning JIT (P≤ 0.05), MS (P≤ 0.01),
SRM (P≤ 0.1), and CRM (P≤ 0.1). Significant differences were not found between the
groups of high and medium mass customization level as well as between the groups of
medium and low mass customization level.
All in all, hypotheses H1a, H5a, and H6a were supported. Hypothesis H7a was
marginally supported, and hypotheses H2a, H3a, and H4a were rejected.
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Table 5
Results of ANOVA test
Lean MC implementation level Pairwise differences (Scheffe) F-value P-value
practices High Medium Low
(N=63) (N=62) (N=62)
JIT 4.72 4.54 4.47 (1,3)** 3.762 .025
TPM 5.01 4.90 4.89 .881 .416
HRM 5.31 5.16 5.13 2.111 .124
TQM 5.29 5.10 5.18 1.871 .157
MS 5.23 5.03 4.91 (1,3)*** 5.388 .005
SRM 5.20 5.08 5.03 (1,3)* 2.998 .052
CRM 5.50 5.44 5.36 (1,3)* 2.477 .087
* P≤ 0.1.
** P≤ 0.05.
*** P≤ 0.01.
Next, we test hypotheses H1b, H2b, H3b, H4b, H5b, H6b, and H7b. we use
hierarchical regression analysis with the overall measure of competitive performance
as a dependent variable (Table 6). In the first equation, we entered plant size, country,
and industry control variables. In the second equation, we added mass customization
into the model. In the third to ninth equations, we added lean practices independently
into the models so that we can measure the incremental impact of each lean practice
on competitive performance given the impact of the control variables and mass
customization. The first equation shows that the control variables alone did not
contribute to the explanation of the variance of competitive performance. The second
equation shows that the addition of mass customization explained a significant portion
(4.7%) of the variance in competitive performance among responding plants. The
third equation shows that the addition of each of lean practices explained an
additional significant portion (ranging between 8.2% - 19.3%) of the variance in
competitive performance among responding plants.
It is interesting to note that mass customization proved to be positively associated
with competitive performance overall measure. The literature has shown some
contradiction in this regard. Christiansen et al. (2004) indicated that mass
customization might lower manufacturing performance as companies offer
customized products at almost the price of mass produced products, and they found
that only weak relationships exist between bundles of early mass customization and
performance. However, Pine (1993) argued that low costs are achieved through
economies of scope, the application of a single process to produce a greater variety of
products more cheaply and more quickly. Other researchers have indicated that mass
customization is associated with higher competitiveness (e.g. Moser, 2007; Da
Silveria et al., 2001; Kotha, 1995).
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Table 6
Results of Hierarchical regression analysis of competitive performance
Variables Eq. (1) Eq. (2) Eq. (3) Eq. (4) Eq. (5) Eq. (6) Eq. (7) Eq. (8) Eq. (9)
(Constant) 3.682*** 2.638*** 1.630*** 1.523*** 1.280** 1.032* .227*** .781 .282
Ln. Size .052 .041 -.057 -.104 -.069 -.098 -.035 -.027 -.052
FIN -.201* -.226* -.257** -.273*** -.303*** -.147 -.268** -.382*** -.433***
USA -.111 -.139 -.185* -.113 -.180* -.046 -.199** -.191** -.288***
GER .011 -.081 -.054 -.057 -.126 -.048 -.139 -.080 -.253**
KOR -.030 -.046 -.083 -.051 -.053 -.049 -.075 -.079 -.112
AUT .099 .056 .043 -.042 -.052 -.074 -.087 -.003 -.135
ELEC -.097 -.132 -.092 -.157* -.140 -.137 -.105 -.092 -.060
MACH -.072 -.097 .020 -.053 -.041 -.067 .038 -.017 -.031
MC .229*** .166** .157* .179** .060 .190** .166** .177**
JIT .372***
TPM .394***
HRM .357***
MS .529***
TQM .372***
SRM .343***
CRM .353***
R² .079 .125 .236 .244 .232 .317 .230 .216 .207
Adj. R² .023 .065 .178 .185 .173 .265 .171 .155 .146
F 1.40 2.07** 4.02*** 4.18*** 3.92*** 6.04*** 3.88*** 3.57*** 3.39***
Change in R² .046 .112 .119 .107 .193 .106 .091 .082
F change 6.91*** 18.99*** 20.43*** 18.12*** 36.67*** 17.82*** 15.04*** 13.51***
* P≤ 0.1.
** P≤ 0.05.
*** P≤ 0.01.
The literature has indicated that lean practices are highly associated with competitive
performance of the plant. Hence, in order to insure that the results presented in Table
6 was not spurious due to the powerful impact of lean practices on performance and to
insure that mass customizers who adopt lean practices have higher performance, we
have split our sample into four groups as shown in figure 2 below. We have split the
sample into high and low mass customization plants based on the mean value as a cut-
off point. In a similar manner, we also have split the sample into high and low
implementers of each lean production practice. Our concern is on the plants that have
achieved high levels of mass customization implementation, therefore, group three
(low levels of mass customization and high levels of lean practices) and group four
(low levels of mass customization and low levels of lean practices) have not be
considered in our additional analysis.
Next, we have conducted t-test to compare group one (high mass customization and
high lean practices) with group two (high mass customization and low lean practices)
concerning competitive performance of the plant as shown in Table 7.
The results of the t-test show that there are significant differences between the two
groups concerning competitive performance for all the lean practices except CRM.
