UNIVERSITI MALAYSIA SABAH
BORANG PENGESAHAN STATUS TESIS
lADUAL
MEMBASMI PEMBAZIRAN MELALUI PENGGUNAAN
VSM BAGI MEMPERBAIKI PRODUKTIVrn DALAM
KILANG
IlAZAH
MASTER OF BUSINESS ADMINISTRATION
SESI PENGAlIAN 2008 - 2010
Saya, Tay Kwai Fui mengaku membenarkan tesis sarjana ini di simpan di
perpustakaan Universiti Malaysia Sabah dengan syarat-syarat kegunaan berikut:
1. Tesis adalah hak milik Universiti Malaysia Sabah.
2. Perpustakaan Universiti Malaysia Sabah dibenarkan membuat salinan untuk
tujuan pengajian sahaja.
3. Perpustakaan dibenarkan membuat salinan tesis ini sebagai bahan
pertukaran institusi pengajian tinggi.
4. TIDAK TERHAD
Alamat: Block A, Lot 13,
4th Floor, Ramin Court,
Penampang,
88300 Kota Kinabalu,
Sabah.
PROF. MADYA OR. NOORHAYATI MANSOR
Penyelia: Prof. Madya Dr. Noorhayati Mansor
Pengarah
Pusat Perakaunan
Universitl Malaysia Sabah
Tarikh: 28 July 2010
Catatan: Tesis dimaksudkan SEBAGAI TESIS ijazah Doktor Falsafah dan Sarjana
secara penyelidikan atau disertasi bagi pengajian secara kerja kursus dan
penyelidikan atau laporan Projek Sarjana Muda (LPSM)
WASTE ELIMINATION
TO IMPROVE PRODUCTIVITY BY USING
VALUE STREAM MAPPING (VSM)
IN THE FACTORY
TAY KWAI FUI
PE PUSTAKAAN
UM¥tNSITI MAlAYSIA SABAH
THESIS SUBMITTED IN FULFILLMENT FOR THE
DEGREE OF MASTER OF BUSINESS
ADMINISTRATION
SCHOOL OF BUSINESS AND ECONOMICS
UNIVERSITI MALAYSIA SABAH
2010
DECLARATION
I hereby declare that the material in this dissertation is my own and original work
except for quotations, excerpts, summaries and references, which have been duly
acknowledged.
Tay Kwai Fui
PE-2008-8268-C
21 July 2010
ii
ACKNOWLEDGEM ENT
First and foremost, I would like to express my gratitude and appreciation to
supervisor, Prof. Madya Dr. Noorhayati Mansor for her kind support and help,
advice and guidance provided by her were extremely beneficial to accomplish
dissertation. I thank also for her unwavering patience and sincerity along
journey until I completed my dissertation.
my
the
my
the
Besides that, I would like to express my heartfelt gratitude to my parents
for their constant support and understanding. Not forget also to express my
grateful appreciation to all my MBA coursemates for their support and inputs which
eventually led to the betterment of my research.
Special thanks to all the individuals and SEC's factory employees that have
partiCipated in the survey. Your value contribution is greatly appreciated.
