Accepted Manuscript

Lean Product Development and Lean Manufacturing: Testing Moderation Effects

Giuliano Marodin, Alejandro Germán Frank, Guilherme Luz Tortorella, Torbjørn

Netland

PII: S0925-5273(18)30273-1

DOI: 10.1016/j.ijpe.2018.07.009

Reference: PROECO 7093

To appear in: International Journal of Production Economics

Received Date: 20 March 2018

Accepted Date: 05 July 2018

Please cite this article as: Giuliano Marodin, Alejandro Germán Frank, Guilherme Luz Tortorella,
Torbjørn Netland, Lean Product Development and Lean Manufacturing: Testing Moderation Effects,
International Journal of Production Economics (2018), doi: 10.1016/j.ijpe.2018.07.009

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Lean Product Development and Lean Manufacturing: Testing

Moderation Effects

Giuliano Marodin
gmarodin@moore.sc.edu
University of South Carolina
1014 Greene Street, 405L, Columbia, South Carolina, United States

Alejandro Germán Frank

frank@producao.ufrgs.br
Federal University of Rio Grande do Sul
Campus Trindade, Mailbox 476, Florianópolis, Brazil

Guilherme Luz Tortorella

gtortorella@bol.com.br
Federal University of Santa Catarina
Campus Trindade, Mailbox 476, Florianópolis, Brazil

Torbjørn Netland
tnetland@ethz.ch
ETH Zurich
Weinbergstrasse 56/58, 8092, Zurich, Swizerland
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Lean Product Development and Lean Manufacturing: Testing Moderation

Effects

Abstract

Many companies allocate significant resources to implementing lean on the manufacturing shop
floor, but fewer resources to implementing lean in the product development processes. Despite a
rich literature on lean production (LP) and a growing literature on lean product development
(LPD), there is limited research on the relation between these two streams and their interaction
effects on operational performance. This paper draws on configurational theory to investigate the
moderating role of LPD on the effects of LM on quality and inventory performance. We used a
survey instrument to collect responses from firms implementing lean across their enterprises. We
tested our hypotheses using ordinary least squares regression models with moderation tests. We
find that LPD practices positively moderate the effects of LM on quality performance. Although
our research concerning the same moderating effect on inventory turnover is inconclusive, we find
that the implementation of LPD has a direct and positive association with improvements in
inventory turnover. Overall, our research suggests that companies can get more out of their lean
implementations if they pursue a systematic implementation of both LPD and LM, rather than
following the more common isolated approach.

Keywords: lean product development, lean manufacturing, operational performance

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1. Introduction

Firms that implement lean production seek to improve both effectiveness and efficiency (Womack

et al., 1990). They get more effective by increasing product quality and value from the perspective

of the customer. They get more efficient by minimizing internal and external variability and

reducing all forms of waste in their information and production flows. Although succeeding with

lean requires an enterprise-wide perspective (Jones and Womack, 2017), lean implementations are

often conducted in a piecemeal manner without sufficient integration across functional areas

(Marodin & Saurin, 2013). In this paper, we investigate the effects on operational performance

improvement of implementing lean in two functional areas at the same time. Specifically, we are

interested in the moderating effect of implementing both lean product development (LPD)

practices and lean manufacturing (LM) practices.

Most lean implementations begin with the application of lean practices at the core value-

adding processes (Marodin and Saurin, 2013). In manufacturing industries, for example, most of

the value is added on the factory shop floor, where inputs are transformed into outputs according

to market demand (Womack et al., 1990). LM practices enable the production of a larger variety

of products at a lower cost and higher quality while using fewer resources compared to traditional

mass production practices.

Several studies have highlighted the positive association between LM and measures of

operational performance, such as quality improvement (e.g. Dahlgaard and Dahlgaard-Park, 2006;

Karim et al., 2008, Netland and Sanchez, 2014; Negrão et al., 2017) and inventory turnover

(Demeter & Matyusz, 2011; Yang et al., 2011). However, although LM practices on average lead

to better operational performance, implementing LM in isolation is not sufficient if firms seek the

breakthrough improvements characterizing a true lean enterprise (Jones and Womack, 2017). To
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capture the full potential and value of lean, it is critical to disseminate lean principles also to other

organizational areas.

One way to increase value for the customer is to design better products, and do so faster

and in a more cost-efficient way (Clark and Fugimoto, 1989). This is possible through the

implementation of lean principles in product development processes (Leon and Farris, 2011; Liker

and Morgan, 2006; Rossi et al. 2017). Additionally, implementing lean principles at the “design”

stage of a product can help reduce systemic problems within an organization that could otherwise

generate substantial waste during later stages (Browning, 2000; Rossi et al., 2012). LPD considers

the customer’s perception of value in order to create new and profitable value streams within the

different organizational areas (Kennedy, 2013; Kumar et al., 2015).

Womack et al. (1990) advocated that companies should implement lean principles across

their enterprises. Yet, there is a lack of empirical evidence concerning the effects of a cross-

functional approach. Whereas some authors suggest a positive association between LPD and

operational performance, there is not much empirical evidence in the literature (c.f., Gautam and

Singh, 2008; Leon and Farris, 2011; Tortorella et al., 2016; Vinodh and Kumar, 2015). To the best

of our knowledge, there is no literature that empirically test the relationship between LM and LPD

and operational performance. Thus, in this paper, we empirically investigate the moderating effect

of LPD on the impact of LM on quality performance and inventory turnover.

