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An agile, lean or flexible enterprises – ate they synonymus or different

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Article · January 2013

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Maja SAJDAK

3.1.
AN AGILE, LEAN OR FLEXIBLE ENTERPRISE
– ARE THEY SYNONYMOUS
OR DIFFERENT NOTIONS?

1. INTRODUCTION

In a changeable and unstable environment companies seek for new ways of

satisfying the ever increasing requirements of customers by enhancing their prod-
uct offering and constantly improving performance. Modern companies not only
have to cope with changing and largely unpredictable market conditions, as well as
constantly compete against global rivals and strive to satisfy the changing require-
ments of clients, but they are also expected to adapt the company structures and
processes to meet all these challenges. The markets in which manufacturing and
service companies operate are characterised by the high intensity of foreign compe-
tition, an aversion to mass-produced items, and services with a limited value to
customers (Zhang, Vonderembse, Lim 2003). In practice, there are many concepts
which make it easier for companies to operate in such a difficult and unfavourable
environment; among them are agility, leanness and flexibility. These terms are
often considered to be synonymous, but in fact they are not. The literature relating
to the subject enumerates the features which differentiate them, even though the
concepts often use similar methods and management techniques.
The aim of this paper is to identify an objective concrete reference for each of
the notional categories, paying particular attention to any similarities and differ-
ences between them. Describing the characteristics of the notions under discussion
will include definitions of the terms by various authors and permit an identification
of any differences between the concepts on the basis of selected criteria. The article
also contains the results of empirical research, which illustrate the differences be-
tween the practical applications of the concepts analysed.

2. AGILITY, LEANNESS, FLEXIBILITY

– IDENTIFYING THE TERMS

Agile manufacturing is a new production model which is a result of changes in

the environment (Goldman, Nagel 1993). A. Gunasekaran defines agility as the
178 Maja SAJDAK

ability to survive and cope in a competitive environment rife with unexpected

changes, which requires quick and efficient responses to market changes. In order
to meet customers' requirements in a constantly changing market, a company must
undertake swift actions aimed at maintaining its competitive advantage. Enterprises
need to introduce innovation in the manufacturing process as well as information
and communication technologies, which require a reorganisation of the company
and new marketing strategies (Gunasekaran 1998).
An agile manufacturing process is characterised by six attributes (Meredith,
Francis, 2000):
• producing to order, as opposed to the traditional manufacturing process where
large quantities of goods are produced and stored,
• meeting customers' specific needs, as opposed to the mass manufacturing proc-
ess where goods are produced for the “average” customer,
• ensuring speed and flexibility in the manufacturing process,
• mobilizing and managing all kinds of knowledge intelligently in order to sup-
port an agility strategy,
• adopting new ways of working when these facilitate agility (moving from func-
tional to team working),
• creating “virtual” projects and ad hoc organisations in order to utilise the requi-
site capabilities when necessary.

Table 1. Definitions of agile management

Definition of agility References

Agility is a capability; it is an organization's capacity to re-
spond rapidly and effectively to unanticipated opportunities
Agile Forum AT Iacocca
and to proactively develop solutions for potential needs. It is
Institute, Lehigh Univer-
the result of an organization and the people who comprise it
sity, USA, (1991)
working together in ways which benefit the individual, the
organization, and their customers
The ability to detect opportunities for innovation and seize those
competitive market opportunities by assembling the requisite D’Aveni (1994)
assets, knowledge and relationships with speed and surprise
The agility that arises can be used for competitive advantage,
by being able to respond rapidly to changes occurring in the
market environment and through the ability to use and exploit a
fundamental resource - knowledge. People need to be brought
Kidd (1995)
together, in dynamic teams formed around clearly defined
market opportunities, so that it becomes possible to lever one
another's knowledge. Through this process is sought the trans-
formation of knowledge into new products and services
The ability to accelerate the activities on a critical path that
commences with the identification of a market need and termi- Kumar, Motwani (1995)
nates with the delivery of a customized product
 AN AGILE, LEAN OR FLEXIBLE ENTERPRISE ... 179