iii
ABSTRAK
Kajian ini menerangkan kepelbagaian proses bukan tambah nilai (iaitu, pembaziran)
yang akan menyebabkan kemerosotan produktiviti dalam industri pengeluaran
elevator. Oleh kerana persaingan global dan permintaan para pengguna berubah
dari masa ke semasa, pengeluar perlu mengambil tindakan untuk mengubah
strategi perniagaan dan pengurusan kifang agar dapat membuat penyesuaian
selaras dengan perubahan yang berlaku secara pantas. Pengeluar juga perlu kekal
kompetetif dalam era ini. Walau bagaimanapun, adalah tidak mudah bagi
pengeluar untuk mencapai tahap ini kerana wujud pelbagai faktor luaran dan
dalaman yang berupaya menyebabkan kemerosotan produktiviti dan memberi
kesan terhadap daya saing organisasi dan seterunya menyebabkan kelewatan
dalam proses kerja dan penghasilan produk yang berkuafiti rendah. Sehubungan
itu, adalah penting bagi pengeluar untuk memiliki strategi berkesan yang dapat
menjamin atau sekurang-kurangnya dapat mengurangkan atau meminimumkan
kos operasi dengan mengenal pasti dan membasmi proses bukan tambah nilai
(iaitu, pembaziran) dalam kifang. Hal ini bertujuan untuk memperbaiki kualiti
dalam setiap bidang value streams, iaitu satu koleksi aktiviti yang memberikan
hasif kepada pengguna. Salah satu bidang yang dikenal pasti ialah pengurusan
kifang. Kajian ini juga menerangkan keberkesanan penggunaan Value Stream
Mapping (VSM) sebagai satu kaedah untuk membendung impak daripada
pembaziran terhadap produktiviti kifang. Oapatan tinjauan fiteratur yang diguna
pakai untuk mengenal pasti amalan perkilangan dan VSM turut ditunjukkan dalam
kajian ini. Oi samping itu, satu current state map yang menunjukkan aliran proses
dalam kifang Sabah Elevator Company (SEC) juga ditunjukkan dalam kajian ini.
Justeru, dapatan literatur menjadi medium untuk memperoleh data berkenaan
tahap pembaziran dan produktiviti dalam kilang ini. Kajian ini berbentuk
eksploratori dan hasil analisis soal selidik menunjukkan masa menunggu dan
kecacatan memberi impak negetif terhadap produktiviti kifang SEC. Penggunaan
VSM pula membantu mengurangkan impak daripada masa menunggu terhadap
produktiviti kilang. Kajian ini dapat menyumbang kepada pengetahuan ten tang
bagaimana proses bukan tambah nilai (iaitu, pembaziran) boleh menyebabkan
kemerosotan produktiviti dalam kilang ini. Justeru, para pengeluar boleh mendapat
pemahaman yang lebih jelas ten tang masalah ini. Implikasi daripada setiap
angkubah, termasuk implikasi pengurusan mencadangkan supaya diadakan state
map masa depan serta cadangan untuk kajian lanjutan bagi tujuan
penambahbaikkan.
iv
ABSTRACT
WASTE ELIMINATION TO IMPROVE PRODUCTIVITY BY USING VALUE
STREAM MAPPING (VSM) IN THE FACTORY
This research describes the various types of non-value added processes (i.e. waste)
that will downgrade the productivity of the elevator manufacturing factory in the
industry. As the international competition and customers' demanqs are changing
from time to time, manufacturer has to change their business strategy and factory
management in order for them to adapt and accommodate to these kinds of rapid
changes. Not only that, it is also crucial for the manufacturer to remain competitive
in the industry, however this is not easy to achieve for most of the manufacturer
as there are many internal and external factors that will downgrade the
productivity and affect the competitiveness of the firm, thereafter deliver poor
quality of products and delay the work processes in the factory. Therefore it is
important for the manufacturer to have an effective strategy that will guarantee, or
at least help to reduce or minimize the operation cost by identify and eradicate
non-value added processes (i.e. waste) in the factory, hence to improve the quality
in every area of the value streams, this shall inclusive of factory management.
Furthermore, the research also describes the effectiveness of the Value Stream
Mapping (VSM) in moderating the impacts of the waste towards the factory
productivity. Results of the literature review, which was used to identify both
manufacturing an9 VSM practises, are presented. Current state map of the SEC's
factory processes flow also being documented and discussed in this research. The
findings of this literature review were synthesized to adapt its instrument to assess
both the waste and productivity level in this factory. This is an exploratory study
and the analysis of the survey results had shown that waiting time and defect has
negative impact on factory productivity in the Sabah Elevator Company (SEC). VSM
does show the moderating effect towards the waiting time on the factory
productivity. The major contribution of this research enables the manufacturer to
gain better understanding on how the non-value added processes (Le. waste) can
downgrade the productivity in this factory. The implication of each variable as well
as managerial implications, proposed future state map, and further suggestions for
future research were identified and proposed.