We draw on configurational theory to hypothesize that, when companies use lean practices

in both product development activities and on the shop floor, LPD practices positively moderate

the effect of the LM practices on operational performance. We use regression analysis techniques

to analyze survey data from 110 Brazilian firms that are implementing lean in both manufacturing

and product development. Our findings show that the relationship between LM and quality is
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positively moderated by LPD and that LPD has a direct positive effect on inventory turnover.

Overall, our results suggest that practitioners should take advantage of a systemic lean

implementation across functional areas. Since lean implementation usually starts (and,

unfortunately, also often ends) in a corner of the manufacturing shop floor, many companies never

realize the full potential of lean (Netland and Ferdows, 2014).

This paper is organized as follows. In Section 2, we clarify the conceptual background. In

Section 3 we draw on configurational theory to develop our hypotheses. Section 4 describes how

we performed the research by surveying firms implementing lean in Brazil and testing our two

hypotheses using an ordinary least squares regression. We present the results of our research in

Section 5 and discuss them in Section 6. Finally, we conclude in Section 7.

2. Conceptual Background

2.1 Lean Manufacturing

Selecting appropriate practices to improve shop floor processes is a major responsibility for

production managers (Herron and Braiden, 2006). Bhasin and Burcher (2006) state that companies

often begin improvement activities by trying to implement a limited number of LM practices

throughout their organizations. These companies typically realize that this approach leads neither

to significant, nor to sustained, improvements. Research on different LM practices has found that

the simultaneous application of practices provides the highest return on investment (Cua et al.,

2001; Shah and Ward, 2003, 2007). Hence, a better and more consistent approach is to implement

bundles of LM practices concurrently (Shah and Ward, 2003).

In a literature review of 102 peer-reviewed articles, Marodin and Saurin (2013) found that

nearly every paper proposed a new or adapted list of lean practices. For example, Shah and Ward
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(2003) proposed that lean practices can be covered by four bundles: Just-in-Time (JIT), Total

Productive Maintenance (TPM), Total Quality Management (TQM), and Human Resources

Management (HRM). A few years later, the same authors proposed ten operational constructs of

lean practices, of which three were supplier-related practices (“supplier feedback,” “JIT delivery

by suppliers,” and “supplier development”), one was a customer-related practice (“customer

involvement”), and six were internal practices (“pull,” “flow,” “short setup times,” “productive

maintenance,” “controlled processes,” and “employee involvement”) (Shah and Ward, 2007).

Although there is no consensus concerning the list of LM practices, different proposals have a high

level of overlap (Marodin and Saurin, 2013). Whereas some studies take a supply chain perspective

on lean, we limit this study to internal LM practices, or lean shop floor practices. Internal LM

practices aim to reduce non-value added activities in the manufacturing operations of the company

(Chavez et al., 2015).

LM practices are widely recognized as a means to improve companies’ operational

performance (Shah and Ward, 2003). Nevertheless, many studies report barriers for achieving

effective implementations in the long term (e.g. Bortolotti et al, 2015; Netland, 2016). A key

challenge is that many companies still limit their lean implementation solely to the factory floor,

ultimately reducing the potential benefits of LM implementation.

2.2 Lean Product Development

Companies that have succeeded in improving their manufacturing shop floor processes often find

that product design becomes a new bottleneck (Letens et al., 2011; Reinertsen, 2009). Traditional

approaches to product development usually lead to a number of common problems, such as project

cost overruns and difficulty retrieving knowledge from previous projects (Haque, 2003; Liker,
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2004; Oppenheim, 2011). When applied to product development, the lean approach leads to

increased flexibility, dynamism, and interaction between teams, as well as shorter development

lead times (Rossi et al., 2017; Wang et al., 2012). However, studies at Toyota have shown that

implementing individual techniques from the LPD toolbox will not transform a company’s product

development processes (Thomke and Fujimoto, 2000). Furthermore, reported cases of successful

LPD adoption—apart from Toyota (e.g., Liker and Morgan, 2011; Lander and Liker, 2007, Sobek

et al, 1999, Sobek and Liker, 1998, Ward et al., 1995)—are still limited. Although LPD gives

organizations the capability to develop high-quality products faster and more efficiently, many

companies have yet to recognize LPD as a potential source of competitive advantage (Jasti and

Kodali, 2015; Kreafle, 2011; Leon and Farris, 2011).

Leon and Farris (2011) performed an extensive literature review of LPD. They found three

major research areas in the LPD literature. The first and most common area looks at how certain

LPD practices affect product development performance. Typical LPD practices include

“concurrent engineering,” “modularization,” “customer/supplier involvement,” and “design for

manufacturability.” When applied, these practices can improve the product development process

itself, strategies for managing product/project portfolio, and the integration of suppliers or

customers (e.g. Doolen and Hacker, 2005; Hines et al., 2006; Karlsson and Ahlstrom, 1996; Liker

and Morgan, 2011; Oppenheim, 2011; Reinertsen, 2009; Sobek et al., 1998). A second area uses

lean principles to define performance measures for LPD; examples include “development lead-

time,” “engineering hours,” “project costs,” and “ratio of developed products” (Krishnan and

Ulrich, 2001). A third and less common area focuses on LPD’s contributions to the organization’s

ability to learn from good and bad experiences of product development and product launch. The
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research done in this domain emphasizes knowledge creation and organizational learning in the

long-term (e.g. Nonaka and Takeuchi, 1995).

