Critical success factors of sustainable manufacturing practices in Malaysian automotive industry

Abstract

The purpose of this study is to examine the critical success factors of sustainable manufacturing practices (SMPs) in Malaysian automotive industry. The questionnaires were designed and distributed to the 50 respondents. The pilot study sample consists of 26 respondents from 50 questionnaires, with an average response rate of 52%. The results of reliability analysis show that social responsibility is critical factor influencing the direct SMPs implementation success. By implementing SMPs in Malaysian automotive industry, it can assist company to improve the quality of management. Thus, this study recommends that the future research explore the influence of SMPs on sustainable performance in Malaysian automotive industry.

Keywords:

• Sustainable manufacturing practices
• manufacturing processes
• supply chain management
• social responsibility
• environmental management
• automotive industry

1. Introduction

Globalisation in Malaysian automotive industry moved aggressively in the early 1960s when the Malaysian government transformed the economic structure in order to encourage the growth of the automotive industry and reduce its dependency on the agricultural sector. Under this policy, two national car projects, namely Perusahaan Otomobil Nasional Berhad (PROTON) (founded in 1983) and Perusahaan Otomobil Kedua (PERODUA) (founded in 1994) have conquered the automotive industry, commanding 29% of the local market share for the year ending March 2011. For the long-term mission, Malaysian automotive industry is hoping to boost the industrialisation process to reach the status of a developed nation by the year 2020.

Recent development in the global economic situation has created the requirement for organisations to reconstruct and restructure their business strategy in order to sustain their performance and effectiveness while remaining competitive in the market positions. In addition, the role of quality improvement within an organisation has become a crucial issue in world-class performance (Sandrock and Tobin 2007) such as productivity, quality, safety and environment. A particular evidence from PROTON Annual Report (PROTON 2011) for the year ending 2010 stated that it had been a landmark year in terms of strengthening PROTON’s operational sustainability practices.

Due to the rise in these issues, the awareness of Sustainable Manufacturing Practices (SMPs) has become an important element in manufacturing industry. A number of researchers have attempted to refine this broad array of SMPs into the framework. Similarly, to support the continued growth and expansion of the manufacturing industry, SMPs are the best approach (Garetti and Taisch 2012; Habidin et al. 2013; Yuan, Zhai, and Dornfeld 2012). In Malaysian business environment, in order to increase sustainability scoring methods for SMPs, PROTON for example utilises the products and processes, predictive models and optimisation technique.

In short, understanding the importance of manufacturing sustainability, an attempt has been made to review selected literature and their research findings on SMPs and their critical success factors (CSFs). Whilst the broad concept is sustainable development is commonly accepted, it is need to fill gaps between theory and practices, barriers and challenges and current trends for this implementation, particularly in the automotive industry.

2. Literature review

2.1. Critical success factors

The CSFs approach is a technique that aid planners and managers to identify, specify and sort among the most relevant and critical factors determining an organisation’s survival and success. The beginning of CSFs approach was in the late 1970s and early 1980s, and for the twentieth century, it becoming increasingly significant issues in the automotive industry (Bouknight 2004). Nowadays, most of the previous studies on CSFs concerned on successful implementation of lean six sigma (Alessandro and Antony 2012; Habidin, Yusof, and Fuzi 2016), total quality management (Awan et al. 2008; Gunasekaran and Spalanzani 2011) and supply chain management (SCM) (Pettit and Beresford 2009) but none that focus on SMPs implementation. In relation to that, this study determined the CSFs for SMPs in Malaysian automotive industry.

2.1.1. SMPs constructs

Global demand for SMPs is putting increasing regulatory and market pressure on the organisations. Although, there has been a flurry of articles discussing the conceptual frameworks, strategies, tactics, tools, models and techniques for SMPs, but academics and practitioners have started seriously focusing of CSFs for SMPs in various countries and industries. Considering the importance of CSFs for SMPs, an attempt has been made in this paper to review most of the literature available on SMPs as an integrated quality improvements programs for the organisations. Therefore, for this proposed paper, the authors suggested four keys of successful factors in SMPs are summarised into the following sections.

2.1.1.1. Manufacturing processes

Increasing competition from quicker rivals and fewer resources are sending clear signals to the organisation to change their manufacturing strategies. New business models and complex relationships are becoming the norm while the strongest strategies are needed in order to streamline operations, boost productivity and maintain quality.

The SMPs is related to manufacturing processes (MP) includes to reduction, recycling and remanufacturing (Rosen and Kishawy 2012). For example, more effective and efficient recyclable packaging designs can make packaging more sustainable. It includes the environmental issues, green manufacturing, life cycle factors and priorities in enhancing MP.

Thus, some of the important aspects to implement SMPs in the early consideration of MP (Giachetti 1998; Jayal et al. 2010) are in terms of: (i) efficient resource (Loskyll et al. 2012; Rosen and Kishawy 2012); (ii) management control (Clute 2008; John and Ngoasong 2008); and (iii) products quality. Hence, the improvement in the MP would be giving the positive impact on working practice and productivity to the automotive industry.

