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In the present global scenario, manufacturing organizations are mainly facing challenges from two directions. First, advanced manufacturing philosophies are emerging, which the existing methods are becoming obsolete (Jasti & Kodali, 2015). Secondly consumer thinking is changing and loyalty goes beyond a rational decision for superior perceived price-performance ratio. The customers have become more demanding for innovative products and services within a very short period of time and at less price (Tersine & Wacker, 2000; Lau, Jiang, Chan, & Ip, 2002; Ho, Lau, Lee, & Ip, 2005). Essentially to cope up with such challenges, the core idea behind strategy formulation by manufacturing firms nowadays, is to maximize customer value while minimizing waste. Hence, manufacturing firms operating in such rapidly changing and highly competitive market, for the past two decades have embraced the principles of lean thinking (Fullerton, Kennedy, & Widener, 2014). The word “lean” refers to lean manufacturing or lean production as it uses less of everything, compared to mass production (Wahab, Mukhtar, & Sulaiman, 2013). It only uses half of the human effort in the factory, half of the manufacturing space, half of investments in tools and half of the engineering to develop a new product in half of the time (Liker, 1998; Womack, Jones, & Ross, 1990). Also, it requires keeping far less than half the inventory on site, results in fewer defects, and produces a greater and ever growing quality of products (Womack, Jones, & Ross, 1990).
SMEs are commonly recognized as being critical to the health of global economy. The current economic environment in the Indian manufacturing industry is offering a perfect opportunity to SMEs of this country to develop and grow by acting as suppliers of large multinational original equipment manufacturers(OEMs). Given the importance of SMEs, it can be assumed that the rapid adoption of lean practices by SMEs has become an important determinant of success in the global market place. SMEs must be benchmarked with the best in industry practices for continuous improvement (Jain, Bhatti, & Singh, 2015). “Cost reduction without compromising on quality” should be the motto of every manufacturing SMEs, to survive in this competitive global economy. To prosper in today’s economic environment, any manufacturing firm must be dedicated to never-ending improvement, and more efficient ways to obtain products or services that consistently meet customer’s need. Lean implementation practices can be categorized as roadmap, conceptual/implementation framework, descriptive and assessment checklist initiatives by the manufacturing firms (Mostafa, Dumrak, & Soltan, 2013) to pursue operational excellence and gain a competitive advantage over their competitors.
Evidence from study suggest that implementing lean in small and medium manufacturing firms is by no means an easy task, which is heavily burdened by several internal and external organizational barriers. In addition to identification of the major barriers of implementation of lean manufacturing in Indian SMEs, the paper also investigated the effect of lean manufacturing implementation on Indian SMEs performance. The result provides insights into the extent of lean manufacturing implementation in SMEs in Indian context and provides further evidences that lean practices are significant in enhancing operational performance. The results show that all the three lean constructs are significantly related to operational performance.