We contribute to the literature on LPD as a “best practice” (the first area suggested by Leon

and Farris, 2011). Specifically, we build on Bartezzaghi et al. (1992), Karlsson and Ahlstrom

(1996), Doolen and Hacker (2005), and Cua et al. (2001) to propose practices commonly

associated with LPD. These are: (i) concurrent engineering; (ii); modularization and parts

standardization; (iii) design for manufacturability; and (iv) customer involvement in product

development. Table 1 presents a definition of each LPD practices.

Table 1: LPD practices, definitions, and references.

TABLE 1 HERE

3. Hypothesis development

Configurational theory posits that organizational features — such as processes, departments and

structures — are interrelated and interdependent (Miller, 1986). As such, configurational theory

can be helpful for understanding how cross-functional processes reinforce each other and work

effectively together. Previous literature has used configurational theory to understand relationships

between elements of lean systems (e.g. De Treville and Antonakis, 2006; Shah and Ward, 2007)

and supply chain integration (Flynn et al., 2010). According to Miller (1992), configurational

theory explores how fit in internal complementarities can generate an integrated competitive

advantage.

In this paper, we look at LM and LPD as interrelated processes within the organization that

can reinforce each other’s effect on operational performance. Configuration is defined as the

alignment and orchestration of processes into specific goals (Miller, 1996). Pursuing both LM and
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LPD practices aligns the objectives of those two functional areas into a shared objective of

developing a more effective and efficient organization (Womack et al., 1990).

3.1 Effects of LM and LPD on Quality Performance

In general, research shows that the adoption of LM practices is positively associated with

improvement in operational performance (Marodin and Saurin, 2013). A common approach in the

literature is to measure operational performance broadly: including, for example, quality,

inventory turnover, delivery, productivity, and efficiency in one performance construct (e.g. Shah

and Ward, 2003; Demeter and Matyusz, 2011; Chavez at al., 2015; Marodin et al., 2016). Other

studies provide empirical evidence of the association between LM practices and single

performance dimensions, such as quality (e.g. Cua et al., 2001; Netland and Sanchez, 2014).

Because quality is a fundamental competitive capability (Ferdows and De Meyer, 1990), it is

arguably an essential measure of operational performance.

The objective of LM is to continuously improve manufacturing processes. Unlike

traditional approaches, LM encourages employees to solve their own workplace problems and

empowers them to stop processes whenever they detect defects or abnormalities (Sim and Rogers,

2008; Vinodh and Kumar, 2015). LM practices facilitate the efficient identification of problems,

root-cause analysis, and problem solving and prevention. Effective problem solving processes, in

turn, are expected to increase quality.

Some problems, however, do not originate in shop floor manufacturing processes, but stem

from ineffective product design process. Hence, solving certain problems on the shop floor may

require the participation of people responsible for product development. LPD practices would

make it possible to solve these problems quicker. More importantly, product development
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activities that operate according to the four principles of LPD (see Section 2.2) may be able to

avoid such problems in the first place. For instance, poor product development processes can

sometimes result in product designs that cause assembly difficulties or even high defect rates on

the shop floor due to the materials used or bad tolerance limits. In such cases, LPD enables firms

to identify and tackle the root causes of these product development-related issues. Hence, in line

with configurational theory arguments, LPD is likely to both preventively and correctively

moderate and enhance the effects of LM practices (Gautam and Singh, 2008).

In a preventive way, LPD tools (e.g. concurrent engineering, design for manufacturability,

and customer involvement) can limit assembly and processing flaws on the shop floor even before

a product goes to production for the first time. This allows the shop floor to use LM practices to

concentrate on solving other problems that fall under its domain and functional scope. In a

corrective way, LPD practices can facilitate solutions to product-related problems detected on the

shop floor. This way, LPD helps the product development activities be more responsive in terms

of making product changes. LPD speeds up the product development process, reducing the lead-

time from planning and designing to production via prototyping. Considering the above discussion

in light of configurational theory, our first hypothesis is:

H1: The positive effect of LM on quality performance improvement is moderated by LPD,

such that the positive effect is greater when LPD is highly adopted.

3.2 Effects of LM and LPD on Inventory Turnover

Inventory is a primary source of tied-up capital in industrial companies; therefore, firms frequently

try to reduce inventory. Inventory itself is a main type of waste, but, more importantly, it also

effectively hides other types of wastes and inefficiencies (Liker, 2004).

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Empirical evidence shows that the implementation of LM practices can reduce inventory

levels. Demeter and Matyusz (2011) found that LM implementation is positively associated with

reductions in raw materials, work-in-process (WIP), and finished goods inventories. Indeed,

inventory reduction is advocated to be one of the most common benefits of the implementation of

LM practices (Schonberger, 2008). For instance, the JIT principle (“pull production”) directly

connects the demand and supply of any two production processes and reduces their shared

inventory levels (Liker, 2004). Similarly, cellular manufacturing, which supports a seamless one-

piece flow of materials, eliminates inventories between process steps (Saurin et al., 2011).

Usually, investigations of the benefits associated with the use of LPD tools are measured

by product development metrics, such as product development lead-time, project success, market

performance, manufacturing flexibility, or product innovation (e.g. Koufteros et al., 2001; Leon

and Farris, 2011). Those metrics are all associated with a firm’s agility in changing its products to

respond to customers’ expectations. As an alternative, Tortorella et al. (2016) empirically tested

the effect of LPD practices on the number of product development problems. However, there is

still a lack of empirical evidence concerning the direct association between LPD practices and

operational performance metrics, such as inventory turnover.

