Abstract

The productivity advances generated from lean manufacturing are self-evident. Plants that adopt lean are more capable of achieving high levels of quality, shorter lead times, and less waste in the system. While it seems logical that higher levels of productivity and quality, as is common in lean companies, should result in positive financial performance, the research community has failed to establish the financial profitability of lean. Those researchers who have studied the financial returns issue report varying results. The goal of this research was to determine if a connection exists between lean and financial success and to discover why so many researchers are finding mixed results. Information Velocity (IV) was theorized to provide the solidifying link between lean and financial performance. Measured by combining the environmental volatility with a company's leanness, IV measures how fast a company can transmit information from the market into a customer-satisfying product in the hands of the consumer. This study analyzed over 530 publicly-traded manufacturing companies to validate the following hypotheses: 1) there is a positive relationship between leanness and financial returns, 2) there is a negative relationship between environmental volatility and financial returns, and 3) there is a positive relationship between IV and financial returns. Regression models were run in various combinations to determine the effect of lean, environmental instability, environmental unpredictability, and IV on financial performance indicators such as return on sales (ROS), return on assets (ROA), and quarter-closing stock price. The outcome of this study showed that financial rewards do result from lean, which positively affected financial performance in almost all scenarios. Environmental instability always negatively correlated with financial returns, and IV mostly shows a positive effect, but with mixed results. Lastly, IV does not explain why researchers find mixed results on the profitability measures of lean. The results of this thesis highlight the significance of implementing lean manufacturing, especially in a dynamic environment. As the instability in the environment increases, profitability decreases. Therefore, an increase in leanness by boosting inventory turns can compensate for the volatility and create enhanced productivity measures and financial results.

Degree

College and Department

Ira A. Fulton College of Engineering and Technology; Technology

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