Lean manufacturing, non‐financial performance measures, and financial performance
International Journal of Operations & Production Management
ISSN: 0144-3577
Article publication date: 20 February 2009
Abstract
Purpose
The purpose of this paper is to examine how utilization of non‐financial manufacturing performance (NFMP) measures impacts the lean manufacturing/financial performance relationship.
Design/methodology/approach
A structural equation model (SEM) is estimated using data provided by 121 US manufacturing executives. In addition to examining direct effects, the study examines whether NFMP measurement mediates or moderates the lean manufacturing/financial performance relationship.
Findings
The results provide substantial evidence that utilization of NFMP measures mediates the relationship between lean manufacturing and financial performance.
Research limitations/implications
The study's findings regarding NFMP measurement suggest that the mixed results of prior studies of the lean manufacturing/financial performance relationship may be due in part to a failure to account for NFMP measurement. Limitations of the study are the non‐random sample and its small sample size, relative to the SEM estimated.
Practical implications
Managers who implement lean manufacturing without utilizing supportive NFMP measures may experience disappointing financial results.
Originality/value
This is the first known study that adopts a SEM framework to examine: how NFMP measurement affects the relationship between lean production and profitability; the direct relationship between NFMP measurement and firm performance; and the impact of lean manufacturing on externally audited, objective measures of firm performance.
Keywords
Citation
Fullerton, R.R. and Wempe, W.F. (2009), "Lean manufacturing, non‐financial performance measures, and financial performance", International Journal of Operations & Production Management, Vol. 29 No. 3, pp. 214-240. https://doi.org/10.1108/01443570910938970
Publisher
:Emerald Group Publishing Limited
Copyright © 2009, Emerald Group Publishing Limited