Manufacturing best practicesin Malaysian small and medium

enterprises (SMEs)Afdiman Anuar

Department of Automotive Technology,Advanced Technology Training Center, Melaka, Malaysia, and

Rosnah Mohd YusuffDepartment of Mechanical and Manufacturing Engineering,

Universiti Putra Malaysia, Serdang, Malaysia

Abstract

Purpose – The purpose of this paper is to investigate the current level of best manufacturingpractices in Malaysian ISO 9000 certified small and medium enterprises (SMEs).

Design/methodology/approach – The authors conducted a survey on 270 ISO 9000 certifiedmanufacturing SMEs. Based on an extensive search of literature on performance requirements, eightareas were identified. Thus, the questionnaire was designed consisting of the eight areas which aremanagement, human resources development (HRD), technology and product innovation, marketingstrategy, quality, production process, supply chain management (SCM) and customer focus. Data wereanalysed using the SPSS software.

Findings – The results showed that among the eight areas, customer focus is the most implementedarea with the highest mean of 4.16, followed by quality (3.92), management (3.78), SCM (3.56),HRD (3.27), marketing strategy (3.05), production process (3.02) and technology and productinnovation with a score of 2.95. The results showed that the level of best manufacturing practices canbe improved further, especially in the area of technology and product innovation.

Research limitations/implications – Only the companies certified with ISO 9000 were selected.The questionnaire only covered eight areas of benchmarking and was analysed using descriptivestatistics.

Practical implications – The paper provides knowledge in assisting the SMEs to identify the areasthat they have to improve to achieve best manufacturing practices.

Originality/value – This is the first attempt to benchmark best manufacturing practices in someMalaysian ISO 9000 certified SMEs. The paper provides some useful insights and can help Malaysianmanufacturing companies to implement best practices and benchmarking to improve their practices.

Keywords Malaysia, Small to medium-sized enterprises, Benchmarking, Manufacturing systems,ISO 9000 series

Paper type Research paper

1. IntroductionSmall and medium enterprises (SMEs) have been the backbone of economic growth of aneconomy in driving industrial development (Normah, 2006). SMEs play a big role innational economies by providing job opportunities and supporting the big industries.Facing increased competitive pressure due to globalisation and increased qualityrequirements from their customers, SMEs manufacturers must increase their productivityand competitiveness in order to survive and prosper (St Pierre and Raymond, 2004).Companies can gain competitiveness by increasing the productivity of manufacturing

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Benchmarking: An InternationalJournalVol. 18 No. 3, 2011pp. 324-341q Emerald Group Publishing Limited1463-5771DOI 10.1108/14635771111137750

operations and fulfilling the changing needs of customers and employees. Thus, themanufacturing organizations must not only become increasingly advanced in theirmanufacturing process but also adopt world-class manufacturing practices. The increasedcompetition will enhance the demand for more customized products.

In Malaysia, the SMEs are under increasing pressure to improve their performance level(Normah, 2006). Globalisation, shortening product life cycle, increasingly sophisticatedconsumers, increasing labour cost and volatility in input prices has created anenvironment where manufacturers must be flexible, adaptive, responsive and innovative(Sohal et al., 1999). Companies used to compete based on price and quality, but now theyhave to compete across all competitive aspect including flexibility and responsiveness inthe current economic environment (Gunasekaran, 2003). Thus, it is necessary to identifythe current manufacturing practices of the Malaysian manufacturing companies andcompare with the manufacturing practices of world-class companies. This will enable thecompanies to identify and direct their focus on the areas that require improvement. Also,the companies will become more aware of the manufacturing practice that will helpincrease their performance and competitiveness. With best manufacturing practices,SMEs will be able to improve their business performance and expand their companyassets, providing work opportunities, and indirectly boosting the growth of the SMEs(Government of Malaysia, 2006) and contribute to Malaysia’s economic development.

2. Materials and methodsThe research involves a questionnaire-based survey. Though there are weaknesses inthis mode of survey such as difficult to obtain co-operation, it was deemed best for thisstudy as it is generally low cost; respondents can consult with others and can reach alarger sampling.

2.1 QuestionnaireThe questionnaire was developed after reviewing the literature on benchmarking and bestmanufacturing practices. The areas and indicators were then validated by Malaysia’sEnterprise 50 winners. Eight areas were found to be dominant (Table I). The authors foundthat some of the researcher mentioned about the same area of manufacturing practicestowards performance. The eight areas were related to quality (Ahire et al., 1996; Taninecz,1997; Kasul and Motwani, 1995), management (Solis et al., 2001; Kasul and Motwani, 1995;Collins et al., 1996; Sohal, 1998; Lagace and Bourgault, 2003), human resourcesdevelopment (HRD) (Rao et al., 1999; O’Sullivan et al., 2002; Taylor, 1995; Solis et al., 2001),marketing strategy (Boone and Kurtz, 2005; Gooze and Harms, 2006), production process(Lagace and Bourgault, 2003; Grando and Belvedere, 2005), technology and productinnovation (Collins et al., 1996; Grando and Belvedere, 2005), supply chain management(SCM) (Corbett, 1998; Stevenson, 2005) and customer focus (Kasul and Motwani, 1995;Taylor, 1995; Jasri, 2003). The respondents were asked to rank from a scale of 1 – being theleast implemented/practiced to 5 – as the most implemented/practiced.

