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.
Highlights
Under the leadership of Taiichi Ohno, Toyota defined a new industrial production model focused on the reduction of waste, continuous improvement and the importance of involving all company employees (Ohno, 1988)
The paper discusses the impact that lean has had on the overall financial performance, with empirical material drawn from three case studies
The study remarks that the main issue seems to be the company’s ability to appropriate the value generated by any savings the firm can make
Summary
Under the leadership of Taiichi Ohno, Toyota defined a new industrial production model focused on the reduction of waste, continuous improvement and the importance of involving all company employees (Ohno, 1988). The lean thinking theory has been evolving. Both researchers and practitioners have stressed the importance of extending the principles of lean production to other company areas (Womack and Jones, 1996). Several industrial firms worldwide have put into practice both lean principles and practices and have achieved important transformations towards continuous improvement, value creation and waste elimination, accomplishing outstanding operational efficiency levels. Numerous authors have studied the aforementioned empirical evidence and have suggested that lean manufacturing initiatives improve companies’ operational performance (Demeter and Matyusz, 2011; Shah and Ward, 2003). The links between lean and operational measures have been deeply studied since it is obvious that the direct impact of lean practices is reflected in production processes’ performance metrics or operational performance metrics (Negr~ao et al, 2017)
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