CHAPTER TWO: LITERATURE REVIEW
This chapter entails a review of theories related to this study, a review of previous literature related to lean practices, implementation of lean programs to supply networks, empirical literature review and a conceptual framework of the study.
2.2 Theoretical Framework
In this section, the research introduces and explores the Theory of constraints (TOC) and Systems Hypothesis and in respect to this research.
2.2.1 Theory of Constraints (TOC)
The focus of the TOC theory is to maximize the system’s performance (Gupta ; Andersen, 2012). Three global measures identified for the TOC theory for evaluating organizational performance toward the goal of the company are finished goods, inventory, and operating expenses (Gupta ; Andersen, 2012). These three measures are company -level operational measures of performance and may be used by the company’s management to achieve continuous improvement (Gupta & Andersen, 2012). In addition, Gupta and Andersen (2012) stated that the TOC’s primary assumption is that at least one constraint in each system limits the ability of achieving higher levels of performance relative to its goals. Any organization can improve its performance and move toward achieving its goals by improving the weakest operating activity (Rhee et al., 2010). When an organization removes the constraint, and moves to a higher level of production or service, a new constraint appears and the cycle of managing the system with respect to the new constraint resumes (Gupta ; Andersen, 2012).SCM is the basis for a firm’s competitive advantage because it enables the firm to lower operation costs, increase the service reliability, decrease the inventory level, reduce order cycle time, lower the number of backorders, improve customer satisfaction, and improve overall competitive advantage (Talib & Hamid, 2014).
Oglethorpe and Heron (2013) used the TOC technique to distinguish and overcome the operational, supply chain blockades, and constraints that happen in the pharmaceutical supply chains, particularly with smaller producers, as they look to build market penetration over a more extensive geographic territory. Oglethorpe and Heron (2013) observed that the TOC approach provides an advancement of knowledge in the area of pharmaceutical supply chain analysis and is done in a way that is more viable in use. Further, Oglethorpe and Heron (2013) prescribed seven general classes to conquer the operational obstructions: constraints due to the nature of the market, due to scale and the nature of products; constraints related to employment and skills; institutional imperatives; constraints in supply chain relationships; certification, policy, and regulatory constraints; and constraints on individual convictions and humanoid attribution.
2.2.2 Systems Hypothesis
According to Ackoff (1981), a system is an arrangement of more than two interrelated components that operate by at bare minimum every component influencing one other component. Systems hypothesis incorporates design, developing of connections and how they function in solidarity towards a shared objective (Laszlo, 1995a). Organizational activities supply chain links and interphases form the system segments to this theory. These interphases together shape well-knit cross-connected operations designs that work interactively in accomplishing a definitive supply operation chain goal (Bertalanffy, 1968). Flynn, (2011) demonstrates that general consequences of a lean operations supply chain is credited to the systems theory’s aggregate intervention areas, in which all chain operators together contribute to formulate, institutionalization and usage of lean tools and procedures. This gives an ideal scientific approach to continuous improvement and subsequently performance as every one of these connected activities.
2.3 Lean Practices
Providing for the Seven Muda Model one of the fundamental strides in the execution of a Kaizen system, is the determination of the appropriate devices for the application of Kaizen methodology in each organization or industry (Imai, 2012). In view of articles published by a several writers, this segment presents data gathered on some Lean instruments and the examples on the application of these instruments. These entails lean practices systems such as Value Stream Mapping (VSM), 5s, Just–In-Time (JIT), Kaizen (Continuous Improvement), Kanban (Pull System), Heijunka (Level Scheduling), Jidoka (Automation), SMED (Single Minute Exchange of Die), TPM (Total Productive Maintenance), and Visual Management.
Kaizen Strategy Planning (KSP) is an instrument created by Kaizen Institute whose primary objective is to design and plan the program of ceaseless change and social change of an organization or association. The KSP is directly identified with the mapping and planning of the organization’s Value chain and is a simplification of the VSM in the following four stages: analysis of the present circumstance, in which the targets and extent of the strategy are clarified, with the quantification of the present state and identification of the improvement suggestions; overview of Kaizen Strategy, which comprises of the prioritization of the activities proposed in the previous stage; Strategic Improvement Plan – planning feasible activities to implement in a transient period; and follow-up, creation of a mission control room and impression of the lessons learned so as to enhance knowledge (Kaizen Organization, 2014). The principle focus of this tool is the advancement of a strategic plan for persistent change through demonstrating how to enhance QCDM indicators (quality, cost, delivery, motivation) and explain the role of leadership and support of a constant improvement program bolstered (Kaizen Establishment, 2014).
