The purpose of this article is to investigate through a literature review, to determine the importance of implementing and practicing lean management in multi-national companies. It is well understood that the market conditions highly volatile due to the increased competition from the traditional brick and mortar retailers as well as on-line retailers. In order to retain the current market segment and to possibly increase it, it is vital to maintain the competitive pricing strategy and high quality standards. During the essay it will be discussed how introducing lean principles and concepts, multi-national companies could achieve this objective

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A detailed investigation to understand the importance of practicing lean management concepts in
Multinational Companies
Charm Rammandala
California Intercontinental University

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Abstract
The purpose of this essay is to investigate through a literature review, to determine the
importance of implementing and practicing lean management in multi-national companies. It is
well understood that the market conditions highly volatile due to the increased competition from
the traditional brick and mortar retailers as well as on-line retailers. In order to retain the current
market segment and to possibly increase it, it is vital to maintain the competitive pricing strategy
and high quality standards. During the essay it will be discussed how introducing lean principles
and concepts, multi-national companies could achieve this objective

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Introduction
Over the last decade consumers buying behavior has changed significantly. While still they
appreciate and willing to pay a premium price for the new innovations and new product
offerings, primary determine factors which decides buying decision is based on the price and the
quality. Several reasons had an impact on this changing behavior. Mainly due to the competition
in the high street. Lin Yan in his book titled Global economy in turbulent times (2015) explains
how over the last decade consumers spending power reduced as most of the consumers
disposable income shrank due to the recession and global financial crisis
Inevitably consumer focused price led market conditions prompted a price war among the
retailers in the high street. This has dramatically changed the way companies do business and
they have to re think the whole supply change to align to new changing developments in the
market place.
It is important to offer quality product, at the right price in the right location. Modern consumers
are not loyal to the brand names unless it’s a high priced luxury item. In order to beat the
competition, most companies now focusing on introducing lean management principles to their
supply chain. The purpose of this essay is to determine the importance of introducing and
practicing lean management to supply chain of multinational companies in order to secure the
current market share and to improve it.

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Main Body
As a result of globalization, significant improvements in the telecommunication sector and the
transportation industry, world becoming ever so closer. This has resulted in more and more
companies looking outside their home country to make their products or sell their products.
Further as a result of the internet and e-commerce, now retailers and consumers have another flat
form to buy and sell .while all these are positive developments, it’s not so for established,
traditional retailers as this means more companies starting to follow the same footsteps and join
the competition. This resulted in price war as price leadership strategy is the most common and
easiest methodology to enter a new market.
Initially offshore manufacturing was attractive to keep the manufacturing cost low so companies
who are engaged in the retail sector could keep a higher profit margin when retailing. However
over the years so called cheap labour countries are shrinking and wages of those employees are
rising due to several reasons. While consumers in western countries appreciate lower retail price,
they do not want to see the products their buying sourced through so called sweat shops.
Consumers prefer ethical sourcing and retailers are forced to monitor their supply chain to ensure
this is the case.
As a result of above developments multinational companies increasingly adopting lean
manufacturing concepts to improve their supply chain management. Lean is a management
strategy to improve the productivity, efficiency and quality. According to Christopher Hann who
wrote the essay titled, The art of Efficiency, another major advantage is the reduction in the cost

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of inventory.(Christoper Hann, 2013) Lean practices just in time concept and this will reduce the
cost of storing and maintaining huge inventory of raw materials as well as finished products. The
savings will help the companies to maintain consumer focused pricing strategy while beating the
competition.
One of the great advantage of the lean manufacturing is that it will standardize the each and
every operation. This will ensure each and every product produced in the same way, eliminating
the product variance. Also through work place organization methodologies such as 5S concept (
Graph 1), it makes significant improvement to the health and safety of the employees and
reduced the wastage throughout the company. Further products are made based on the demand
hence the cost for storage of finished goods are reduced. All these attributes help multinational
organizations to run a smooth operation whereby help to maintain or lower the cost
Graph 1

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Graph 2 below shows the improvements made to Kontavill manufactures production plant after
introducing lean manufacturing concepts. Orders which were pending to complete reduced by
95% while productivity improved by 35%. As a result of improved methodologies, lead time
reduced by 35%. As a result of all these improvements, company’s cash floor was much better
and gave the edge when it comes to beating the competition.
Graph 2
Value stream mapping is one of the key tool used in lean manufacturing concept to understand
the total process involved from raw material sourcing to retail store(James P Womak & Daniel T
Jones, 2015) By having a clearly laid out map describing each and every process will give the
opportunity to determine the value it brings to the process. As a result company could eliminate
the non-value adding processes and improve the rest.

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It is important to acknowledge that lean management strategy can be implemented throughout
the company and not only the manufacturing plant which could be based in the home country or
in an offshore location. In all work places can be benefit from adopting those principles (Don
Tapping & Tom Shunker, 2003)
Some of the most notable improvements can be achieved through lean are,
 Involvement of the total workforce. This will have a positive effect on the company
culture as each and every employee feel valued
 Greatly improved quality. This could be the products that coming out of the production
line or the quality of the work employees does in the office environment. This can be
achieved through standardization and continuous improvement.
 Elimination of problems through root cause analysis. Lean management insist training
workforce in lean thinking. This will help the staff to think strategically and logically to
determine the factors causing the problems. Tools such as fish bone analysis and 5 why
helps to eliminate problems
 Lower production cost is one of the key achievement through lean implementation. As a
result of standardization and eliminating non value adding processes, the amount of man
power needed greatly reduced. Also improved productivity and efficiency helps to bring
operating cost down significantly

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Multinational companies are by nature big and spread across the borders. These companies have
employees and managers from different countries with different values. In order to bring all
together to achieve a common target, it is important to have a standardized operation procedure.
Lean management does just that.
Summery
The purpose of the essay was to highlight the importance of implementing lean manufacturing
concept to multinational companies. As discussed, it is important to understand the changing
environment where company operate and realize that customers as well as suppliers are
demanding better prices. In order to beat the competition and offer lowest possible price to
customers and at the same time to pay fair and sustainable price to manufactures, companies
have to have a strong battle tested strategy. This is where lean manufacturing helps customers.
Lean will help to produce best possible products to the lowest cost by eliminating all
unnecessary waste which occur during the manufacturing process and within the supply chain

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References
Christoper Hann (2013) The art of efficiency
retrieved from business economics & theory collection http:/go.galegroup.com.ezp
James P Womack & Daniel T Jones (2015) Seeing the whole value stream
retrieved from business & theory collection. www.go.galegroup.com
David R Gibson (2007) Applying lean principle to design effective supply chain
Retrieved from business & theory collection. www.go.galefroup.com
Thomas L Jackson & Karem R Jones (1996) Implementing a lean management system
John Nicholas (2011) Lean production for competitive advantage
Don Tapping & John Shunker (2003) Value stream map for the lean office