The ability of enterprise to cope with unexpected changes, to

survive unprecedented threats from the business environment
and to take advantage of changes as opportunities. Agility
Goldman (1995)
means delivering value to customer, being ready for change,
valuing human knowledge and skills, and forming virtual part-
nership
The ability to produce a broad range of low – cost, high quality
products with short lead items in varying lot sizes, built to Vokurka, Fliedner (1997)
individual customer specification
The ability of an enterprises to respond quickly and success-
McGaughey (1999)
fully to change
Agility relates to the interface between the company and the
Katayama & Bennett
market. Agility acts as a pillar to improve competitiveness and
(1999)
business prospects.
Agile production is a new production model resulting from
changes in the environment which links innovations in produc-
tion, information technology and communication by funda- Gunasekaran (1999)
mental organizational redesigning and new marketing strate-
gies
The ability of an organization to respond rapidly to changes in
Christopher (2000)
demand, both in terms of volume and variety
The ability of an organization to thrive in a constantly chang-
Rigby (2000)
ing, unpredictable business environment
The ability to cope with unexpected challenges, to survive
unprecedented threats of the business environment and to take Zhang, Sharifi (2000)
advantage of changes as opportunities
An organization’s capacity to gain competitive advantage by
intelligently, rapidly and proactively seizing opportunities and Meredith, Francis (2000)
reacting to threats
The ability of a firm to redesign their existing processes rapidly
and crate new processes in a timely fashion in order to be able Sambamurthy, Bharadway,
to take advantage of and thrive in unpredictable and highly Grover (2003)
dynamic market conditions
A set of interlinked changes in marketing, production, design
Storey (2005)
and organization
The ability of a firm to dynamically modify and/or reconfigure
individual business processes to accommodate the required and Raschke, David (2005)
potential needs of the firm
The ability to efficiently change operating states in response to
Narasimhan (2006)
uncertain and changing demands placed upon it
Agility encompasses the ability to fundamentally reconfigure
available options in order to accommodate unforeseen envi-
Bernardes, Hanna (2009)
ronmental circumstances and subsumes or is supported by
flexibility
The capability of surviving and prospering in a competitive Dahmaradeh, Banihashemi
environment of continuous and unpredictable change by react- (2010)
180 Maja SAJDAK

ing quickly and effectively to changing markets, driven by

customer-designed products and services. It is not about small-
scale continuous improvements, but an entirely different way
of doing business
The ability to seize emerging opportunities connected with
such features of a company as perceptiveness, flexibility, intel- Trzcieliński (2011)
ligence and shrewdness
Source: (Sajdak 2013).

Taking into account the different strategic orientations of companies, connected

with adopting different business models, in addition an agile enterprise one can
also distinguish the concept of a lean enterprise. The origins of the agility paradigm
can be traced back to the theory of a lean enterprise, which comprises concepts and
methods which aim to minimise waste and consequently maximise efficiency as
the company uses fewer resources (capital, financial, human, organisational) and
less time to achieve the same goal (Trzcieliński 2011).
As Trzcieliński (2011) points out, leanness is a precondition of a company's
agility. He also indicates that the concept of a lean enterprise is predominantly used
by companies with a high manufacturing potential which provides them with con-
siderable autonomy in reaching their goals. This means that demand for the prod-
ucts which are manufactured as a result of this potential must remain relatively
stable over a long period of time.

Table 2. Definitions of lean management

Definition of lean References

Group of individuals, functions and legally separate but op-
Womack and Jones (1994)
erationally synchronized companies
The elimination of all waste, including time, to enable a level
Naylor, Naim, Berry (1999)
schedule to be established
A production process that covers the total enterprise and is
intended to achieve prefect first-time quality as well as waste
minimization by removing all activities that do not add value, Shields (1999)
continuous improvement, flexibility, and long-term relation- Sarkis (2001)
ships
A management method which creates such a work culture in
an organisation that all members of the organisation are in-
tent on lowering costs, enhancing quality and shortening the
response time to customer needs in order to fulfil customer
Trzcieliński (2011)
expectations in a changeable environment. This concept
emphasises eliminating all waste
Source: own compilation based on subject literature.

