Performance Improvements In SMEs Within The Engineering Sector
Small and Medium sized Enterprises (SMEs) are defined as companies with less than 250 employees and currently account for 99% of all enterprises, 47% of the total job market and generate £3.3 trillion in the UK (BIS 2013). The manufacturing sector in the UK currently accounts for 10% of the gross value creation and employs around 2.5m people (GOV.UK 2013). Due to ever-increasing globalisation trends in this industry and customers’ sensitivity to price and quality with no compromise tolerance, this sector is now feeling the pressure for continuous business improvement more than ever (Deros etl al., 2011). However, SMEs in this industry tend to allocate much of their inherently limited resource to the technical aspects of the business, which has traditionally left them behind the most recent continuous improvement trends pursued by large manufacturers.
Lean and Six Sigma have been widely acknowledged as the main business improvement philosophies of all time (Womack and Jones, 2003). Manufacturers (often large corporates), who can afford to invest in business improvement, to change their organisations’ culture and to overcome the resistance to change, have reported enormous success in employing these philosophies. Countless success stories have been repeatedly reported on the achievements of employing lean (Dettmer, 2001), six-sigma (Nonthaleerak & Hendry, 2008) and lean-six-sigma (Loan et al., 2014). SMEs, however, have only recently started to practice lean thinking (Yogesh, 2012). There are few reports on the best practices of lean in SME (Deros et al., 2011, Medbo, 2013), but those available show that the success rate of employing lean-six-sigma in SMEs has not been as outstanding as in large corporates. A thorough investigation of these suggests that due to lack of resources and time, they often tend to take a few tools and methods from these approaches, without an attempt to create the underlying culture needed to launch these concepts as integrated principals. Various sources suggest a success rate of no more than 25-30 percent (Dettmer, 2001), and other suggest that only local efficiencies can be achieved (Goldratt, 2008). It therefore highlights a need for a wider study on how best business improvement practices can be developed and practiced within SMEs, instead of borrowing tools and replicating methods from concepts that has been generated in different environments (larger manufacturers). To do so, however, the first step is to develop an inclusive set of measures for SME manufacturers, with which they can measure their performance and set targets for improvement. This research, therefore, adapting a positivism and interpretivism approach, will critically review the current literatures to design a performance measurement index for SMEs in the engineering sector and then a business improvement framework, based on the proposed index.
The measurement index and improvement framework will then be tested as part of an action research study with the objective of identifying learning from the adoption of the proposed model and developing this model further. It is likely that this exciting research will lead to further studies, enabling generalisation to a wider context, and ultimately the findings would be converted into guidelines, which are accessible for small/medium engineering firms with the aim of increasing their productivity and thereby provide impact on the economy as a whole. To achieve this, we will focus on the following research questions:
1. How to best measure business performance in SMEs in the engineering sector?
2. What are the business improvement essentials for small/medium engineering firms? Can an improvement framework be developed?
3. What can be learnt from practicing this model in an action research study; and how can the learning be employed to generalise the model?
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FTE Category A staff submitted: 23.00
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