Modularization and standardization play important roles in LPD by reducing product

complexities and variations (Fujimoto and Takeishi, 2001). Reducing the number of components

in a product directly affects inventory by decreasing raw material inventory levels. Indirectly, these

LPD practices reduce variability on the shop floor, which reduces WIP and finished goods

inventories (i.e. reducing the bullwhip effect). Reduced variability also allows the shop floor to

solve more problems, which could further reduce inventory levels (Liker, 2004; Liker and Morgan,

2011). The reduction of inventory realized through JIT manufacturing is only possible when
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processes are stable (Liker, 2004). For instance, a lower number of variants (due to the

modularization of products) facilitates the implementation of quick changeovers, since there are

fewer tools and combinations of changeover sequences to standardize. This, in turn, allows firms

to produce smaller batches, which ultimately decreases throughput times and inventory levels.

Furthermore, better supplier integration supports more frequent deliveries and, hence, lower levels

of raw materials inventories. Taken together and following the reasoning of configurational theory,

we hypothesize:

H2: The positive effect of LM on inventory turnover improvement is moderated by LPD,

such that the positive effect is greater when LPD is highly adopted.

4. Research Method

4.1 Sample selection and description

To test our hypotheses, we needed to collect data from companies with different levels of

experience with both LM and LPD. We collected data from industrial participants of the 2014 IV

Conference of Lean Systems in Porto Alegre, Brazil. This conference is an annual event held in

Southern Brazil, one of the most industrialized regions of the country. We targeted this sample

because it constitutes a cross-industry professional network of practitioners with different degrees

of experience with both LM and LPD. We distributed a survey to the 470 attendees of this

conference through on-site questionnaires and e-mails four weeks after the conference, with sub-

sequent follow-ups.

In order to ensure face and content validity, we pre-tested the survey instrument with three

academics and three operations managers who were implementing lean in their firms. The

instrument was improved according to their feedback and suggestions. We obtained 110 usable
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responses for the variables considered in this paper (an effective response rate of 23.4%). Table 2

shows the composition of the sample.

Table 2: Sample composition of survey responses (N=110).

TABLE 2 HERE

4.2 Variable constructs

We have four main variables: LM implementation, LPD implementation, quality improvement,

and inventory turnover. All details about the constructs are given in Appendix A. We measured

LM practices by adapting Shah and Ward’s (2007) six internally related dimensions of a LM

system (though one of these—LM6—was later excluded; see Section 4.4). We reduced the

constructs to single item questions, following the same procedure of Azadegan et al. (2013), in

order to have one multi-item construct for LM implementation.

To measure LPD, we build on a multi-item scale construct for LPD used by Doolen and

Hacker (2005). The construct consists of three items; concurrent engineering, modularization and

part standardization, and design for manufacturability. We supplement this scale with a fourth

common LPD item suggested in the literature: customer involvement in product development.

Hence, the latent construct of LPD consists of four of the most common LPD practices.

The items related to LM and LPD practices were measured by asking each respondent

about the degree of adoption of each practice at the respondent’s plant on a five-point Likert scale

(not adopted = 1, partially adopted = 3, fully adopted = 5). For example, for “concurrent

engineering” (one of the LPD practices), we asked: “What is the degree of adoption of concurrent

engineering in your product development process?”

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Our construct for quality performance covered two performance metrics used by Shah and

Ward (2003); quality at the source (first time through) and scrap and rework. Both of these metrics

are considered major sources of waste by the LM literature (Netland and Sanchez, 2014). Finally,

since inventory turnover is a straightforward performance metric, we simply measure it as

“inventory turnover per year.” The dependent variables, quality and inventory turnover, were also

measured using a five-point Likert scale. Specifically, we asked respondents about the variation

of each performance metric over the last five years (worsened significantly = 1, no change = 3,

improved significantly = 5), following previous research testing the impact of LM on operational

performance (e.g. Shah and Ward, 2003).

We control for confounding effects of firm size, as it has been found in some studies to

influence the degree of adoption of lean practices and operational performance (e.g. Cua et al.

2001; White et al., 1999; Shah and Ward, 2003).

4.3 Sample and common method variance bias

To test for non-response bias, we used the extrapolation technique, which is based on the

assumption that late respondents are most similar to non-respondents (Armstrong and Overton,

1977; Wagner and Kemmerling, 2010). Following this approach, we tested for non-response bias

using Levene’s test for equality of variances and a t-test for the equality of means between early

respondents (respondents at the conference, n1= 70) and late respondents (respondents of the e-

mails and follow-ups, n2 = 39). We applied this test for all variables (questionnaire items)

comprising the different constructs of our model (see Appendix A). The results indicated no

differences (p > 0.01) in means or variations between the two groups. Thus, we found no statistical

reason to believe that our sample is significantly different from the rest of the population.
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Single respondents can be another important source of common method bias, particularly

when the same person provides both the dependent and independent variables with psychometric

scales that represent their opinions, and not actual data (Podsakoff et al., 2003). Thus, we follow

several techniques suggested by Podsakoff et al. (2003) as remedies for common method bias.

Regarding question formulation, we positioned the questions addressing the dependent variables

first in the questionnaire and physically far from those addressing independent variables. We

included midpoint labels in the scales. A statement assuring the respondents’ anonymity and

emphasizing that there were no right or wrong answers was included at the beginning of the

questionnaire. In addition, the respondents were appropriate key informants for the collected data,

since all of them were directly involved in lean implementations in their organizations.