For this study, small and medium manufacturing companies that have been certifiedwith ISO 9000 as listed in the Federation of Malaysian Manufacturers (FMM, 2005)directory and Small and Medium Scale Industries Development Corporation (SMIDEC,2006) web site has been selected. ISO 9000 certified manufacturing companies weredeemed as the best choice as respondents since according to Taninecz (1997) theyimplement various manufacturing practices and portray yield improvements and quality

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performance improvements in the company. The companies were contacted by telephoneand e-mail to notify them about the questionnaires, to verify their address and identify thepersons responsible in this area at managerial levels. The self-administered questionnairewas then mailed to the managers of the selected companies with a cover letter requestingthat the questionnaire to be answered by those in the managerial position and haveknowledge in this area. Several ways for follow-ups such as e-mail, telephone calls andcompany visits were made to remind the respondents of the questionnaires.

2.2 Data analysisThe data were analysed using statistical package for the social science (SPSS) software.Descriptive statistics analysis has been done to analyze the data. The descriptiveanalysis displays univariate summary statistics for several variables in a single tableand calculates standardized values and can be ordered by the size of their means(in ascending or descending order). By sorting the means in ascending order, the levelof manufacturing practices and vital practices implemented in companies wereidentified.

Practice Metrics Author

Customer focus Time delivery Kasul and Motwani (1995), Taylor(1995) and Jasri (2003)Customer satisfaction

Customer retention Deming (1986) cited in Agus andHassan (2001)

Quality Quality control, quality policy and plan,quality function deployment (QFD)and quality cost

Kasul and Motwani (1995)

Top management commitment Taninecz (1997)Supplier and customer relationship Taninecz (1997) and Stevenson (2005)

Management Top management commitment Kasul and Motwani (1995) and Solis et al.(2001)

Employee involvement Sohal (1998) and Lagace and Bourgault(2003)

Organizational culture Collins et al. (1996) and Sohal (1998)SCM Supplier involvement Sridharan et al. (2004)

Facility control Corbett (1998) and Stevenson (2005)Resource management and flexibility Beamon (1999)Vendor and material management,inventory levels and quality of thematerials

Kasul and Motwani (1995)

Human resourcedevelopment

Skill development Taylor (1995) and Solis et al. (2001)Giving rewards and employee satisfaction Rao et al. (1999), Cassell (2002)

Productionprocess

Production process flexibility Lagace and Bourgault (2003) andGrando and Belvedere (2005)Elimination of waste and response time

Marketingstrategy

Product strategy Boone and Kurtz (2005) and Gooze andHarms (2006)Marketing plan

Distribution strategy Collins et al. (1996), Sohal (1998),SMIDEC (2005) web site

Technology andinnovation

New technology Kasul and Motwani (1995)Setup time, change over time and leadtime reduction for equipments

SMIDEC web site and Grando andBelvedere (2006)

Innovation

Table I.Summaryof benchmarkingpractices metrics

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3. Results and discussionsBased on the total of 270 questionnaires distributed, 60 usable questionnaires wereidentified which represent 22.2 percent response rate. The questionnaire was answeredby operation managers, quality managers and others of similar positions or higher.The replies to the questionnaire have been analysed and the results are presented in thefollowing sections of the paper. Since a score from 1 to 5 have been used, the weightedmean average score for each answer is presented.

3.1 Customer focusFulfilling customer needs and requirements has become vital for modern enterprises toensure competitiveness. One of the most talked about challenges of organizations iscustomer satisfaction (Denkena et al., 2006). Zairi (1994) regards it as a culture changethat can yield to competitive outcomes of the highest order. Customer satisfaction is justone of the key practices to improve performance (Denkena et al., 2006). The overall meanfor customer focus is 4.16. Table II showed that all the practices scored above 4.0 exceptfor integrating customer satisfaction into company’s vision and goals (3.95) and havinga channel for customers’ to complaint and give suggestion (3.82). Having a companypolicy to deliver product on time for customer has the highest mean at 4.35. Underdownand Talluri (2002) cited in St Pierre and Raymond (2004) reported that manufacturingpractices is judged to be important in terms of delivery, quality and price. It is followedby the organization’s commitment to satisfy customers, monitoring customersatisfaction and using customer requirements as the basis for quality having a meanscore of 4.33 each. Rosnah (2004) highlighted that to improve the level of customer’ssatisfaction, customer’s complaints have to be responded quickly.