Flexibility refers to a company's ability to swiftly move from one task to an-
other within the framework of the routine procedures adopted by the company.
 AN AGILE, LEAN OR FLEXIBLE ENTERPRISE ... 181

These tasks are predefined, which makes it possible to use the necessary proce-
dures. The traditional dimensions of flexibility include those connected with prod-
ucts or services (e.g. value, product mix, flexibility specification) and those con-
nected with processes (e.g. equipment replacement, planning or innovation flexibil-
ity). Agility, in turn, refers to a company's ability to cope with unexpected market
changes. Agility can apply to every dimension of flexibility. The key difference
between the two notions is the ability to quickly respond to unexpected market
changes, which is linked with agility (Fliedner, Vokurka 1998). Table 3 shows
some typical definitions identified in the literature.

Table 3. Definitions of flexible management

Definition of flexibility References

Ability to respond effectively to changing circumstances Gerwin (1987)
The quickness and ease with which plants can respond to
Cox (1989)
changes in market conditions
The adaptability of a system to the wide range of possible
environments that it may encounter Sethi and Sethi (1990)
The ability of a manufacturing system to generate high net
revenues consistently across all conceivable states of nature Ramesesh and Maliyakal
in which it may be called to function (1991)
The ability to cope with changing circumstances or instabil-
ity caused by the environment Gupta and Somers (1992)
The ability of a system to quickly adjust to any change in rele-
Nagarur (1992)
vant factors like product, process, loads, and machine failure
A response to external uncertainty Newman, Hanna and Maffei
(1993)
The ability of a manufacturing system to change states
across an increasing range of volume and/or variety, while
Upton (1994)
adhering to stringent time and cost metrics
The ability to respond quickly to changing customer needs
Small and Chen (1997)
at a reasonable price
The capability of an organization to move from one task to
another quickly and as a routine procedure Vokurka and Fliedner (1998)
An organization’s ability to meet an increasing variety of
customer expectations without excessive costs, time, organ- Zhang, Vonderembse, Lim
izational disruptions, or performance losses (2003)
It is agility, mobility, elasticity, but also quick recovery. It
is the ability of the whole organisation to adapt without
Krupski (2005)
identifying specific areas for adaptation
Source: (Bernardes, Hanna 2009, Krupski 2005).

Some authors distinguish between internal and external flexibilities. For in-
stance, D. M Upton (1994) defines internal flexibility as the operations strategy and
the set of capabilities a firm nurtures to respond to its environment; and external
182 Maja SAJDAK

flexibility as the capabilities possessed by the organization and used to accommo-

date sources of variability to which the firm must respond and which are seen as
flexible by the market. This external dimension also fits the two strategies pro-
posed for using flexibility: reactive and proactive. D. Gerwin (1993) proposes two
major strategies for using flexibility: adaptive and redefinition. The adaptive strat-
egy refers to the defensive or reactive use of flexible competencies to accommo-
date unknown uncertainty; while the redefinition strategy refers to a proactive use
of flexible competencies to raise customer expectations and gain a competitive
advantage.

3. AN AGILE, LEAN OR FLEXIBLE ENTERPRISE

– A COMPARATIVE ANALYSIS ON THE BASIS
OF SELECTED CRITERIA
In the table below are presented the key differentiations between mass, lean and
agile manufacturing. It appears that there is a growing shift away from the concept
of lean manufacturing towards the new management philosophy of agile produc-
tion. This trend has arisen because lean production methods and tools are not suit-
able for the competitive environment (Sharp, Irani, Desai, 1999).

