Lean Supply Chain Management in SMEs

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Table of Contents

Introduction & Research Background

Research Problem & Statement

Research Objectives

Literature Review

Research Significance & Limitations

Research Design

Concluding Statement

Preferred Supervisor

Bibliography / References

Lean Supply Chain Management in SMEs: A Literature Analysis & Case Study of New Zealand Company

Introduction & Research Background

In today’s world, developers are increasing their expectations on several aspects of projects, requiring it to be cheaper, completed faster, with an increasing quality without lacking on the safety (Remo Mastroianni & Tariq Abdelhamid, 2013). This situation which has grown greater with the subprime crisis of 2008, comforted the industry to thrive for means to eliminate wastes and increase profit. Due to the compressed project schedules, the

construction often begins without the final design being released for construction (Hanna Awad S., Russell Jeffrey S., Gotzion Timothy W., & Nordheim Erik V., 1999). Such situation has led scholars to study on other industry so to find other means of management, which proved producing better results, in order to translate it to the construction industry.

A supply chain or logistics network is the system of organisations, people, technology, activities, information and resources involved in moving a product or service from supplier to customer. In the 1980s the term Supply Chain Management (SCM) was developed to express the need to integrate key business processes.

As early as during the 1990s, the research community analysed the possibility to translate

the Lean production principles, introduced by the Toyota’s engineer Taiichi Ohno, to

the construction industry (Koskela-TR72.pdf, n.d.) (Luis Alarcón, 1997). The manufacturing environment and processes being fairly different from the ones occurring in the construction industry naturally led to deep interests and analysis of the Lean production philosophy, hence, the creation of the International Group for Lean Construction (IGLC) contributing to a significant part of the theoretical lean construction theories produced.

Although the definition of Small and Medium Enterprises (SMEs) varies in different countries or regions, it’s a common view that SMEs are an important driving force no matter in developed countries or developing countries. They are playing a significant role in developing national economy, increasing employment, enlarging export, promoting innovation, and providing personalized service, etc.

According to 2016 Small Business Profiles for the States and Territories, which was produced by the U.S. Small Business Administration’s Office of Advocacy, there are 28.8 million small businesses in U.S. They take up 99.7% of the total U.S. businesses, and nearly half of the overall private workforce is working in small businesses. In Europe, SMEs are also ubiquitous, they took up 99.8% of all the non-financial business enterprises in the EU28 in 2014. And 67% of the total employment was employed by SMEs, which means about 90 million employees were involved (Muller et al, 2016). Stated in Statistics New Zealand Business Demography (Feb 2014), the total number of enterprises in New Zealand in February 2014 was 487,875 of which 97% are SMEs. More than 970,000 employment positions were created by SMEs. And they also contributed nearly 30% of New Zealand’s GDP.

 Research Problem & Statement

  1. The construction system is a dynamic process and influenced by internal and external factors, such as weather, budget, government, technique issues and resources. Each of the factors will affect the project. Hence, project works over schedule and over budget will occurred.
  2. In the production process, this is often no good set up relating to the provision of a project. The schedule always planned well before the project activity. However, the planning could be performed poorly due to certain unforeseen issues.
  3. Research has shown that in traditional construction projects only approximately one-half of the tasks assigned for a given week are likely to be completed in that week (Lincoln H. Forbes, Syed M. Ahmed, & Syed M. Ahmed, 2010). Flow variability greatly influences original schedule, as a delay in work completion by one trade directly affects the downstream activities of the next session (Lincoln H. Forbes et al., 2010).
  4. There was an insufficiency in housing sector in New Zealand due to the population rise. So the construction firms build house in a rapid manner which lead to quality issues.

Research Objectives

This research tries to use literature analysis and case study to explore the case company’s experiences of implementing Lean thinking in SCM especially in New Zealand. The main objectives of the research are:

  1. To determine the awareness of lean construction within the engineers who work in construction industry in New Zealand.
  2. How the case company did the Lean implementation in the company and throughout its SC and what effects were achieved.
  3. Key concepts such as SC, SCM, Lean Thinking, and LSCM will be introduced and reviewed.
  4. To find out the unique features of an SME’s SC and the specific problems it has in its SCM and understand the practices conducted by the case company.
  5. To discuss the suitability of applying lean practices for an SME to improve its SCM among the construction in New Zealand.

Literature Review

(Bruno Pontes Mota & Ricardo Rôla Mota, 2008)has analyzed that after applying lean construction concepts they noticed that productivity has been enhanced and duration of project concentrated. Construction phase of a residential project in the town area of brazil. The project comprise the construction of 18 houses finance by a private investor and it was constructed and managed by a small achieve a more stable flow of work and the number of emergency request for resource decreased radically. Also, the project was completed a month move ahead when compared to its original timetable thus allowing the investor to sell the units sooner than expected. Finally after, analyzing the reimbursement achieve in this pilots project the company’s upper management has decided to use lean concepts in other projects, and the private investors wants to make certain lean is used in other projects finance by this company.