Table II also shows the significant levels for each customer practice. Although mostof the practices were highly implemented, only using customer requirements as the basisfor quality and employee always increases interaction with customers and supplierswere significantly correlated at 0.003 and 0.005, respectively. Sinclair and Zairi (1995)

Practices Mean Sig.

Customer practicesThere is a policy to deliver product on time for customers 4.35 0.563Using customer requirements as the basis for quality 4.33 0.003Monitoring of customer satisfaction 4.33 0.979Level of organization’s commitment to satisfy customers 4.33 0.507Usage of customer feedback in new product design 4.27 0.321All the complaints and suggestions are documented and implemented to improvecustomer satisfaction 4.18 0.346The company increases personal contacts with customers 4.17 0.431Employee always increases interaction with customers and suppliers 4.15 0.05Customer meetings are viewed as opportunities for improvement 4.13 0.509Working more closely with suppliers 4.12 0.376There is a procedure to measure customer satisfaction level (interview, survey, call, etc.) 4.10 0.890Marketing department actively seeking customer inputs to determine requirements 4.05 0.917The integration of customer satisfaction into company’s vision and goals 3.95 0.275There is a channel for customers to complaint and give suggestion 3.82 0.199Overall mean 4.16

Table II.Customer focus practices

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showed that from their survey, using the customer requirements as the basis to improvequality of product and services will enhance the customer satisfaction level. The resultsindicated that even though some practices were highly implemented (.4.00), thesepractices did not have a significant impact on performance where their significancelevels are above 0.05. For example, although the policy to deliver product on time forcustomer is the most implemented compared to the other practices, its level ofsignificance is only 0.563 indicating that the practices do not give impact and relatedtowards customer focus performance level.

3.2 QualityIn manufacturing, quality of the products produced is the main factor of competitiveness.Quality is an important aspect to measure performance of an organization (Kasul andMotwani, 1995). It refers to the ability of a product or service to consistently meet or exceedcustomer expectations (Stevenson, 2005). Table III shows the mean value for qualitypractices of the SMEs surveyed. The overall mean for quality is 3.92. Quality is dividedinto three categories namely management responsibilities, quality tools and qualitycontrol and procedure. Among these three categories, quality control and procedurescored the highest at 4.24. Nearly, all the practices listed under this category scored above4.0 indicating that the practices were highly implemented. Process control wasidentified and planned, including documented work instructions had the highest scoreof 4.37. All the practices scored above 4.00 except for establishing, documenting andmaintaining procedures for handling, storage, packaging and delivery products. Havinghigh scores on process control and procedure will ensure their products meets thespecified requirements and prevents defects and scrap occurring (Kasul andMotwani, 1995).

To achieve high-quality standards, it is necessary for commitment from the topmanagement to improve the organization’s quality performance. Managementresponsibilities have a mean of 3.96. Under this category, four practices were highlyimplemented which are quality policy is defined and implemented in the company (4.22),followed by all the personnel assigned for quality purpose are trained (4.20), level ofcompany’s commitment to implement IS0 9000 (4.17) and a documented qualitymanagement system exists to ensure that the product conforms to specifiedrequirements (4.10). Top management commitment is necessary to improve anorganization quality performance. The implementations of quality policies such asISO 9000 will improve quality performances, yield improvements and decrease customerreject rate (Taninecz, 1997). The other practices scored below 4.00.

Even though quality tools can help in solving various problems or helping improvingcompany performance (Goetsch and Davis, 2003), it is the least implemented in the SMEssurveyed. Only continual improvement showed that it is highly implemented (4.04) bythe companies. It is followed by problem solving and decision making and implementingtotal quality management (TQM) with mean values of 3.73 and 3.72, respectively.It is a fact that benchmarking is known as an excellent management tool that leadto better performance. However, benchmarking practice only scored 3.22 and at thebottom of three together with just in time ( JIT) (3.18) and Six Sigma (2.70). Sincebenchmarking requires accurate benchmarking metrics, formal strategy, time, moneyand commitment, it has to be done correctly. If it is not, it may be disastrous to company’sperformance (Davies and Kochhar, 2002).

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Practices Mean Sig.