v
TABLE OF CONTENTS
PAGE
TOPIC
DECLARATION
ii
ACKNOWLEDGEMENT
iii
ABSTRAK
iv
ABSTRACT
v
TABLE OF CONTENTS
vi
LIST OF FIGURES
ix
LIST OF TABLES
x
LIST OF APPENDICES
xi
CHAPTER 1: INTRODUCTION
1.1
Introduction
1
1.2
Research Problem
3
1.3
Research Objectives
3
1.4
Scope of Study
4
1.5
Significance of Study
5
1.6
Organization of the Dissertation
5
CHAPTER 2: LITERATURE REVIEW
2.1
Introduction
6
2.2
Definition of Productivity (Dependent Variable)
6
2.3
Definition of Waste (Independent Variable) and
Hypotheses Development
2.3.1
10
Overproduction
11
vi
2.3.2
Waiting Time
13
2.3.3
Transportation
14
2.3.4
Processing
14
2.3.5
Inventory
17
2.3.6
Motion
18
2.3.7
Defects
19
2.4
Definition of Value Stream Mapping (Moderating Variable)
20
2.5
VSM - Current State Map of SEC's Factory
24
2.6
Previous Studies on the Adoption of VSM to Eliminate Waste
In order to Improve Factory Productivity
28
2.7
Summary of Research Hypotheses
31
2.8
Summary
32
CHAPTER 3: RESEARCH FRAMEWORK AND METHODOLOGY
3.1
Introduction
33
3.2
Explanatory Case Study
33
3.3
Research Framework
34
3.4
Nature of Study
35
3.5
Instrument
35
3.6
Population of Sample
36
3.7
Data Collection Method
36
3.8
Data Analysis
3.9
3.8.1
Factor Analysis
37
3.8.2
Reliability Test
37
3.8.3
Correlation Analysis
37
3.8.4
Regression Analysis
38
38
Summary
CHAPTER 4: RESEARCH FINDINGS
4.1
Introduction
39
4.2
Factory Analysis
39
vii
4.3
Descriptive Statistics of Respondents Profile
40
4.4
Reliability Test
44
4.5
Correlation Analysis
45
4.6
Regression Analysis
46
4.6.1 Multiple Regression
47
4.6.2 Hierarchical Regression
50
Summary of Findings
52
4.7
CHAPTER 5: DISCUSSION AND CONCLUSION
5.1
Introduction
53
5.2
Recapitulations of Study
53
5.3
Discussion and Implications of Study
53
5.3.1 The impact of Overproduction on Productivity
54
5.3.2 The impact of Waiting Time on Productivity
54
5.3.3 The impact of Inappropriate Transportation on
55
Productivity
5.3.4 The impact of Inappropriate Processing on
56
Productivity
5.3.5 The impact of Excess Inventory on Productivity
56
5.3.6 The impact of Inappropriate Motion on Productivity
57
5.3.7 The impact of Defect on Productivity
57
5.3.8 The impact of VSM as Moderator on Productivity
58
5.3.9 Managerial Implications
59
5.4
VSM - Proposed Future State Map
62
5.5
Limitations of Study
64
5.6
Suggestions for Future Research
65
5.7
Conclusion
66
REFERENCES
67
APPENDICES
71
viii
LIST OF FIGURES
PAGE
Figure 2.1
VSM - Current Stat e Map of SEes Factory
27
Figure 3.1
Research Framework
34
Figure 5.1
VSM - Proposed Future State Map
61
ix
LIST OF TABLES
PAGE
Table 4.1
Summary of Fdctor Analysis KMO and Bartlett's Test
40
Table 4.2
Summary of Respondents Profile
42
Table 4.3
Summary of Descriptive Statistics for Variables
43
Table 4.4
Summary of Cronbach's Alpha of Variables
45
Table 4.5
Summary of Correlation Analysis between Variables
46
Table 4.6
Multiple Regression of Waste
47
Table 4.7
Analysis of Variance of Waste
47
Table 4.8
Variables in Equation of Waste
47
Table 4.9
Model Summary of llierarchical Analysis
50
Table 4.10
Hierarchical Regression with Moderating Variable - VSM
51
Table 4.11
Summary of the Hypotheses
52
x
LIST OF APPENDICES
PAGE
APPENDIX A: Instrument (Questionnaire)
xi
71
CHAPTER 1
INTRODUCTION
1.1
Introduction
International competition and customers' demands are changing from time to time.