We applied Harman’s single-factor test with an exploratory factor analysis, which is one

of the most widely used exploratory methods to check for common method bias (Podsakoff et al.,

2003). A Harman’s test with all independent and dependent variables resulted in a first factor that

included 26% of the variance. Since we found no single factor accounting for the majority of the

variance in the model, Harman’s test suggests that common method variance might not be a

problem. Additionally, we followed the Single-method-factor approach procedure as suggested by

Podsakoff et al. (2003 and 2012), when the source of bias is not identified a priori. That consist in

including a single common method variance factor and evaluating the changes of the coefficients

of each item in the model. We performed a confirmatory factor analysis (CFA) of the two

constructs (LM and LPD) and their respective items with and without the inclusion of the single

common factor. The difference between the two models was below the 0.2 threshold for the

coefficient differences, as suggested by Doluca et al. (2018). The procedural and statistical

remedies indicate that common method variance is not a concern in our research.
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4.4 Construct validity and reliability

For the multi-item constructs (LPD and LM), we first used confirmatory factor analysis (CFA) to

confirm unidimensionality of the constructs. Because of the sample size constraints, we estimated

two separate CFA models, as suggested by Bentler and Chou (1987): one for each single construct

and the other for the complete model of exogenous/moderator constructs (LM and LPD). As fit

indicators, we used the root mean square error of approximation (RMSEA), the comparative fit

index (CFI), and the Tucker-Lewis index (TLI). The results indicated that all models fit adequately

regarding the respective threshold values proposed by Hair et al. (2009) (RMSEA ≤ 0.08, CFI ≥

0.9 and TLI ≥ 0.9); although the chi-square test was non-significant, which is expected for samples

with less than a dozen variables (Hair et al., 2009). For the single construct analysis, the CFA

showed the following parameters: LM (χ2/df = 5.9, χ2 p-value = 0.207; RMSEA = 0.066; CFI =

0.991; TLI = 0.976); LPD (χ2/df = 10.69, χ2 p-value = 0.298; RMSEA = 0.014; CFI = 0.998; TLI

= 0.999). The single construct model for the independent variables showed the following

parameters: LPD and LM (χ2/df =36.02, χ2 p-value = 0.07; RMSEA = 0.063; CFI = 0.971; TLI =

0.958). In both analyses, only one item was excluded from the LM construct (see Appendix A,

LM6) because it presented a factor loading below the minimum threshold (factor loading > 0.5, p-

value < 0.01) at the CFA.

Convergent validity was also tested using the Fornell and Larcker’s (1981) criteria, which

considers the average variance extracted (AVE) and composite reliability (CR). All constructs

exceeded the recommended values for good convergent validity (i.e. AVE > 0.5 and CR > 0.7)

(Hair et al., 2009); LM (AVE = 0.870; CR = 0.970) and LPD (AVE = 0.883; CR = 0.968). Both

constructs’ reliabilities exceeded the acceptable Cronbach’s alpha level of 0.7.

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To assess discriminant validity, we first followed a procedure recommended by Fornell

and Larcker’s (1981). According to the authors, the AVE for each construct should be greater than

the squared root of the bivariate correlations between the two constructs. We indeed found that the

square root of the AVE for each construct was greater than the correlation between LM and LPD,

thus confirming the discriminant validity of the constructs. Second, the bi-variate correlation

between LM and LPD is also lower than Cronbach’s alpha for each construct, which also indicates

discriminant validity, according to Crocker and Algina (1986). The correlation matrix for all four

constructs (LM, LPD, quality, and inventory turnover), including their respective means, standard

deviations, and Cronbach’s alphas, is shown in Table 3. The full questionnaire items and their

factor loadings are shown in Appendix A.

Table 3: Correlations, means, and standard deviations of LM, LPD, and performance metrics.

TABLE 3 HERE

5. Results

We performed a set of OLS hierarchical linear regression models to test the theoretical models for

the two proposed dependent variables. In the regression models, we used the composite scores

(means of items) for each variable. Moreover, before calculating the interaction term (LM x LPD)

to represent the moderator variable in the regression equation, we used standardized values for the

focal predictor and moderator to address multicollinearity (Aiken and West, 1996). Our results

report the unstandardized coefficients, since the scales were standardized before the analysis

(meaning that the unstandardized coefficients represent a standardized effect) (Goldsby et al.,

2013). We also verified that the data meet the requirements for normality, linearity, and
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homoscedasticity for the regression analysis (Hair et al., 2009). Normality was analyzed by means

of residuals. For linearity, we plotted partial regressions for the independent and moderating

variables and conducted a visual verification. Similarly, homoscedasticity was examined visually

in plots of standardized residuals against predicted value. All three criteria fulfil the required

conditions for an OLS regression.

The regression results are shown in Table 4. In the hierarchical process, we first analyzed

only the effects of the control variables on each dependent variable (quality and inventory

turnover). Then, we added the direct effects of LM and LPD on the independent variables. Finally,

we added LPD as a moderator effect (interaction term). The variance inflation factors (VIFs) in

the regressions models were all lower than 2.0, suggesting that multicollinearity was not a concern.

Table 4: Results of the hierarchical regression analysis a

TABLE 4 HERE

As shown in Table 4, for the first dependent variable—quality performance—the additions

of the independent variables (Model 2) and the interaction term (Model 3) produced incremental

improvements in the model (i.e. the change in R2 was significant in both stages). As a result, the

full model for quality was significant (F-value = 4.136, p < 0.01) and explained 10.4% of the

variance. This model shows that LM has a significant positive influence on quality performance

(b = 0.204; p < 0.01) and that this relationship is positively moderated by the adoption of LPD

practices (b = 0.162; p < 0.05).