Quality control and procedureProcess control is identified and planned, including documented work instructions 4.37 0.105All purchased products conform to specified requirements 4.35 0.215The quality document are reviewed and approved prior to use 4.32 0.365There is a procedure to ensure verification during a process 4.30 0.714There is a procedure for final inspection testing 4.30 0.000There is a procedure to control all quality documents 4.28 0.678There is a procedure for verification, storage and maintenance of a purchaser-suppliedproduct 4.27 0.226There is a procedure for products to be identified during all stages of production,delivery and installation 4.27 0.172There is a procedure to control, calibrate and maintain inspection measuring and testequipment 4.27 0.327There is a procedure to ensure an incoming product is not used until it has beeninspected or otherwise verified as conforming to specified requirements 4.20 0.455There is a procedure to ensure that products which do not conform to specifiedrequirements are controlled 4.15 0.431There is a procedure to investigate the cause of a non-conforming product and thecorrective action needed to prevent recurrence 4.10 0.047Procedures for handling, storage, packaging and delivery products are established,documented and maintained 3.98 0.098Mean 4.24 0.295

Management responsibilitiesQuality policy is defined and implemented in company 4.22 0.924All the personnel assigned for quality purpose are trained 4.20 0.389Level of company’s commitment to implement IS0 9000 4.17 0.766An established and documented quality management system exists to ensure that theproduct conforms to specified requirements 4.10 0.001A top executive decision to commit fully to a quality program 3.97 0.504Require supplier to meet stricter quality specifications 3.97 0.275There is warranty cost for each customer reject 3.95 0.295The design requirements are reviewed with the customer 3.90 0.585Level of company’s commitment to implement TQM 3.85 0.350Level of company’s commitment to implement other quality technique (Six Sigma,5S and JIT) to control defect rate 3.80 0.904Require suppliers to adopt a quality program 3.77 0.109Increased employee involvement in design and planning 3.60 0.312Mean 3.96 0.451

Quality toolsContinual improvement 4.02 0.914Problem solving and decision making 3.73 0.720Implementing TQM 3.72 0.339Total quality tools (Pareto chart, cause-effect diagram, check sheets, histograms,scatter diagrams, run charts, control charts, etc.) 3.60 0.318Optimizing and controlling through statistical process control (SPC) 3.35 0.200QFD 3.22 0.066Benchmarking 3.22 0.276JIT manufacturing 3.18 0.261Six Sigma 2.70 0.103Mean 3.42 0.355Overall mean 3.92

Table III.Quality practices

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Regression analysis was performed by taking performance as dependent variable andquality practices as independent variable, only three practices were found to bestatistically significant with quality performance. They were highly implemented by therespondents. The practices were final inspection testing procedure (0.000), procedure forinvestigating the cause of a non-conforming product and the corrective action needed toprevent recurrence (0.047) and an established and documented quality managementsystem exists to ensure that the product conforms to specified requirements (0.001).These practices can help improve quality performance as reported by Kasul andMotwani (1995) that quality control and procedures are needed to achieve plant zerodefects and improve quality performance.

3.3 ManagementManagement has always been identified as the most important essence in achievingexcellent quality level (Taninecz, 1997) and as one of the major determinant of successfulTQM implementation, Dale and Plunkett (1984). Management is necessary to achieveexcellence performance. It is one of the most important factors for management practiceadoption and many researchers unquestionably recognized this factor (Thiagarajan andZairi, 1998; Agus and Hassan, 2001; Chen, 1997; Sohail and Teo, 2003; Kasul andMotwani, 1995).

Table IV shows the mean value for management practices of the SMEs surveyed. Theoverall mean for management is 3.78. Among the practices listed, senior managementalways co-operate with the operational departments (4.15) and with customers andsuppliers for improving company’s performance (4.13) are highly implemented. Havingtop management commitment to collaborate with other parties can improve company’sperformance (Sohail and Teo, 2003; Solis et al., 2001). The result showed that only twoout of six practices were highly implemented. Naturally, top management is responsiblein guiding all activities of the company towards quality excellence. If the managementgoes bad, it will create unsatisfied employees and customers. For employees, it will leadto low interaction between employees and top management and affecting the employees’morale towards the job. While for customers, they will lose their trust over the companyand naturally will impinge on the company’s performance level.

Only senior management always co-operate with the operational departments practiceis highly statistically significant at 0.000. Top management have to guide all activities

Practices Mean Sig.

Management commitmentSenior management always co-operate with the operational departments 4.15 0.000Senior management always co-operate with customers and suppliers for improvingcompany’s performance 4.13 0.318The management of the company is carried out collectively by senior managers andwith employee participation 3.72 0.972The management of the company is carried out in person by the managing director 3.67 0.476The management promotes a set of company values to its employees 3.67 0.318The organizational culture is open and trusting 3.60 0.071The top management conducts training in problem solving for department leaders 3.50 0.099Overall mean 3.78

Table IV.Management practices

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of the company towards quality excellence through co-operation between employees,customers and suppliers and create a trustful organizational culture (Sohal, 1998).