Manufacturers have to change their business strategy and factory management in
order for them to adapt and accommodate to these kinds of rapid changes. In
relation to this, it forces a drastic change for most of the manufacturing. As a
result, manufacturers are aggressively searching for an appropriate and effective
operational strategy in order to increase their competitiveness in the global market
(Rawabdeh, 2005).
As the international competition is growing intensely, this has caused the
traditional types of manufacturing paradigms are being opposed and forced the
new manufacturing concepts are being developed (Hines & Rich, 1997), such
development and invention are crucial for the firm to remain competitive in the
global market. In order to increase the competitiveness over the competition in the
industry, manufacturers have been putting a lot of effort to deliver the quality
products in order to faster respond and achieve the quality requirements that are
demanded by the customers. However, this is not easy to achieve for most of the
manufacturers as there are many internal and external factors that will downgrade
the productivity and affect the competitiveness of the firm, thereafter deliver poor
quality of products and delay the work processes in the factory. For instance,
inappropriate segregation of works, inappropriate of the machine used, employee
delay the works in the organizations, waiting for the instruction to be given from
management and others, over processing, excessive of inventory, inefficient of
supply chain and defects of the products, are amongst the most critical factors that
need to be resolved.
Nowadays, as there are many manufacturers struggle in the global
markets, the attention has been diverted to reduce the operation costs and
1
eliminate waste in the factory, thereafter to increase the competitiveness in the
industry. In relation to this, organizations and academic institutions have adopted
the concept of benchmarking as an ideal approach to identify and detect the intercompany performance gaps, thereafter to seek for alternative strategies in order to
be implemented in the organizations.
Benchmarking is actually a concept in which the organizations will
continually study, observe and review the operation and production line, thus
identify the ways to improve the manufacturing processes in order to produce a
better output in the organizations (Holloway et al., 1998). In many organizations,
benchmarking is accomplished by comparing the outputs for the months
throughout the year. However, a general drawback for this type of traditional
benchmarking concept is that, it shows only little guidance of how to close the
gaps although its primary purpose is to highlight and raise awareness of the intercompany performance gaps (Hines & Rich, 1997).
In relation to this, early work in this area suggests that it is difficult to
standardize and benchmark processes in different organizations. This is because
different organizations are implementing different strategies and processes in
managing the operation and production line (Hines et al., 1999). That is,
organizations will have their own methodologies to be adopted in the factory. As a
result, a new type of benchmarking tool called Value Stream Mapping (VSM) has
been developed (Hines and Rich, 1997). The rationale behind the effectiveness of
this VSM is that, it is not comparing a firm's work processes with others, but
oppositely, it internally compares how good the process itself could be in relation
to increasing and improving the overall factory productivity (Hines et al., 1999).
Specifically, the VSM compares the value adding processes and wasteful activities
in the factory. Not only that, VSM also provides guideline and a clear picture of
how to improve the processes flow by removing a realistic percentage of the nonvalue added processes (i.e. waste) in the current factory system.
Adopting VSM could be an essential step as it promises to reduce costs,
. improve quality and productivity by eliminating non-value added processes (i.e.