2.1.1.2. Supply chain management

SCM becomes a focus for researchers when more and more organisations are making use of SCM to improve their organisational performance. This strategic viewpoint has been adopted in automotive industry (Despeisse et al. 2012; Fu 2007).

Most of the previous articles argued that SCM provides a strategic link between strategic cost management, SCM and internet application, supply chain relationship quality and cooperative strategy (Su et al. 2008), supply chain integration and customer delivery performance (Boon-itt and Wong 2011), flexibility supply chain and supply chain performance (Habidin et al. 2015) and product quality and business performance (Agus 2011). The authors look at how to align this success factor with company goals and how an organisation might use SCM measure to drill down and locate a manufacturing problem that is causing the organisation to miss its sustainability target.

2.1.1.3. Social responsibility

Social responsibility (SR) practice is considered as significant and necessary issue in order for the business society, considered as the most responsible actor for socio-economic and environmental problems and to provide efficient solutions for the more sustainable future (Loureiro, Sardinha, and Reijnders 2012). A growing body of academic literature on SR indicates that the best quality record of SR positively influences organisational performance in various industries and for the automotive industry (Simpson and Power 2005). Hence, the evaluation of SR would be explored based on the organisation requirement in this research.

Research by Vicianova (2011) argues that SR assists to create benefits for the automotive industry. The findings shows that SR can assist companies to increase sales, enhance profits, reduce operating costs and enhance investors. This is supported by Torugsa, O’Donohue, and Hecker (2012) who state that SR has a positive impact on the company to improve their performance. The authors suggested that by implementing SR in the organisation, it can increase the profitability of the company.

2.1.1.4. Environmental management

Indeed, many academics and practitioners have highlighted that the modeling; simulation and practices of environmental management (EM) are very important aspects in a variety of industrial applications around the world. Normally, waste reduction in manufacturing contributes to EM (Jabbour et al. 2012) through greater efficiency in the use of production resources (Latreille, Buscha, and Conte 2012) and the adoption of cleaning practices and improved organisation of the productive environment.

For the automotive supplier itself, most of automotive manufacturers have implemented the EM in operational performance (Jabbour et al. 2012; Oltra and Jean 2009). In doing so, EM will be measured by doing this research, particularly in the automotive supplier.

3. Methodology

A set of survey questionnaire was carefully designed to ensure that most of the issues concerning SMPs. The final form of the survey questionnaire consisted the success factors of SMPs. The questionnaire utilised the seven-point Likert scale, representing a range from very low = 1 to very high = 7 which has been used by management researchers before (Latreille, Buscha, and Conte 2012; Shaw, Park, and Kim 2012).

In the SMPs questionnaires, questions were divided into various sections, starting with some general information (type of product, quality award, etc.) and then focusing on CSFs (MP, SCM, SR and EM). To evaluate questionnaires were e-mailed and reviewed by sustainability manufacturing expert from one local, two, international academic and two practitioners. The questionnaires were modified based on their comments. For SMPs items, the expert comments that EM2 should delete this item and not relevance in research scope.

Questionnaires were administered in each PROTON vendor by researchers. This study was focused on PROTON vendors. The PROTON vendors that has been selected based on pilot study was 50 vendors. The questionnaire was sent to 50 PROTON vendors only. Further, to collect data pilot study, the questionnaire was sent to 50 PROTON vendors only. However, of the 50 questionnaires sets were distributed, only 26 questionnaires collected, with an average response rate of 52%. This amount is accepted for the purpose of a pilot study by Emory and Cooper (1991) with their suggestion that respondents ranging from 25 to 100 are appropriate.

We were mailed to the Executive Manager, Director of Operations/Manufacturing or the person with the equivalent position in the organisation. The Executive Manager, Director of Operations/Manufacturing is the best chosen regarding the sustainable manufacturing practice and the results of the SMPs implementation.

The pilot study was to identify the clarity relevancy of the questions, clear meaning and terms normally used in the industry, time taken to answer all the questions and to test the internal measurement reliability. Thus, the analysis had been performed using the SPSS Version 21.0 for descriptive analysis to identify the means and Cronbach Alpha of each instrument.

The literature was adopted from previous studies. Table 1 shows the SMPs measurement items for this study.

Table 1. SMPs constructs and their measurements items.