This interaction effect is illustrated in the slope of Figure 1, where low and high LPD

implementation were defined based on the middle point of the five-point Likert scale used for the
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item measurements. The regression for low level of LPD of the slope (Figure 1) was significant

(F= 15.631, p<0.001), explaining 21.6% of the variance in the predicted value; while its association

to the predicted value of quality performance showed a standardized significant coefficient

(b=0.481) at p<0.001. On the other hand, the regression for high level of LPD of the slope (Figure

1) was strongly significant (F=177.128, p<0.001), explaining 76.5% of the variance in the quality

performance predicted value (b=0.877, p<0.001). In conclusion, the results support Hypothesis 1,

suggesting that LM practices are positively associated with quality improvement and that

relationship grows stronger when the firm also implements LPD practices.

FIGURE 1 HERE

Figure 1 – LPD positively moderates the effect of LM on quality performance.

Regarding our second dependent variable—inventory turnover—we found no significant

evidence of a moderating effect of LPD on LM. Though the addition of the independent variables

(Model 2) produced incremental improvements in the model (i.e. the change in R2 was significant

in both stages), the addition of the interaction term (Model 3) produced no significant changes.

Therefore, the final model adopted was Model 2 (F-value = 18.262, p < 0.01), which explained

32.4% of the variance. This model shows that both LM and LPD are independently and

significantly positively associated with inventory turnover improvement (b = 0.337; p < 0.01 and

b = 0.342; p < 0.01, respectively). However, both LM and LPD have only direct effects on

inventory turnover improvement; we found no evidence of a moderation effect between them.

Although our hypothesis H2 could not be supported, the evidence that LPD is positively associated
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with inventory turnover is an interesting finding on its own, which indicates direct or potential

mediating effects.

We verified the possibility of LPD mediating effects of LM on Inventory on a post hoc

analysis, which was not planned a priori in our theoretical model. We followed the 3-steps Baron

and Kenney’s (1986) and found evidences of a partial mediating effect. The first step shows a

significant OLS regression model when using LM as an independent variable and LPD as a
2 2
dependent variable (F-value = 30.643, p < 0.01, 𝑅 = 0.366, and Adjusted 𝑅 = 0.354), with a

significant beta for LM (b = 0.607, p < 0.01). The second step was to run another OLS regression

model with Inventory as the dependent variable and the LM as independent variable, adding

control variable for company size, which resulted also in a significant regression model (b = 0.523,
2 2
F-value = 20.061, p < 0.01, 𝑅 = 0.275, and Adjusted 𝑅 = 0.261). When comparing the former

model with the Model 2 on Table 4, the beta coefficient of LM is reduced from 0.523 to 0.324

when including LPD as a third independent variable. By following Baron and Kenney’s (1986)

recommendation to test for mediating effects, we concluded that LPD partially mediates the effect

of LM on Inventory turnover.

6. Discussion

We have investigated the moderating effect of LPD practices on the impact of LM on performance

improvements in quality and inventory turnover. LM practices are popular and widely

disseminated as a way to improve operational performance by reducing inventory and increasing

quality levels. Although the adoption of LM practices usually increases operational performance

(e.g. Negrão et al., 2017; Shah and Ward, 2003), breakthrough improvements that characterize a

true lean enterprise are rare. To address systemic problems within an organization, it is essential
 ACCEPTED MANUSCRIPT

to disseminate and adapt lean principles and practices in other areas, such as product development

(Browning, 2000; Rossi et al., 2012). This perspective finds theoretical support in configurational

theory (e.g. Miller, 1986, 1992, 1996). By analyzing a data set of 110 firms located in Southern

Brazil, we explored the moderating effect of LPD on the impact of LM practices on improvements

in quality (H1) and inventory turnover (H2).

Our results confirmed H1, indicating that LPD positively moderates the effect of LM

practices on quality improvement. In other words, LM practices have a stronger impact on quality

performance in firms that are also adopting LPD practices than in firms that are not using LPD

practices. Furthermore, LM practices alone have a positive impact on quality improvement, as

shown in several previous studies (e.g., Negrão et al., 2017; Netland and Sanchez, 2014). It is

worth noting that the direct association between LPD and quality was not significant. A possible

explanation for that is that LPD does not improve quality without the implementation of LM

practices. Indeed, LM reduces process variability by standardizing work methods to ensure the

availability of equipment, materials and trained workers (De Treville and Antonakis, 2006; Shah

and Ward, 2007). Without such stability, it would be more difficult to find root causes and

improvement opportunities for quality problems that can be solved during product development

and product improvement processes. This possible explanation is aligned with arguments from

configurational theory and our previous suggestions about how LPD positively moderates the

effect of LM practices on quality improvement both preventively and correctively.

Our results do not support the second hypothesis (that LPD moderates the effect of LM on

inventory turnover improvement). However, we found that LPD has a direct positive association

with improvements in inventory turnover. Our results suggest that practices like design for

manufacturability, modularization, and concurrent engineering help reduce inventory levels. Since
 ACCEPTED MANUSCRIPT

most of the literature on LPD focuses on assessing the impact of LPD practices on product

development metrics, evidence of a direct effect of these practices on inventory turnover is a new

contribution to the LPD literature. We speculate that firms that use LPD practices experience fewer

problems at the product launch phase, which may allow them to implement smaller inventory

buffers (to account for potential problems). The implementation of LPD practices may reduce the

complexity of components and process steps, which may—in turn—lower inventory levels.