2
waste) in every area of the value streams in the factory. This shall be inclusive of
factory management and supplier networks. According to Abdulmalek and Rajgopal
(2007), the concept of VSM is crucial and vital for most of the firms especially in
this difficult economic time as its goal is to eliminate, or at least reduce the nonvalue added processes (i.e. waste) in the factory, thus enabling less inventory, less
space, less time, less cost and less resource to produce more, or alternatively to
produce the same output with less resources.
Therefore, this study examines various types of wastes that are occurred in
the Sabah Elevator Company (SEC). The author will study and document the
current processes flow in the SEC's factory, thereafter to propose the adoption of
VSM in order to improve its productivity and efficiency of the factory.
1.2
Research Problem
According to Seth et al. (2008), most activities in the factory create waste,
therefore attention needs to be given to improve the productivity in the factory,
and immediate actions need to be taken for the firm to remain competitive in the
global market. In relation to this, removal of non-value added processes (i.e.
waste) from the factory is essential to improve the factory productivity (Conner,
2001). Therefore, this study examines the impacts of non-value added processes
(Le. waste) towards productivity in the SEC's factory. From the review of the
literature, studies which focus directly on waste elimination in improving factory
productivity by using VSM is rather lacking. Therefore, the research problem shall
focus on identifying the non-value added processes (Le. waste) which reduce the
factory productivity, and determining how would the VSM assists in eliminating the
non-value added processes, hence improving the factory productivity and
efficiency.
1.3
Research Objectives
The main objective of this study is to demonstrate how the VSM tool when used
appropriately, can help in eliminating waste, reducing factory throughput time,
improving product quality, achieving better overall financial and operational
control, thus improving productivity and efficiency of the factory.
3
An elevator factory is used to illustrate the approach in order to identify
and eliminate the types of wastes in this factory, thereafter to increase its
productivity and efficiency within the manufacturing transformation processes.
Since some of the information is confidential, the company is referred to as Sabah
Elevator Company (SEC) throughout this study. The specific research objectives for
this study are listed below:
i)
To identify major types of non-value added processes (i.e. waste) in the
existing system.
ii)
To document the current flow of the sales orders (current state map) in the
SEC's factory.
iii)
To apply VSM to determine the improved flow of sales order.
iv)
To determine the total reduction of time (in hours) associated with the
elimination of non-value added processes in the factory.
v)
To propose a new flow (future state map) of the processes that will help to
improve the factory productivity.
1.4
Scope of Study
Factory productivity is a major concern for most of the manufacturers because it is
the important criteria to determine the competitiveness of the factory in the
industry. Therefore, waste elimination and reduction of factory throughput time
can be a daunting task due to their complex interactions in the factory processes.
Besides that, many internal and external factors will also influence and affect the
factory productivity. However, there are basic principles such as adoption of VSM,
if applied correctly, can be adopted to identify and eliminate various types of nonvalue added processes in the factory. Therefore, the scope of this study is to focus
on productivity and efficiency of the SEC's factory processes from the point of sales
order to final delivery to customers. In between the .factory processes, there are
ma~y
wastes which can be identified and eliminated in order to improve the flow
and thus, productivity and the efficiency of the sales order processes in the
factory.
4
1.5
Significance of Study
This study contributes to improving factory productivity by eliminating waste using
VSM . The outcome of the elimination process will reduce operational and
production costs, thus reducing the final price to the end consumers. This will
increase the competitiveness and SEC's sustainability in a long run and promote
steady growth stream for the factory.
1.6
Organization of the Dissertation
This study contains of 5 chapters. Chapter 1 consisted of a description and
introduction of the study, research problem, objectives of study, scope of study,
significance of study and overview of the dissertation of organization of this study.