3.4 Supply chain managementSCM seeks to enhance competitive performance by closely integrating the internalfunctions within a company and effectively linking them with the external operations ofsuppliers, customers and other channel areas (Kim, 2006). SCM is a concept involving theintegration of all the value – creating elements in the supply, manufacturing anddistribution process. It consists of all parties involved in fulfilling a customer requestwhether directly or indirectly (Chopra and Meindl, 2004) in the flow and transformationof goods and services from material stage to the end of user (Russell and Taylor, 2000).The supply chain not only includes the manufacturer and suppliers, but alsotransporters, warehouses, retailers and customer themselves. Table V shows the supplychain practices of SMEs with each score, respectively. The overall mean for SCM is 3.56.SCM is divided into five groups namely supply chain policies, supply chain functions,and the involvement of suppliers, company and customer involvement in SCM process.

Supply chain policies group has the highest mean at 4.20 compared with the otherfour groups. All the practices scored above 4.00, with products delivered on time scoringthe highest at 4.34. Jasri (2003) reported that on time delivery is always being used as ameasure of quality management excellence. For the supply chain functions, the meanwas 3.66. Among the practices listed under this category, communication (4.10) andinformation sharing (4.05) were highly implemented compared with the others.Managing supply chain means controlling all the functions over a facility includinginventory management, communication and information sharing between suppliers andcustomers, transportation and products manufacturing (Stevenson, 2005).

The supplier, company and customer involvement all scored above 3.00 with companyinvolvement the highest (3.64), followed by customer and supplier involvement at 3.23 and3.08, respectively. Inventory management in company involvement has the highest score(4.05) indicating that the practices were highly implemented. Beamon (1999) reported thatresources management efficiency is an important aspect in supply chain measurement.Resources are generally measured in terms of inventory levels. Settlement and paymentprocess is the most important process in supplier and customer involvement withtheir means at 3.63 and 3.82, respectively. Merchandising was the least concern for alltypes of involvement. Each type of involvement showed different priorities in the SCMprocess.

In supply chain policies, all the practices were highly significant except for productswere delivered on time and customer’s products that have met the order specificationsupon delivery at 0.069 and 0.352, respectively. Although products were delivered on timeis highly implemented by the respondents, the practices were not related to supply chainperformance. Most of the practices under supply chain functions category werestatistically significant with performance at significance levels ranging between 0.000and 0.001. The score indicated practices such as reducing customer returns/rework(0.000), maximizing customer service (0.001), reducing transportation costs (0.000),planning and deploying inventory effectively (0.000), reducing warehouse costs (0.000),decreasing manufacturing cycle time (0.001), reducing item procurement cycle time(0.000), reducing inventory costs (0.000), having product in stock (0.000) and providingpredictable delivery performance (0.000) were significant to supply chain performance.

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Practices Mean Sig.

Supply chain policiesProducts delivered on time 4.34 0.069Number of supplies delivered on time 4.18 0.000Customer’s products that have met the order specificationsupon delivery 4.27 0.352Customer orders that were rejected has not expressed as apercentage of the total sales 4.13 0.012Supplies that were rejected does not recognized as defective 4.11 0.001

Mean 4.20 0.087Supply chain functionsCommunication 4.10 0.309Information sharing 4.05 0.581Coordination 3.97 0.671Reducing customer returns/rework 3.90 0.000Maximizing customer service 3.73 0.001Reducing transportation costs 3.65 0.000Planning and deploying inventory effectively 3.63 0.000Reducing warehouse costs 3.63 0.000Decreasing manufacturing cycle time 3.63 0.001Innovating new products and services 3.58 0.835Vertical integration (owning and controlling your ownsupply chain) 3.53 0.141Reducing item procurement cycle time 3.50 0.000Reducing inventory costs 3.33 0.000Having product in stock 3.32 0.000Providing predictable delivery performance 3.28 0.000Mean 3.66 0.169Supplier involvement in SCM processSettlement/payment process 3.63 0.934Demand management (forecasting) 3.33 0.000Transportation management 3.22 0.000Inventory management 3.20 0.037Promotional planning 3.17 0.667Production planning 2.98 0.807Product development 2.97 0.377Merchandising (retail only) 2.15 0.105

Mean 3.08 0.366Company involvement in SCM processInventory management 4.05 0.938Production planning 3.90 0.781Transportation management 3.88 0.000Settlement/payment process 3.83 0.530Demand management (forecasting) 3.78 0.000Product development 3.72 0.488Promotional planning 3.50 0.673Merchandising (retail only) 2.42 0.126

Mean 3.64 0.442Customer involvement in SCM processSettlement/payment process 3.82 0.680Product development 3.52 0.001

(continued )Table V.SCM practices

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As for different level of SCM process involvement, transportation and demandmanagement process in both company and supplier involvement has 0.000 significantlevels. In customer involvement, the processes that were positively related to supplychain performance were product development and promotional planning withsignificant levels at 0.001 and 0.000, respectively. Supply chain functions includeforecasting, inventory management, information management, production scheduling,distribution and customer service were needed to achieve excellence in supply chainprocess (Beamon, 1999; Stevenson, 2005).