A possible explanation for not finding empirical evidences to support our second

hypothesis could be the existence of a mediating effect of LPD on the impact of LM on Inventory,

and not a moderation effect, as assumed a priori. It is possible that companies that implement LM

become more aware of the problems hidden by high levels of inventory (Liker, 2004), while they

may also recognize that some root causes of higher inventory levels actually originate at early

product development stages and can be solved by implementing LPD practices. For example, the

need for close involvement with a customer or for the standardization of a part may stem from the

shop floor’s need to reduce inventory by reducing the variety of components in stock. Firms often

begin implementing LM on the shop floor, then increase the depth and spread of the use of lean

practices to other areas (Netland and Ferdows, 2016), such as product development.

To delve deeper, we performed a post hoc tests that showed that LPD partially mediates

the effect of LM on Inventory. These results show that LM may have a direct effect on both LPD

and Inventory, and that LM has an indirect effect on Inventory, mediated by LPD. This means that,

instead of LPD facilitating the association between LM and inventory turnover, it may work as an

enabler for both. In other words, LPD may not be a boundary condition, as we hypothesized, but

possibly boost the reduction of inventories. It is worth noting that it can also be that there are both

mediation and moderation effects occurring simultaneously, and that the moderation effect was
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not strong enough to be captured in our data. Thus, we suggest that future research investigate and

theorize if and why LPD can mediate the effect of LM on inventory turnover.

A further possible explanation could be that the moderation effect of LPD on LM for

inventory reduction only occurs when companies achieve a higher maturity of implementation of

both LPD and LM (and that this effect is different from quality performance). Indeed, Brazilian

companies have on average lower levels of lean implementation compared with companies from

many developing countries (such as United States, Japan and Germany) (Marodin et al., 2016). In

addition, there is a time lag (hysteresis) between implementing LM and LPD and realizing

improvements in operational performance. A minimum of 2-3 years is suggested as the time

required for realizing a significant impact of LM on operational performance (e.g., Netland and

Ferdows, 2016; Marodin et al., 2016). In addition, one should expect that several product

development cycles are needed for the moderation effect of LPD on LM’s effect on operational

performance to materialize. This may of course take several years.

It is worth noting that both Model 3 for Quality and Model 2 for Inventory showed a

significant and negative impact for the control variable “firm size” on operational performance

(Table 4). These results find some support in the literature. For example, Shah and Ward (2003)

also found a significant and negative impact of firm size on operational performance. A likely

explanation is that smaller firms are able to more quickly translate LM and LPD implementation

into improved performance.

To summarize, our results show that LM practices have the potential to improve both

inventory turnover and quality performance, and that LPD practices positively moderate the impact

of LM on quality performance, as well as improve inventory turnover directly.

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7. Conclusions

This paper has investigated the moderating effect of LPD on the relationship between LM practices

and operational performance. We found that LPD practices positively moderate the effect of LM

practices on quality performance improvement. The findings concerning the same moderating

effect on inventory turnover were inconclusive; however, we found that the implementation of

LPD has a direct and positive association with improvements in inventory turnover, with a possible

moderating effect of LM on LPD implementation. Overall, in line with configurational theory, our

research suggests that lean implementation will have a greater effect on operational performance

improvement if the implementation spans across both manufacturing and product development

areas.

7.1. Limitations

This research is subject to the usual limitations of single-respondent survey research. First,

although we took measures to reduce concerns of common method bias, our data set remains

limited. We therefore encourage future empirical research to test the effects of cross-functional

lean implementation with larger datasets. Second, opinion-based surveys face limitations related

to data subjectivity. Therefore, testing the identified relationships with real operational

performance data is another promising path for future research. Third, we developed the LPD

multi-item construct based on an extensive literature review, but we acknowledge that multi-layer

and more complete measurement instruments for LPD would be better. Additionally, we limited

our models to testing the impacts of LPD and LM on the operational performance metrics of

inventory and quality. Thus, future studies could investigate whether similar relationships occur

when other performance metrics, such as unit cost or productivity, are used.
 ACCEPTED MANUSCRIPT

It is worth noting that there is potential for a mediating effect between LPD, LM, and

operational performance. However, since the literature and assumptions used to develop our

hypotheses suggested a moderating effect, we did not focus our study on concurrent models,

although our post hoc analysis demonstrated it. Our additional tests suggest that the effect of LM

on inventory reduction could be partially mediated by LPD. This deserves further investigation in

future works, especially due to the fact that many companies only implement LM without using

practices of LPD.

7.2 Implications for research and practice

Our findings have implications for both research and practice. From a theoretical perspective, the

results emphasize the need to understand the systemic relationships among lean implementations

in all aspects of a business, not only on the factory floor (Jones and Womack, 2017; Karlsson and

Ahlstrom, 1996). For this purpose, configurational theory can serve as useful theoretical

perspective. Whereas prior research has found support for relationships among different LM

practices and bundles (e.g. Saurin et al., 2011; Shah and Ward, 2003), this research focused on the

under-investigated relationships between LM practices and other aspects of the business (in our

case, LPD).

For practitioners, a first implication is that the joint implementation of LPD and LM yields

a better effect on quality improvement than the implementation of LM alone. Hence, we advise

managers to follow a cross-functional approach to lean implementation. Lean should not be

exclusively used at the manufacturing shop floor. Focusing all of their resources on the LM is not

the most efficient way to improve operational performance. Instead, managers should align

initatives to implement both LM and LPD.