Chapter 2 is all about the review of the literature which is related to this study, the
definition of the variables and the proposed hypotheses will be discussed. This
chapter is mainly focused on the review of "productivity", "waste" and the adoption
of "value stream mapping" in the factory. The intention of this chapter is to
provide the history and common methods of measuring the variables as mentioned
above. Besides that, the current flow of sales order in the SEC's factory is being
documented and discussed in this chapter. Chapter 3 is an explanation and
discussion pertaining to the research framework and methodology that is used in
this study. Chapter 4 discusses the finding of this study. Chapter 5 consisted of the
discussion on the implications (both theoretical and practical). A proposed future
state map also being documented and discussed in this chapter. Furthermore,
research limitations, suggestions for future research and conclusion for the study
also included in this chapter.
5
CHAPTER 2
LITERATURE REVIEW
2.1
Introduction
From the review of the literature, there are indeed not many studies directly
addressing the issues and impacts of the waste towards the productivity in the
factory. In this chapter, the literature review will focus on providing an overview of
various types of wastes, and will describe how VSM can be adopted and used as a
fundamental component in eliminating waste in order to improve the productivity
in the SEC's factory.
2.2
Definition of Productivity (Dependent Variable)
Quesnay (1766) first introduced the term of "productivity" in the Journal de
l'Agriculture. Since then, the word "productivity" has been widely applied in many
different circumstances in the different industries, mostly in relation to the
organization economic systems (Tangen, 2002). Furthermore, it has been strongly
argued that productivity is one of the most important criteria that should not be
neglected in improving the overall financial and productivity controls in the factory
(Singh et al., 2000). Specifically, manufacturers should focus and concentrate on
how to improve the productivity in order to remain competitive in the global
market. Grossman (1993) also discusses that manufacturers should perceive the
productivity improvement as one of the key competitive task in the factory. In
order to remain competitive in the industry, it is necessary for the manufacturers
to improve the productivity and efficiency as this will lead to greater cost reduction
in the operation and production line.
In spite of the fact that productivity is perceived as the most important
factors that affect the manufacturing competitiveness (Porter, 2000), however,
many researchers state that, productivity is always being neglected and ignored by
manufacturers who do not realize the importance of improving productivity in the
factory (e.g. Sink & Tuttle, 1989; Singh et al., 2000; Broman, Z004).
6
Chew (1988) also states that, even though the concept and theory of the
productivity has already existed for a long time, surprisingly management may still
do not know how to answer the simple question of what productivity is all about.
According to Forrester (1993), this is because there is no common agreement and
aligned objective from the management on what the term "productivity" actually
represents in the organization.
Tangen (2005) suggests that the definitions of productivity are based on
individual opinions instead of a shared and common perception that are perceived
by the others. In the industrial engineering field, productivity is being defined as
the relation of output (which is the goods produced) to input (which is the
resource consumed) in the factory transformation process (Sumanth, 1994).
Furthermore, according to Moseng and Rolstadas (2001), productivity can be
described as the ability to fulfil the customers' demands with a minimum
consumption of the resources. That is, with the minimum consumption of the
resources, it is able to produce quality goods and increase the output.
Bernolak (1997) provides an explanation in which productivity is highly
associated with manufacturing. According to this researcher, productivity means
how much and how well the production line can produce the goods from the
resources consumed. The researcher also claims that, if the firm is able to produce
more and quality goods from the same resources, it is to be known as increased in
productivity. On the other hand, if the firm produce the same goods with lesser
resources, factory productivity is considered to be increased as well. The
researcher also provides the meaningful explanation for the term resources. "By
resources, it means all human and physical resources, which are the people who
produce the goods or service providers, and the assets with which the people can
produce the goods or provide the services. The resources that people use include
the land and buildings, fixed and moving machines and equipment, tools, raw
materials, inventories and other current asset." (Bernolak, 1997, p.206).