3.5 Human resources developmentBaharun et al. (2004) stated that human resource dimension is very important to achievetotal quality in organization. HRD involves the training, educating and developingpeople for the purpose of contributing towards the achievement of individual,organizational and societal objectives (Wilson, 1999). Table VI shows the mean value forHRD practices of the SMEs surveyed. The overall mean for HRD is 3.27. HRD is dividedinto two groups, namely top management as a motivation to human resource andemployee involvement.

Top management as motivation to human resource has a mean of 3.29. All thepractices were not highly implemented and scored slightly above 3.00 except for amountof time the people in department spend regularly together planning for the future with ascore of 2.95. Top management role in human resource is important although thepractices were not highly implemented among the respondents. It has been seen as avital human development needs to empowering employees to change and raise the desirefor achieving company’s goals (Chan, 1993).

Employee involvement had a mean of only 3.25, which suggested that it can beimproved further. According to Agus and Hassan (2001), employee involvement andincrease in quality awareness among employees are important to achieve world-classmanufacturing. All the practices scored above 3.00 except for employee’s satisfaction fortheir career advancement in HRD and employee resistance to changes in the companywith means of 2.98 and 2.92, respectively. Cooperation between co-workers to get the jobdone had the highest mean of 3.58 compared to the other practices within HRD practices.Empowering the employees through skill development activities such as performing atask as a team will develop an encouraging workplace environment (Taylor, 1995).

Coaching provided by management to prepare employees for future responsibilities,frequency of recognition employee receives for doing a good job and employeeunderstanding of vision and strategic plans of HRD are significant at 0.000. Solis et al.

Practices Mean Sig.

Promotional planning 3.43 0.000Production planning 3.40 0.955Demand management (forecasting) 3.27 0.284Inventory management 3.10 0.840Transportation management 3.02 0.901Merchandising (retail only) 2.30 0.279Mean 3.23 0.493Overall mean 3.56 Table V.

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(2001) highlighted that integration of training, development of career and organizationvision will improve individual and organizational effectiveness. Cassell et al. (2001) alsofound that employee recognition and performance appraisal encouraged the employeesto perform well in their work. Employee’s resistance to change in the company scored2.92 is the lowest mean compared to the other HRD practices, but has a significance levelat 0.004. Although the practice is the least practiced among the respondents, the analysisfound that the practice gave an impact towards human resource performance.

3.6 Marketing strategyMarketing strategies consist of promoting; distributing and positioning the product inthe market and create services that satisfy individual and organization objectives (Booneand Kurtz, 2005). Marketing strategy was selected as one area of manufacturing practicesin this study since it is closely related to customer needs and expectation. For example,a new product was manufactured with an excellent prospect and superb quality.If the news about the product does not reach the consumer, there will be no sales. Hence,it will have an affect on company’s performance. Thus, marketing strategy is needed tointroduce the product to the public at the right place and time. Table VII shows the results

Practices Mean Sig.

Top management as a motivation to human resourceWillingness of senior management to accept improvement suggestion 3.55 0.311Responsibility of the people in company for accepting the success or failure of theproducts or services they produce 3.50 0.283Coaching provided by management to prepare employees for future responsibilities 3.47 0.000Willingness of management to reward taking risks 3.37 0.569Amount of credit management gives to people when they deserve it 3.37 0.971Senior management sets an example of quality performance in day-to-day activities 3.37 0.075Level of acceptances of new policies and procedures within each department 3.20 0.306Likelihood of new ideas quickly being approved for trial implementation 3.12 0.913Level of flexibility within HRD to change management methods 3.02 0.569Amount of time the people in department spend regularly together planning for thefuture 2.95 0.940Mean 3.29 0.494Employee involvementLevel of cooperation between co-workers to get the job done 3.58 0.081Level of opportunity for employees in the company to exchange information with theirsupervisor 3.48 0.890Opportunity to improve employee’s skills in their present job 3.42 0.207Amount of information each employee receive through official communication channelsto do their job 3.38 0.290Frequency of recognition employee receives for doing a good job 3.32 0.000Level of pride the people in company have in their work 3.30 0.403Level of agreement among all employees concerning HRD’s division, strategic plan andday-to-day operational priorities 3.20 0.305Level of employee’s commitment to improve procedures in HRD 3.15 0.399Employee understanding of vision and strategic plans of HRD 3.00 0.000Level of employee’s satisfaction for their career advancement in HRD 2.98 0.885Level of employee resistance to changes in the company 2.92 0.004Mean 3.25 0.315Overall mean 3.27

Table VI.HRD practices

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of the marketing strategy practices of SMEs with each score, respectively. The overallmean for marketing strategy is 3.05. Marketing strategy is divided into three categorynamely marketing policies, advertisement methods and forecasts method.