 ACCEPTED MANUSCRIPT

Second, our study shows that LPD has direct effects on operational performance metrics,

such as inventory levels, and not just on product development metrics, which have been the focus

of the majority of previous research on product development. Although we found strong direct

effects of both LPD and LM on inventory reduction (c.f. beta values in Inventory Model 2, Table

4), further investigation revealed that LPD partially mediates the effect of LM on inventory.

Perhaps there are two implications of this mediation effect: Firstly, an increase of the depth of LM

implementation on the shop floor is likely to spread lean principles to other parts of the

organization, such as product development. Secondly, an increase in LPD implementation can help

reduce inventory levels, partly due to LPD implementation itself and partly due to interaction

effects with LM on the shop floor.

 ACCEPTED MANUSCRIPT

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Appendix A – Questionnaire items

1. Questionnaire items used to assess the level of implementation of LM practices:
Implementation level on a five-point Likert scale: 1 – not adopted to 5 – fully adopted. Construct
validity: RMSEA (0.066), CFI (0.991), TLI (0.976), Cronbach’s alpha (0.815).
Lean production shop floor practices Factor loadings
Code
(Adapted from Shah and Ward, 2007) CFA
Pull Production - Facilitate JIT production including kanban cards
LM1 0.544
which serves as a signal to start and stop production
Quick Setup - Reduce process downtime between products
LM2 0.789
changeovers
Total Productive Maintenance - Address equipment downtime
LM3 through total productive maintenance and thus achieve a high level 0.729
of equipment availability
Production Flow - Establish mechanisms that enable an
LM4 0.535
continuous flow of products
Employees Involvement - Employees’ role in problem solving,
LM5 0.728
and their cross functional character
Controlled Processes - Ensure each process will supply defect free
LM6 [Excluded]
units to subsequent process

2. Questionnaire items used to assess the level of implementation of LPD practices:

Implementation level on a five-point Likert scale: 1 – not adopted to 5 – fully adopted. Construct
validity: RMSEA (0.014), CFI (0.998), TLI (0.999), Cronbach’s alpha (0.794).
Lean product development practices Factor loadings
Code
(Adapted from Doolen and Hacker, 2005) CFA
LPD1 Customers are involved in product development 0.670
LPD2 Concurrent engineering 0.703
LPD3 Modularization and parts standardization 0.710
LPD4 Design for manufacturability 0.747

3. Questionnaire items used to assess the performance level of quality:

Performance level on a five-point Likert scale: 1 – very low to 5 – very high.
Performance metric Factor loadings
Code
(Shah and Ward, 2003) CFA
QUAL1 Scrap and rework N.A.
QUAL2 Quality at the source (first-time-through) N.A.

4. Questionnaire item to assess the performance level of inventory turnover:

Performance level on a five-point Likert scale: 1 – very low to 5 – very high.
Performance Metric
Code
(Kaynak, 2003) Factor loadings
INVENTORY Inventory turnover per year N.A.
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4.5

3.5

Figure 1: LPD positively moderates the effect of LM on quality performance.

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Table 1: LPD practices, definitions, and exemplar references.

LPD practices Definition Exemplar references

Concurrent Engineering A systematic approach to the integrated and Sobek et al. (1999);
synchronal design of products. Ha and Porteus (1995)
Product modularization A design process of the product structure in a set Takeishi and Fujimoto (2003)
and standardization of assembled modules that can be standardized
and used across different product lines.
Design for Designing products in such a way that they are Youssef (1994)
Manufacturability easy to manufacture, often accomplished by a
simplification of the product structure.
Customer involvement in Aligning product specifications to the Cristiano et al. (2000); Akao
product development customers’ need, for example using Quality and Mazur (2003)
Function Deployment or other methods where
the customer provide feedback during the
product development process.

Table 2: Sample composition of survey responses (N=110).

Automotive 25 23% Operations Director 12 11%

Metallurgical 16 15% Operations Manager 20 18%
Respondent’s
Food & Beverage 10 9% profile Operations Supervisor 10 9%
Furniture 8 7% Manufacturing engineer 32 29%
Agroindustry 8 7% Other operational function 36 33%
Industrial
sector Electronic 7 6% Small (<100 employees) 48 43%
Company’s
Petrochemical 5 5% size Medium (100-500 emp.) 41 38%
Military weapons 4 4% Large (>500 employees) 21 19%
Industrial equipment 2 2%
Transportation systems 2 2%
Others 23 21%

Table 3: Correlation, mean, and standard deviation of LM, LPD and performance metrics.

Mean S.D. LM LPD Quality Inventory

LM 3.10 0.908 --
LPD 2.84 0.914 0.605** --
Quality 3.77 0.693 0.286** 0.144 --
Inventory 3.16 1.041 0.502** 0.514** 0.142 --
Cronbach´s alpha 0.815 0.794 N.A. N.A.
**p<0.01; N.A.: not applicable

Table 4: Results of hierarchical regression analysis a.

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Quality Inventory turnover

Model 1 Model 2 Model 3 Model 1 Model 2 Model 3

Company size (Control) -0.218 -0.312 -0.404** -0.167 -0.313* -0.286

LM 0.336*** 0.292*** 0.324*** 0.337***
LPD -0.049 -0.020 0.328*** 0.320***
LM x LPD interaction 0.162** -0.048
F-value 1.113 4.044*** 4.136*** 0.649 18.262*** 13.746***
R2 0.010 0.104 0.137 0.006 0.343 0.346
Adj. R2 0.001 0.078 0.104 -0.003 0.324 0.321
Change in R2 0.093*** 0.034** 0.337*** 0.003
n= 110. a Unstandardized regression coefficients are reported. * p<0.1.; **p<0.05; ***p<0.001