Table 4. Key differentiation between lean and agile manufacturing

Lean Agile
Drivers – market – customer
– economy of waste – economy of diversity
– predictable markets – unpredictable markets
– make to forecast – make to order
Focus – technology and systems – people and information
Suppliers – fewer – selection from many
– high level of trust – high level of trust
– long-term – short-term
– co-operative – shared risk/reward
Organisation – teaming – multi-skilling
– flatter organisation – empowerment
Product – many options – customised
– high quality – fitness for purpose
Process – flexible – adaptive
– automated – knowledge based
Philosophy – administrative – leadership
Source: (Sharp, Irani, Desai, 1999).

J.M. Sharp, Z. Irani, and S. Desai (1999) indicate the key differences between
lean and agile manufacturing:
 AN AGILE, LEAN OR FLEXIBLE ENTERPRISE ... 183

• Lean production is regarded by many as simply an enhancement of mass pro-

duction methods, whereas agility implies breaking out of the mass production
mould and producing much more highly customized products – where the cus-
tomer wants them in any quantity.
• In a product line context, it amounts to striving for economies of scope, rather
than economies of scale – ideally serving ever-smaller niche markets, even quan-
tities of one, without the high cost traditionally associated with customization.
• Agile manufacturing further requires an all-encompassing view, whereas lean
production is typically associated only with the factory floor.
• Agility further embodies such concepts as the rapid formation of multi-company
alliances or virtual companies to introduce new products to the market.
• A lean company may be thought of as a very productive and cost efficient pro-
ducer of goods or services.
• An agile company is primarily characterised as a very fast and efficient learning
organization even if it was not initially productive and cost efficient.
The lean concept makes sense in conditions where the demand is predictable and
the requirement of variety is low, but in situations connected with a more volatile
demand pattern and thus a wide variety of customer requirements, it is the concept of
agility that is generally the more acceptable one (Ganguly, Nilchiani, Farr, 2009).
However, J. Sarkis (2001) defines agile manufacturing as a strategy that incor-
porates within itself both the concepts of lean and flexible manufacturing and ad-
dresses the business enterprise world.
In the table below the conceptual differences and relationships between lean and
agile manufacturing compiled by J. M. Sharp, Z. Irani, and S. Desai (1999) are
presented. Customers, markets, and competitors are becoming increasingly unpre-
dictable, and this does not suit lean production methods such as JIT. By contrast,
agile manufacturing aims to perform well, both operationally and strategically, in
a turbulent environment.

Table 5. Conceptual differences and relationships between lean and agile manufacturing

Lean manufacturing Agile manufacturing

Investment in technology
Removed layers
Reduced waste
Worker input
Established teams
Greater dependence on suppliers
Stable processes
Product development time in months
High quality at point of sale
Source: (Sharp, Irani, Desai, 1999).
Investment in people, information systems
Multi-skilled work force
Robust, reconfigurable teams, equipment, infrastructure
Partnering in all stages of manufacturing
Self-directed work teams, management breaking barriers
Effective technology and information integration
Reconfigurable processes
Development time in weeks
High quality across product life
184 Maja SAJDAK

In the proposed definitions and the areas of agility presented it is very often
indicated that a company's responsiveness and flexibility of action are notions
which are directly linked with agility. According to E. Bernardes and M. Hanna
(2009) these notions, however, are not the same. Flexibility is connected with ex-
ante actions and gives a company the chance to prepare for change, which involves
reconfiguring the system in advance with a view to further transformation. Flexibil-
ity of a system permits a quick response to unexpected changes (an increase or
decrease in demand). Agility, in contrast, is a concept oriented towards achieving
a competitive advantage in a turbulent and changeable environment. Although
agility shares some features with flexibility, it is primarily the ability of “managing
uncertainty” by means of the options which are available within the current con-
figuration and predefined limitations. Agility is the ability to fundamentally recon-
figure the available options in order to accommodate unforeseeable circumstances
in the environment, and it is reinforced by a company's flexibility. Responsiveness,
in turn, refers to a company's actions and behaviours within the adopted systems of
coping with change (Sajdak 2013).
M. Bruce and L. Daly discuss the characteristics of the textile and apparel in-
dustry and identify the perspectives of lean, agile and ‘leagility’ (a combination of
these) within the existing supply chain literature, which have been proffered as
solutions for achieving quick and reduced lead times.