The Five S (5S) 5S is a tool that intends to shop floor organization and adds to great condition and functionality of all workplaces, by cleaning, housekeeping and disciplining (Melton, 2005). Like the name specifies, the tool is divided in five stages: sort (seiri) – remove superfluous things; straighten (seiton) – arrange the items so they can be effortlessly picked; shine(seiso) – clean the work environment; standardize (seketsu) – maintain the three past steps; and sustain (shitsuke) – keep all the standards in order (Imai, 2012).
The objective of Visual Management is to outwardly distinguish the area of work. It is used to help communicate, as well as to help highlight anomalies and to abstain from committing errors (Tenera e Pinto, 2014).The improvement of visual management is portrayed as a one amongst the best Lean tools and one of whose effect is felt quickly, as its viable application to production systems adds to the rapid increment of the primary indicators of performance: safety, quality and productivity, acting as an interface amongst employees and production system (Murata and Katayama, 2010).
Single Minute Exchange of Die (SMED) was developed by Shingeo Shingo at a time Taiichi Ohno was implementing Just-in-Time in Toyota, One of Taiichi Ohno’s principle objectives was to produce smaller, more regular batches to create flow and eradicate stocks. In this setting he employed Shingeo Shingo with the motivation behind lessening the changeover times with the goal of producing smaller batches without diminishing productivity (Ferradas ; Salonitis, 2013). SMED methodology is divided in five steps: observing the present methodology; isolating the internal and external activities; converting internal activities to external; reducing the internal activities; and finally reducing the external activities (Shingo, 1985). Upon combining these five steps, Shingo reached unexpectedly positive results in reducing changeover times, but the general success rate was only accomplished when all the people whose duties were involved in change were incorporated, such as the cleaning crew, the maintenance team, the quality division and all providers of materials and tools needed to implement the changes. Hence, it is concluded that it is not only necessary to contemplate the system but also achieving the commitment of all employees included. (Almomani et al., 2013).
The Kanban system was created as a subsystem of Toyota Production System with the goal of controlling stock levels, production orders and the supply of parts and raw materials. Kanban is entails a control mechanism that enhances material flow and screens the production of the required items in the right amount at the appropriate time (Lage Junior e Godinho Filho, 2010).
2.4 Implementing lean programs to supply networks
Kenyan pharmaceutical manufacturers operate in an intricate atmosphere since their production process entails multiple inter-related processes that use various materials from several distinct suppliers. Many of these manufacturers have implemented lean practices to reduce waste, cost, cycle time and variability in outputs (Altria and Carleysmith 2009). Reports show that pharmaceuticals manufacturers applying lean have lowered cycle time and enhanced efficiency of manufacturing and procurement processes (Altria and Carleysmith, 2009).
Research of Azagedan et al. (2013) has discovered that the ecological vulnerability influences lean operations and lean procurement practices. As a result, intricate atmospheres lender it more problematic to detect, diagnose and respond to challenges. For instance, in an intricate supply chain, it may be difficult to diagnose whether a production shortfall was due to a quality issue in the raw material, a late conveyance from a provider, or an internal procedure issue that happened during final assembly. Complex atmospheres also enhance the possibility of operational errors. For instance, firms in a more intricate atmosphere have more providers, which intensifies the chances of errors in projecting raw material requirements and handling in -bound logistics (Azadegan, Patel et al. 2013). The higher levels of volatility and uncertainty in changing environments undermines lean operations to harmonize production process and reduce inventory, which undermines the efficacy of lean operations (Azadegan, Patel et al. 2013). Previous researches define supply chain integration as a competitive resource that manufacturers use to create economic rents and that this could influence general performance positively. Supply chain integration can be realized through adoption of; supplier involvement, knowledge transfer, lean program commitment and lean program alignment strategies.
Currently, firms view supply chain management through integration as a vital apparatus to expand their competitive edge. Supply chain traverse all movement and storage of raw material, work-in-progress inventory, and finished merchandise from point of origin to point of consumption (Qrunfleh and Tarafdar 2013). This is to say, a strategic supply chain signifies a set of practices that complete key tasks in support of its network methodology such as building relationship with suppliers, eliminating waste, facilitating customization, and exchange of information within the supply chain (Li et al., 2005; Li et al., 2006; Wong et al., 2005; Zhou and Benton, 2007). These practices are believed to represent the most important forms of integration that are employed in supply network: external integration (observed through tactical supplier partnership) and delivery integration (observed through postponement) (Frohlich and Westbrook 2001).
Strategic supplier partnership is the lasting bond between the organization and its suppliers, which affects the tactical and operational competences of participating companies to help them realize substantial constant benefits (Li, Rao et al. 2005).