According to Tangen (2005), the above definitions given by Bernolak
confine two important descriptions. First, the productivity is very much related to
7
the availability and consumption of the resources. That is, the firm's productivity is
said to be downgraded if the resources are not properly being utilized. On the
other hand, if there is often a lack of resources in the factory, this will downgrade
the firm's productivity as well. Second, productivity is closely related to the value
creation for the manufacturers. That is, high productivity can be achieved if
resources and activities in the factory transformation processes create value to the
goods that are produced. Hence, it is important for the manufacturers to eliminate
non-value added processes (i.e. waste) in order to improve factory productivity
and efficiency. This is because waste is considered to be opposite of what
productivity denoted (Tangen, 2005).
In general, productivity means how well the workers can perform in the
factory. It is also covers the investment of the tools and machines in the factory.
Besides that, the employee education and training of human resources shall also
be taken into consideration when defining the terms of productivity in the factory
(Helms, 1996). Employee (or to be known as operator in the factory) who
performs a job in the factory is a producer, they are responsible for and contribute
to the improvement of the productivity. When comparing the total time spent by
the workers and total materials consumed in producing a goods, it is important to
have a measurement for the productivity in order to benchmark the processes,
which means if the workers can perform their jobs better, with the same total time
spent and materials consumed, they are able to produce more goods, therefore
the firm is considered having an overall increase in productivity and efficiency.
Throughout the review of the literature, productivity has been defined as the key
to economic prosperity for an organization (e.g.: Tangen, 2005; Helms, 1996).
As being argued by Stainer (1997) and Bernolak (1996), most of the
manufacturers assume that the definition of productivity is similar with production.
Manufacturers always make a wrong assumption that increased in production
represents increased in productivity. This is not necessary true as productivity
cannot be said to increase or decrease unless an actual comparison is made in the
factory by comparing the outputs for the consecutive months throughout the year.
Manufacturers have to compare the production volume and numbers of outputs
8
produced by the operators before the judgement is made to the increase or
decrease of the firm's productivity.
Moreover, as stated by Misterek et al. (1992), improvements in productivity
can be caused by five different relationships, which can be summarized as below:
i)
Increased in output faster than the increased in input. The increase in input
is proportionately less than the increase in output (managed growth);
ii)
With the same input, more output is produced (working smarter);
iii)
With the reduction in input, more output is produced (the ideal);
iv)
With the reduction in input, same output is produced (greater efficiency);
and
vi)
Decreased in input more than decrease in output. The decrease in input is
proportionately greater than the decrease in output (managed decline).
In a nutshell, productivity is a multidimensional term, according to Tangen
(2005). The definition and concept of the term productivity are different depending
of what context it is placed in. For instance, productivity measured for
management staffs is usually different from the productivity measured for the
operators or technicians of an assembly line. The variance and reasoning of this
indicates that, productivity must be perceived from a different perspective and
view from a different angle at each level. The precise definition shall therefore
depending on which context it is applied for.
9
2.3
Definitions of Waste (Independent Variables) and Hypotheses
Development
A fundamental approach to improve the factory productivity and efficiency is the
ability to identify the non-value added processes (Le. waste), thus eliminate or at
least reduce all forms of waste within the value streams in the factory. The
rationale behind this rectification and elimination of waste in the factory need to be
understood by the manufacturers in order to effectively identify and adopt the
waste elimination tool to improve productivity and efficiency in the factory.
According to Hicks (2007), there are few techniques that can be adopted in
order to identify and eliminate the various types of waste that is a burden and
barrier to the productivity improvement in the factory. The techniques include the
five "S"s (Warwood & Knowles, 2004), Kaizen (Imai, 1986), Six Sigma (Pyzdek,
2003), Single Minute Exchange of Die - SMED (Shingo, 1985), and Value Stream
Mapping (Hines and Rich, 1997).
Often in practise, most activities in the factory create wastes (Seth et al.,
2008). Within the context of manufacturing system, there always exist seven types
of waste. These are the commonly identified and accepted wastes in the Toyota
Production System (TPS) as introduced by Ohno (1988) of Toyota and thereafter
reported by Womack and Jones (1996). The seven types of wastes include
overproduction, waiting, transportation, processing, inventory, motion, and defect.