Marketing policies have a mean of 3.79. Company thanking the customer for theirbusiness scored the highest (3.93) compared with the other practices listed withinmarketing strategy practices. All the practices within marketing principles are atmoderate level of implementation. Although the practices were not highly implementedby the respondents, marketing policies are good starting point for developing marketingplan (Cohn, 2008). Understanding customers’ needs, understanding and keeping aheadof competition and communicating effectively with its customers to satisfy customerexpectations were also found to be essential to the success of all businesses (RevisionNotes. Co. UK, 2008). Several practices such as company knows the customers’ wantsand desire (0.000), company has a unique selling proposition for the business (0.000),company gives special privileges to loyal customers and regards them as the businessgreatest asset (0.004) and company has a policy of reducing risk to the customers (0.000)were statistically significant indicating to performance. It is very important tounderstand the needs and wants of customers (Kasul and Motwani, 1995). The needs of

Practices Mean Sig.

Marketing policiesThe company thank the customers for their business 3.93 0.293The company regards the customer as always right and deals with this effectively togain businesses 3.88 0.296The company knows the customers’ wants and desires 3.83 0.000The company has a unique selling proposition for the business 3.83 0.000The company gives special privileges to loyal customers and regards them as thebusiness greatest asset 3.82 0.004The company gives the customers both emotional and rational reasons to buy theirproducts 3.75 0.835The company ensures that they are ahead of their competitors in offering products andservices to their customers 3.68 0.457The company has a policy of reducing risk to the customers 3.62 0.000Mean 3.79 0.236Advertisement methodCatalogues 3.47 0.349Internet 3.33 0.200Newspaper advertisement 2.35 0.083Magazines 2.25 0.295TV commercial 1.75 0.354Mean 2.63 0.256Forecasts methodMoving average 2.42 0.086Weighted moving average 2.40 0.000Trend equation 2.30 0.891Exponential smoothing 2.18 0.862Native method 2.05 0.817Mean 2.27 0.531Overall mean 3.05

Table VII.Marketing strategy

practices

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customers may vary between different groups of people. Customers’ needs may includethe after sales service and the service provided when the purchase of the goods is made.Advertisement methods have a mean of 2.63. Using catalogue (3.47) is a more popularmethod of advertising compared with the internet or using newspapers, magazines andtelevision since it involve lower cost, yet effective. The forecasts method category has amean of 2.90. All the practices within the group such as moving average, weightedmoving average, trend equation, exponential smoothing and naı̈ve method were hardlyimplemented by the respondents. Taking performance as dependent variable andmarketing strategy practices as independent variable, nearly all the practices were notrelated to marketing strategy performance except for weighted moving average withsignificance levels at 0.000 indicating that the practice is related and give impacttowards performance. The companies may want to consider the importance ofimplementing some forecasting techniques as forecasting is important to marketingpractitioners and one of the most important aspects of company’s successes (Armstrongand Brodie, 1999) and also forecasts were used to form marketing plans (Dalrymple,1987 cited in Armstrong and Brodie, 1999).

3.7 Production processThe ability to adapt today’s production to rapidly changing market conditions isessential to ensure competitiveness (Denkena et al., 2006). Table VIII shows theproduction process practices of SMEs with each score, respectively. The overall meanfor production process is 3.02 with the production by order system scoring the highest at4.11. Some of the technologies that can be found at production line such asmanufacturing cells, numerical control machines, automated machines and system havelow scores. This showed that technology integration or usage is lowly implementedamong the Malaysian SMEs and has been identified as a major factor restraining SMEsgrowth and expansion. So far, Malaysian SMEs are dependent on their own technologyand have to automate their production (SMIDEC, 2004).

Regression analysis showed that three practices were found to be statisticallysignificant towards performance. Production by order system, automated productionline and automated material handling system are positively significant at 0.000, 0.002and 0.000 significance levels, respectively. Lagace and Bourgault (2003) stated thatby increasing production flexibility, it can substantially increase an organization’s

Practices Mean Sig.

Production practicesProduction by order system 4.11 0.000Manufacturing cells 3.15 0.980Numerical control/computer numerical control (NC/CNC) machines 3.03 0.710Automated in-process inspection 2.94 0.213CAD or CAD-CAM system 2.86 0.850Automated production line 2.83 0.002Computer-integrated manufacturing (CIM) system 2.83 0.734Automated quality control system 2.81 0.405Automated material handling system 2.69 0.000Overall mean 3.02

Table VIII.Production process

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ability to response towards elimination of waste, economies of scope and response timewhich coherently increase the production capacity.