2.5 Empirical Literature Review
In a study regarding lean enterprise and supply chain performance of pharmaceutical companies in Kenya, Onyango (2011) observes that Global Benchmarking, Electronic inventory management, TQM practices, ICT integration in the supply chain, Innovation and creativity, Satisfactory customer services, zero waste tolerance, JIT delivery services were related to Performance of Pharmaceutical companies in Kenya with a 70% variation. Onyango (2011) further observes that those practices were linearly related with Performance of Pharmaceutical companies in Kenya.
A study carried out by Wainaina (2009) on supply chain management best practices in large private manufacturing firms in Kenya identified that lean enterprises experience challenges like; insufficient monitoring and control to the suppliers’ delivery time, lack of suppliers ngagements, lack of supply chain integration and collaboration especially with trade marketing and distribution teams, lack of close inventory review out of not having periodical checks, lack of clear responsibility line inside supply chain management, lack of understanding and visibility to the desired marketing activities, lack of understanding and recognition to the production constraints and management, as well as capacity planning.
A study carried out by Bolo (2009) on selected strategy variables on firm’s performance indicated that various challenge which include; resistance to change by management and inadequate technology to support the concept were key hindrances of the practice. The key aspect of supply chain management practices are supply chain integration, information sharing, customer service management, geographic proximity and JIT capabilities. Simone ; Kleiner (2004) focused on five practices at supply chain level that are a key to create supply chain responsiveness. They include outsourcing, strategic supplier partnerships, customer relationship, and information sharing and product modularity. Locher (2007) also conducted the research regarding supply chain management practices; they investigated long-term relationship, cross-functional teams, supplier base reduction and supplier involvement.
McManus (2007) examined that long-term relationship, information sharing, cooperation process integration and supply chain leadership underlying the supply chain management practices are the key determinants of lean supply chain practices of competitive companies. Schonberger (2007) identified supply chain management practices in form of strategic supplier partnership, customer relationship and information sharing. This research adopts the same supply chain management practices (supplier partnership, customer relationship and information sharing).
A study carried out by Kamaru (2012) on Lean supply chain practice in urban Road construction projects revealed that companies have adopted various lean supply chain management practices which include emphasizing on customer focus, developing avenues for waste reduction, practicing continuous improvement in their processes and adopting JIT techniques in inventory management. Benefits accrued from implementation of lean supply chain practices include cost reduction, waste elimination and profit maximization.
2.6 Conceptual framework
A research by Bortolotti et al (2016) posits that there is a shared and recursive effect amid supply chain attributes and practices for extending the scope of lean programs to the supply network. Based on this research and other case studies we designed the conceptual framework below.
CHAPTER THREE: RESEARCH METHODOLOGY
The chapter summarizes and gives the methodology used to carrying out the study. Therefore, it encompasses research design, target population, collection of data and analysis of data.
3.2 Research Design
This study shall adopt a cross-sectional survey design and shall aim at evaluating the implementation of lean practices and supply chain performance of pharmaceutical companies in Kenya. Cross-sectional surveys give a chance to assess links and interrelationships between variables and sub-groups in a population (Easterby-Smith, Thorpe Jackson ; Lowe, 2008). The study shall be descriptive and concerned with finding out the what, where and how of a phenomenon and data will be collected from a sample selected to represent a larger population (Hines, 2004)
Targeted population for this survey shall consist of 20 major pharmaceutical manufacturers of the 43 listed in the Kenya Pharmaceutical society directory (KPA, 2016) that are listed as local manufacturers. The study shall target those that are tasked in running and own the key processes in the supply network and directly engage with employees such as supply chain managers, engineering managers, finance managers and production managers given.
3.4 Sampling design
The study shall use random sampling method and shall target all the supply chain managers, engineering managers, production managers, and the finance managers from the 20 firms selected.
3.5 Data Collection
The study shall use questionnaire method to collect primary data directly from the sampled 48 managers. The study shall target supply chain managers, engineering managers, finance managers and production managers. Supply chain managers are responsible for supply chain function of the organization. On the other hand, engineering managers are responsible for the design and layout of production as well overall machine efficiency and availability. Production managers supervise transformation of raw materials to finished products. Finally, finance managers have the information concerning financial performance in the organization. The questionnaire will be administered by the researcher supported by research assistants.
3.6 Data Analysis
Descriptive inferential statistics will be used to analyze demographic information of study respondents, and lean practices applied by the pharmaceutical manufacturing firms. By using this technique, the researcher shall be able to elucidate which practices for help in extending the scope of lean programs to supply networks. That is, the lean practice which has the highest influence on organizational performance.