According to Ohno (1988), wasteful activities do not add value to a product. For
instance, products sit in the storage, products being moved around from one
location to another location, raw materials are queuing and waiting to be
processed, all. these activities indeed add no value to the products, hence
downgrade the productivity and efficiency of the factory.
Explanation is further explored and discussed by Rawabdeh (2005), in
which the researcher states that the seven types of wastes can be eventually
categorized into four main groups. These are man, machine, material and method.
Each category of these represents the different types of wastes that occur in the
traditional manufacturing processes in the factory. In short, the man category
10
contains the type of waste for overproduction, waiting and motion; the machine
category contains the type of waste for over-processing; whereas the material
category shall contain the type of waste for transportation, inventory and defects;
and the method shall inclusive of all types of the wastes, as improper
methodologies being implemented in the factory will downgrade the productivity of
the factory.
2.3.1 Overproduction
Overproduction is said to occur when operations in the factory continue after they
should have to be ceased (Hicks, 2007). In other words, overproduction is the
production of material in which it is not needed now by the manufacturers and
customers. This is often occurs in the large batches production, products being
made too early and faster than the speed at which they are needed by the
customers. Manufacturers found that it is difficult to estimate precisely the actual
numbers of goods that they should have to produce.
As discussed by Nielsen (2008) in his research, overproduction means
working on something before it is required by the next step in the process flow, or
before it is required by the customers. As a result, product sits in work in process
queues or in a finished goods stock, and it is indeed not needed now. This kind of
phenomenon is considered non-value added processes (Le. waste) for the
manufacturers that will downgrade the productivity and efficiency in the factory.
Generally, overproduction can be caused by a few factors in the factory, such as
poor quality and design of the factory layout, long setups, over complexity of
interactions and unreliability of the machine used within the manufacturing
environments. To rectify and resolve this type of waste, the manufacturers should
avoid using the complicated and long setups in the factory in order to make the
production line run effectively and efficiently. Furthermore, manufacturer should
also avoid running the production line with inappropriate type of machine as this
will lead to overproduction that in turn cause the increase of the operation cost,
thereafter downgrade the productivity and efficiency of the factory.
11
Overproduction will also cause an excess of products, products being
produced too early and thereafter increased the unnecessary inventory. Always,
overproduction happens when the manufacturer over purchase resources than
they are needed to be delivered to the customers. Manufacturers found that it is
difficult to estimate the actual amount of products that need to be purchased and
produced. For example, because of the long change over time in the large batch
production, it is often to exceed the quantity that are ordered and needed by the
customers, thereafter lead to increase in the inventory.
In Ohno (1988) view, overproduction is the worst amongst all these seven
types of waste in the factory. This is because this type of waste usually generates
all the other forms of waste, especially inventory. Rationally, overproduction
causes the increase of the amount of the space to store the raw materials as well
as overly produced goods. By keeping large batches of finished goods in the store,
this is often being referred to as non-productive cost, and this is the cost that
increases the operational cost. Furthermore, the waste from overproduction will
lead to not only excess in inventory, but also tonnes of unnecessary paperwork,
double handling cost, extra space, extra storage, interest finance charges,
machinery, defects and poor quality of goods, human resources and overhead
cost. All of these are initially downgraded the productivity of the factory.
Generally, overproduction is being viewed as the most serious waste as it
discourages a smooth flow of the production in the manufacturing environments. It
is expected to restrain quality and productivity in the factory as well. The
statement is supported by Hines and Rich (1997) that, such overproduction tends
to lead to excessive storage times in the factory. As a result, defects may not be
detected early as problems hide in the inventory, products may deteriorate in its
quality and pressures on work rate from the factory staff may be generated. Ohno
(1988) also states that, overproduction causes the excessive work-in-progress
stocks which result in the physical disturbance of operations that lead to poor
communication that downgrade the productivity and efficiency of the factory. This
kind of phenomenon is indeed having a negative impact on the productivity.
12
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