(Chien-Ho Ko, 2017)identified that lean building design model (Lbdm) by lean concepts to develop design quality. Hidden waste in conventional design workflow is primary identified using value streaming mapping (Vsm). Vsm is used for visualization and recognized by visiting gemba. Present design process is separated into three stages, namely initial design, essential design, and detailed design. In building projects, designers and engineers involve professionals from different fields. In addition, traditional designs are tend to be completed by individual designers and engineers without interactive partnership. As a result, constructability and hidden design problems break absent during construction phase, resultant in schedule delays and financial statement overruns. In this study, an managerial learning environment is built to assist project stakeholders to learn from faulty designs. The design quality can be improved through iterative communications. Consensus can therefore be converged from the collaborative design workflows. The proposed method that allow project stakeholders to validate their design needs can achieve feasible design artefacts, thus enhancing project performances. In the future, researchers may consider other lean tools and technique to supplementary improve design quality.

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(Jay Shankar Goit, 2016)is analyses decrease in the overall cost of the activity, decrease in overall time of the activity and just in time (jit) be able to implemented, easy to recognize from the top to bottom of the construction pyramid and we can put an end to “just do it‟ policy of implement activities. They analyze the general perception of construction industry and how the lean construction tools can be used to advance the implementation of these activities particularly in supervision construction wastes. As mentioned in their paper, they developed a process improvement tool using lean construction which are executed it in different sites. They received an irresistible response from the construction team, and they establish it very effective tool that can be implemented in the site. Very simple and easy to use, better way to convey the information about a crisis to the top management, easy to understand from the top to bottom of the construction pyramid, decline in the overall cost of the activity, fall in overall time of the activity.

(Mohd Arif Marhani, Aini Jaapar, & Nor Azmi Ahmad Bari, 2012)believed that based on the literature review, it can be over and done with the current application and implementation of lean construction into the Malaysian construction industry is still in its formative years or in a very early stage even though it-is known to present a good platform for the stakeholders to accomplish value for money for their projects. Its full execution in the Malaysian construction industry in particular is not an easy task as it will need more effort from all associated parties such as the education organization and for the practitioners.

(Rishav Sarma Bardalai & Arunima Jayakumar, 2015)identified the last planner is a method that can be implement in the site for the successful execution of the work. The last planner process begins with the reverse phase schedule, a detailed work plan specifies handoffs amid trades for every phase. Base on the rps, a “look ahead” schedule provide the activities to be finished during the coming weeks and the backlog of ready work.

(Andrew R. J. Dainty, Sarah J. Millett, & Geoffrey H. Briscoe, 2001)identified that in most supply chains, Small and Medium Enterprises (SMEs) play a very important role in ensuring success. SMEs in the construction sector are also facing great challenges due to fluctuating demand cycles, project specific product demands, uncertain production conditions and the need for a diverse range of specialist skills within geographically dispersed short-term project environments

(Usama Hamed Issa, 2013)indicated that the use of lean construction technique in construction projects has significant effects on the decrease in pet [percent expected time-overrun] values and the enlarge in Ppc values [percent plan completed]. Sepani senaratne identified that lean construction is an idea still new to lots of construction industries in the world. Lean construction can be argued as a strategic option when implement in a new setting, where certain test such as its suitability and acceptability desires to be done prior to its execution. Hence, they aimed to explore the suitability and acceptability of lean thinking in Sri-lanka. The learning adopt an opinion survey using Delphi method to bring together empirical data. The result reveal frequent flow activities that generate waste and their causes in the Sri-lankan construction industry. The investigate further finds that the domestic construction industry workforce is unaware of these flow activities that create waste and their cause. When experienced majority believe the core principles of lean construction and are having a kaizen mentality, which is middle to lean thinking. Therefore, the learning concludes that lean construction is suitable and acceptable in the Sri-lankan context. Overall, the study offers an move towards to test lean construction in a new construction industry using an opinion survey.

From a literature review, it is observed that many authors stress the importance of SCM in different fields, specifically in manufacturing and retail. But very limited research is available about the application of SCM in SMEs from the construction industry. In this study, the author will try to analyse implementation of SCM in a construction organisation and also illustrate a framework for evaluating effectiveness.