Table 6. The distinguishing attributes of lean and agile

Distinguishing attributes Lean Agile

Typical products commodities fashion goods
Marketplace demand predictable volatile
Product variety low high
Product life cycle long short
Customers drivers cost availability
Profit margins low high
Dominant costs physical costs marketability costs
Stockout penalties long-term contractual immediate and volatile
Purchasing policy buy goods assign capacity
Information enrichment highly desirable obligatory
Forecasting mechanism algorithmic consultative
Source: (Bruce, Daly 2004).

The results presented by M. Hallgren and J. Olhager (2009) indicate that lean
and agile manufacturing differ in terms of drivers and outcomes. The choice of a
cost-leadership strategy fully mediates the impact of the competitive intensity of an
industry as a driver of lean manufacturing; while agile manufacturing is directly
affected by both internal and external drivers, for example a differentiation strategy
as well as the competitive intensity of an industry. The study also confirmed that
 AN AGILE, LEAN OR FLEXIBLE ENTERPRISE ... 185

agile manufacturing is found to be negatively associated with a cost-leadership

strategy, emphasizing the difference between lean and agile manufacturing. The
major differences in performance outcomes are related to cost and flexibility, such
that lean manufacturing has a significant impact on cost performance (whereas
agile manufacturing has not) and that agile manufacturing has a stronger relation-
ship with volume as well as product mix flexibility than lean manufacturing does.

Table 7. External and internal drivers of agile and lean manufacturing

Hypotheses
No. Description of hypotheses testing
H1a There is a positive relationship between the competitive intensity
Accepted
of an industry and cost leadership as a competitive strategy
H1b There is a positive relationship between the competitive intensity
Accepted
of an industry and differentiation as a competitive strategy
H2a There is a positive relationship between the competitive intensity
Rejected
of an industry and lean manufacturing
H2b There is a positive relationship between the competitive intensity
Accepted
of an industry and lean manufacturing
H3a There is a positive relationship between cost-leadership and lean
Accepted
manufacturing
H3b There is a positive relationship between a differentiation strategy
Accepted
and agile manufacturing
H3c There is no relationship between cost-leadership and agile manu-
Accepted
facturing
H3d There is no relationship between a differentiation strategy and
Accepted
lean manufacturing
H4a-d There is a positive relationship between lean manufacturing and
(a) cost, (b) quality, (c) delivery speed, (d) delivery reliability Accepted
performance
H4e-f There is no relationship between lean manufacturing and (e)
Accepted
product mix flexibility and (f) volume flexibility performance
H4g There is a positive relationship between agile manufacturing and
Accepted
cost performance
H4h-l There is a positive relationship between agile manufacturing and h) i) j) Ac-
(h) quality, (i) delivery speed, (j) delivery reliability, (k) product cepted
mix flexibility, and (l) volume flexibility performance k) l) Rejected
Source: (Hallgren, Olhager 2009).

4. CONCLUSION

This paper presents an overview of the notions of company agility, leanness and
flexibility, and extensively describes their characteristic features. Next, the notions
under analysis are compared on the basis of selected criteria and the author indi-
186 Maja SAJDAK

cates certain differences which stem from the objective perspective and strategic
orientation. Comparisons between the three approaches to company management
clearly show the different sources of competitive advantage and different internal
and external (environmental) conditions for implementing the concepts analysed.
The available subject literature, as well as the conclusions reached in this paper,
makes it possible to formulate a thesis that agility is the broadest of the notions
analysed, while leanness and flexibility are the prerequisites for agility.

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