3.8 Technology and product innovationTechnology usage can help improve the organization’s performance to cope with problemssuch as insufficient manpower, lack of skilled workers and unvarying production efficiency(Crick and Jones, 1999). Table IX shows the mean value for technology and productinnovation practices of the surveyed SMEs. The overall mean for technology and productinnovation is 2.95. Technology and product innovation is divided into three categoriesnamely investment for new/improved product, technology costing and technologyimplementation.

Investment for new and improved product has a mean value of 3.29. Lager and Horte(2002) found that to be successful in-process industries, development of new andimproved product is needed. Customer needs for new product ideas scored the highestmean of 4.11 and was highly implemented by the respondents compared to the otherpractices within the technology and product innovation practices. Customers appeared

Practices Mean Sig.

Investment for new/improved productCustomer needs for new product ideas 4.11 0.940Employee training 3.63 0.731Machinery and equipment 3.45 0.004Marketing the introduction of new goods or services 3.45 0.651In-house research and development 3.33 0.095Marketing research for new product ideas 3.29 0.603Research and development research for new product ideas 3.06 0.429Industrial design 3.05 0.003Purchase of other external technology (e.g. licenses and trademarks) 2.93 0.300External research and development 2.63 0.842Mean 3.29 0.460Technology costingManufacturing/production cost 3.17 0.328Quality control/inspection cost 3.07 0.199Packaging/transportation/delivery cost 2.66 0.142Marketing/advertising cost 2.63 0.243Machine tools setup cost 2.58 0.315Maintenance cost 2.53 0.594Design phase cost 2.39 0.039Marketing research cost 2.09 0.316Simulation cost 1.96 0.000Mean 2.56 0.242Technology implementationProduct design technology (i.e. CAD, SPC, etc.) 3.25 0.828New marketing technology (i.e. web site and e-commerce) 3.18 0.083ICT (i.e. internet and intranet connection) 2.95 0.000Manufacturing process technology (i.e. supply chain system) 2.93 0.529Integrated technology (CAD&CAM, CIM, etc.) 2.52 0.002Mean 2.97 0.288Overall mean 2.95

Table IX.Technology and product

innovation practices

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as the biggest influence to the success of the company’s products (Goetsch and Davis,2003). The company should be proactive to satisfy customers’ needs and their productmust be beyond the buyers’ expectations. All the practices were not statisticallysignificant except for industrial design and machinery and equipment with significancelevels at 0.004 and 0.003, respectively.

Technology costing has a mean of 2.56. Manufacturing or production cost and qualitycontrol or inspection cost scored 3.17 and 3.07, respectively. All the practices were nothighly implemented by the respondents and not significant related towards technologyperformance. Except for design phase and simulation cost, the practices were positivelysignificant towards technology performance at 0.039 and 0.000 significance levels,respectively, although they being the least concern among the respondents.

Technology implementation has a mean of 2.97. All the practices were not highlyimplemented. Product design technology had the highest score of 3.25 within the group.Only information communication technology (ICT) and integrated technology werepositively significant at 0.000 and 0.002, respectively. Although integrated technology isthe least concern among the respondents, the practices are actually related to technologyperformance.

4. Summary of eight areas of manufacturing practicesTable X shows the overall mean for each area of manufacturing practices, indicatingthat the customer focus had the highest score of 4.16, followed by quality, management,SCM, HRD, marketing strategy, production process and technology and productinnovation the least implemented. The results clearly showed that there areopportunities for the SMEs to improve their manufacturing practices.

5. ConclusionThis study is an effort to investigate the current level of manufacturing practicesimplemented in Malaysian ISO 9000 certified SMEs and how they affect performance ineach area. Since these companies are certified, they would be able to show betterperformance than other SMEs. However, the results clearly showed that thesecompanies also fall short of some practices which may help them to be more competitivesuch as technology and product innovation. Though customer focus has the highestmean and can be concluded that the area was deemed important, the companies shouldalso focus on the other areas which are as important to achieve improvements inbusiness performance. The results also indicated that in some areas, the companies were

No. Manufacturing practice Overall mean

1 Customer focus 4.162 Quality 3.923 Management 3.784 SCM 3.565 Human resource development 3.276 Marketing strategy 3.057 Production process 3.028 Technology and product innovation 2.95

Table X.Summaryof manufacturingpractice overall mean

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focusing on certain practices (highly implemented) that do not influence performance inthat area. The companies should be able to evaluate their practices and identify therelevant areas that will positively affect their performance. By continuously monitoringtheir practices with best practices through benchmarking, the companies can improvethe level of competitiveness of their manufacturing organizations.

There is some limitation to the study due to the sample size. A bigger sample willgive a clearer picture of the practices and that the companies can benchmark theirpractices not only between but within the industry. However, this study has providedsome insights on the manufacturing practices of some ISO certified SMEs and thismaybe a beginning of their journey towards continuous improvement.

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Corresponding authorRosnah Mohd Yusuff can be contacted at: rosnah@eng.upm.edu.my

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