Research Significance & Limitations

Productivity improvement has been a major initiative of the New Zealand construction industry. Currently the construction sector strives to increase productivity by 20% in 2020. Since 2009 an increasing number of construction organisations have implemented lean construction practices in an attempt to improve their project delivery. These lean practitioners have implemented the Last Planner System (LPS) as a production planning and control system to achieve project goals. Most LPS users have reported satisfactory results from their implementation, however, there is a need to provide empirical support to these claims. This study investigates the usefulness of LPS implementation amongst construction industry users in New Zealand. It determines from the study the level of LPS implementation and provides empirical evidence of the benefits of its implementation in New Zealand.

Limitations of this research is that the research findings of case study are hardly to be generalized to a larger research scope. When it comes to single case study, the limitation can be more obvious. Because of the different business environment, history, culture, size, people, etc., each company has its uniqueness. By conducting single case study, it is possible for the researchers to get an in-depth understanding of the case company, but it is not necessarily to be enough for providing a sound basis for generalizing the findings to other companies.

Additionally, the limited time of the research. Any new management strategy for a company should be a long-term project, it requires prudent decisions, step-by-step plan and implementation, continuously adjustments, etc. So, it is unlikely to have an effect immediately.

Research Design

The approach for these research/ study would be mostly theoretical. This thesis may start with a phenomenon in construction industry, which is common and difficulties in construction system. Identifying possibilities to develop and improve, which can be settled in lean construction area. Theoretical study is the main research method used in the report, including several theories illustrates in order to build the foundation for the report. To reach the final finding, a combination with several key theories is made. Since Lean and Lean principle as a concept can be use in any area, it does not have pertinence in construction industry. Construction supply chain is a fact in construction needs principles to direct and optimize. Hence, a good combination between theories and fact is made.

Concluding Statement

The main purpose of this research project is to investigate the issues/ problems related to the supply chain management process in SMEs in the construction industry of New Zealand. Also, to provide the ultimate solution for the identified problem and how to apply that.

This research project at the end would be most probably capable of changing the whole current construction industry scenario of New Zealand.

Bibliography / References

  • Andrew R. J. Dainty, Sarah J. Millett, & Geoffrey H. Briscoe. (2001). New perspectives on construction supply chain integration. Supply Chain Management: An International Journal. https://doi.org/10.1108/13598540110402700
  • Chien-Ho Ko. (2017). Lean Building Design Model. Procedia Engineering, 182, 329–334. https://doi.org/10.1016/j.proeng.2017.03.104
  • Hanna Awad S., Russell Jeffrey S., Gotzion Timothy W., & Nordheim Erik V. (1999). Impact of Change Orders on Labor Efficiency for Mechanical Construction. Journal of Construction Engineering and Management, 125(3), 176–184. https://doi.org/10.1061/(ASCE)0733-9364(1999)125:3(176)
  • Jay Shankar Goit. (2016). MINIMIZATION OF WASTAGE USING LEAN TECHNOLOGY IN CONSTRUCTION. International Journal of Technical Research and Applications, 4(3), 382–390.
  • Koskela-TR72.pdf. (n.d.). Retrieved from http://www.leanconstruction.org.uk/media/docs/Koskela-TR72.pdf
  • Lincoln H. Forbes, Syed M. Ahmed, & Syed M. Ahmed. (2010). Modern Construction: Lean Project Delivery and Integrated Practices. https://doi.org/10.1201/b10260
  • Luis Alarcón. (1997). Lean Construction. CRC Press.
  • Mohd Arif Marhani, Aini Jaapar, & Nor Azmi Ahmad Bari. (2012). Lean Construction: Towards Enhancing Sustainable Construction in Malaysia. Procedia – Social and Behavioral Sciences, 68, 87–98. https://doi.org/10.1016/j.sbspro.2012.12.209
  • Muller et al. (2016, March 1). Annual report on European SMEs 2014/2015, SMEs start hiring again: Final report : November 2015. [Website]. Retrieved August 11, 2019, from https://publications.europa.eu/en/publication-detail/-/publication/7c9fbfe0-e044-11e5-8fea-01aa75ed71a1
  • Remo Mastroianni, & Tariq Abdelhamid. (2013). THE CHALLENGE: THE IMPETUS FOR CHANGE TO LEAN PROJECT DELIVERY. Alexandria Engineering Journal, 52(4), 679–695. https://doi.org/10.1016/j.aej.2013.04.008
  • Rishav Sarma Bardalai, & Arunima Jayakumar. (2015). Study and Implementation of Lean Technique in Construction Industry- A Case Study. International Journal of Innovative Research in Science, Engineering and Technology, 4(4), 2277–2286. https://doi.org/10.15680/IJIRSET.2015.0404084
  • Usama Hamed Issa. (2013). Implementation of lean construction techniques for minimizing the risks effect on project construction time. Alexandria Engineering Journal, 52(4), 697–704. https://doi.org/10.1016/j.aej.2013.07.003


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