This result might be surprising as customer involvement and relation management has
been widely considered in the literature as one main success factor and perquisite for
mass customization.
18
Group 2 Group 1
High High/Low High/high
Mass
Customization
Group 4 Group 3
Low Low/low Low/high
Low High
Lean practices
It seems that CRM is more associated with customer satisfaction and maximization of
the perceived value to customers to a greater extent than competitive performance.
Hypotheses H1b – H6b were supported while we were reluctant to accept hypothesis
H7b.
Table 7
Results of t-test
Performance No. of
No. Group S.D. t- value p-value
mean plants
1 High MC/High JIT 3.96 .571 46 2.593 .011
High MC/ Low JIT 3.64 .561 39
2 High MC/High TPM 4.00 .510 48 3.414 .001
High MC/ Low TPM 3.58 .601 37
3 High MC/High HRM 3.98 .550 47 2.993 .004
High MC/ Low HRM 3.61 .571 38
4 High MC/High MS 3.99 .510 56 4.185 .000
High MC/ Low MS 3.48 .582 29
5 High MC/High TQM 4.02 .571 48 3.878 .000
High MC/ Low TQM 3.56 .501 37
6 High MC/High SRM 4.02 .518 48 3.998 .000
High MC/ Low SRM 3.55 .565 37
7 High MC/High CRM 3.91 .531 50 1.645 .105
High MC/ Low CRM 3.69 .641 35
6. Conclusions
19
Plant size, country and industry did not explain a significant portion of variation in
competitive performance level. This implies that competitive performance depends on
overall infrastructure, capabilities and strategies, which are the pillars of superior
performance, regardless of the size of the plant, industry or country to which the plant
belongs to.
Second, the results show that four lean practices, just-in-time production,
manufacturing strategy, supplier relationship management, and customer relationship
management are associated with mass customization implementation level. Many
companies are reluctant to adopt mass customization strategy due to demand and
supply uncertainties associated with its implementation. Our study suggests that the
ability of companies to manage their supply chains is the main success factor of mass
customization. Lean supply chain management effectively enables companies to
manage uncertainties associated with mass customization, and enables them to
efficiently and timely respond to customer needs and requirements. Manufacturing
strategy, which is often neglected in the lean production literature, proved to be a
powerful tool to increase mass customization level as it guides the efforts to build the
necessary infrastructure for successful mass customization implementation.
Three lean practices, total quality management, total productive maintenance, and
human resource management were not found to affect mass customization. Although
these practices are essential for traditional lean plants, our results suggest that these
practices are not sufficient for mass customization environment which requires
different ways to HRM and different approaches to quality management that exceed
those implemented in traditional lean plants to ensure the provision of greater value to
customers.
Third, the results show that mass customization has a direct positive impact on the
competitive performance of the plant. This implies that MC is an effective strategy to
improve the competitiveness of the plant and to gain a competitive advantage.
Companies are advised to seek ways to minimize and eliminate extra costs due to
adopting mass customization strategy.
Fourth, this study re-emphasized that lean production practices are associated with
higher competitive performance. In today’s competitive environment, companies are
recommended as never before to apply lean practices in order to maintain and
enhance their competitive advantage.
Fifth, this study shows that lean production practices are an effective tool for mass
customizing firms to improve their competitive performance. High mass customizers
with high lean practice show higher competitive performance than high customizers
with low lean practices. The only exception was customer relation management which
is an essential tool to facilitate mass customization implementation and to maximize
customer satisfaction.
The limitation of our study is that the measurement scales used for our research may
not capture all the aspects and practices implemented by the surveyed plants.
Furthermore, only three industries were included in our sample.
Similar research studies should be undertaken in case of other industries and less
developed countries to investigate the potential of mass customization and the
willingness and readiness of the firms to adopt it. Case studies are needed for
companies implementing mass customization and lean practices. Also, Additional
empirical research is needed to investigate the impact of other operational practices on
mass customization.
20
Appendix A
Multi-item measurement scales
JIT production
21
TPM
HRM
22
Small Group Problem Solving (Cronbach’s α-coefficient = 0.824)
Question 1 During problem solving sessions, we make an effort to get all team members’ opinions
and ideas before making a decision.
Question 2 Our plant forms teams to solve problems.
Question 3 In the past three years, many problems have been solved through small group sessions.
Question 4 Problem solving teams have helped improve manufacturing processes at this plant.
Question 5 Employee teams are encouraged to try to solve their own problems, as much as
possible.
QuestionR 6 We don’t use problem solving teams much, in this plant.
TQM
23
MS
SRM
24
Supplier Lead Time (Cronbach’s α-coefficient = 0.600)
Question1 We seek short lead times in the design of our supply chains.
Question2 We purchase in small lot sizes, to reduce supplier lead time.
Question3* When outsourcing, we consider supplier lead time as a greater priority than cost.
Question4 Our company strives to shorten supplier lead time, in order to avoid inventory and
stockouts.
* Items are deleted
CRM
25
Appendix B
Competitive Performance Scales
Please circle the number that indicates your opinion about how your plant compares to its competition
in your industry, on a global basis.
1: Poor, low end of industry; 2: Equivalent to competitors; 3: Average; 4: Better than average; 5:
Superior
Unit cost of manufacturing 1 2 3 4 5
Conformance to product specifications 1 2 3 4 5
On tome delivery performance 1 2 3 4 5
Flexibility to change volume 1 2 3 4 5
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