SMPs constructs	Item	Adopted	Authors
MP	Extent to which water based paints is used Extent to which recycled material is used Extent to which raw material on JIT basis is received Extent to which air emissions is minimised Extent to which hazardous and non-hazardous waste creation are minimised Extent to which reusable parts are designed Extent to which accessible parts are designed Extent to which waste materials are reduced Extent to which greenhouse gas emissions is reduced Extent to which energy efficiency is improved	Adopted	Millar and Russell (2011), Fairfield, Harmon, and Behson (2011), Loskyll et al. (2012), and Rosen and Kishawy (2012)
SCM	Extent of forming partnership with suppliers to promote sustainable manufacturing Extent of encouraging suppliers to use recycled materials Extent of sources from environmentally friendly suppliers		Agus (2011), Despeisse et al. (2012), and Millar and Russell (2011)
SR	Extent of promoting good relationship with the staff and union Extent of using documented code of ethnic to guide the behaviour of the firm Extent of using social responsibly as a strategy for creating brand loyalty		Millar and Russell (2011), and Loureiro, Sardinha, and Reijnders (2012)
EM	Extent of reducing pollution and toxic chemical use and their effects on our employees, customers and the communities in which we operate Extent of securing needed raw materials over the long term for our employees, suppliers, customers and the communities in which we operate Extent of reducing and/or managing the risks and impacts of climate change on our employees, customers and the communities in which we operate Extent of ensuring an adequate supply of water for our employees, suppliers, customers and the communities in which we operate		Fairfield, Harmon, and Behson (2011), Jabbour et al. (2012), and Latreille, Buscha, and Conte (2012)

3.1. Validity and reliability

Validity requires reliability. In quantitative research, validity is one of the most essential manifestations of research method. Validity refers to the extent to which the number obtained truly reflects what the user intended to measure. According to classical citation on Cronbach’s alpha, (Zadek, Forstater, and Yu 2012) has identified thousands of investigations report that are based on measurement must be concerned with the accuracy or dependability. A reliability coefficient demonstrates whether the test designer was correct in expecting a certain collection of items to yield interpretable statements about individual differences.

Result of the reliability tests of SMPs constructs is between .841 until .804 (refer Table 2). The Cronbach’s for all constructs in this study was larger than .800, indicating an acceptable level of reliability of the constructs. According to Hair et al. (2010) the minimum acceptable value for test variable is .7. The results of reliability analysis show that four CSFs are valid and reliable for measurement CSFs of SMPs in Malaysian automotive industry. This can be attributed to the fact that all the questionnaire items were either adopted or adapted from published journals or articles that have been empirically tested or conceptualised.

Table 2. Reliability analysis of the SMP constructs.

Factor	Number of item	Cronbach alpha
Manufacturing processes	10	.810
Supply chain management	3	.812
Social responsibility	3	.841
Environment management	4	.804

4. Results and discussions

The result including means for all the variables is presented in Table 3. In Figure 1, overall mean for each factor was obtained to investigate the level of SMPs perceived by respondents. The highest mean value was observed for SR at 5.7308 and the lowest for SCM at 5.3077. On the other hand, MP (5.6308) and EM (5.3269) are the two least constructs CSFs perceived by respondent. The discussion about degree of perception of SMPs practices are determined from these criteria obtained from it.

Table 3. Average rating of CSFs by degree of SMPs.

Factor	Mean	SD	Average mean	Rank
Manufacturing processes			5.6308	2
MP1	5.58	.578
MP2	5.65	.485
MP3	5.81	.402
MP4	5.54	.508
MP5	5.81	.402
MP6	5.65	.629
MP7	5.62	.637
MP8	5.65	.485
MP9	5.46	.508
MP10	5.54	.508
Supply chain management			5.3077	4
SCM1	5.54	.706
SCM2	5.04	.871
SCM3	5.35	.892
Social responsibility			5.7308	1
SR1	5.77	.430
SR2	5.65	.689
SR3	5.77	.430
Environment management			5.3269	3
EM1	5.35	.629
EM2	5.31	.618
EM3	5.19	.634
EM4	5.46	.582

Figure 1. CSFs of SMPs implementation in Malaysian automotive industry.

Notes: MP = manufacturing process, SCM = supply chain management, SR = social responsibility, EM = environmental management.

4.1. Social responsibility

SR is viewed by the automotive manufacturers as the most crucial factor that would be sustained. This result strongly supported by Sava, Moisa, and Langa (2011) who was conducted a research on promoting SR by SMEs in Romanian car manufacturers. Findings showed that Renault Nissan has concerns about social responsibility by providing products and services that meet customer needs, ensuring safety and quality of products and services.

According to Zadek, Forstater, and Yu (2012), active engagement in SR offers an opportunity to influence one of the most powerful forces shaping the landscape for global business and sustainable development. To summarise, to achieve this success factor would have as result the creation of added value for six key responsibilities or dimensions of SR: stakeholders, customers, shareholders, company, partners, staff and society as a whole.

4.2. Manufacturing process

Based on the observations made by respondents, this factor achieved values over the acceptability level of 5.6308 (see Table 2). Respondents agreed that it is important for automotive manufacturers to sustain MP in order to manage and control the use of raw materials during the production process occur. In line with that, the organisation could be produced a higher product quality at optimal levels. As with every other part of the MP, the organisation in this pavilion are adapting to ever-higher demands in productivity, dependability and sustainability in an era of aggressive competition and a still-uncertain economy.

Considering sustaining operational excellence in manufacturing, Ramabhadran (2011) who is Global Leader in DuPont, company has created and applied DuPont Sustainable Solutions to a better, safer, healthier life for people everywhere. In many companies in Germany, MP which conserves resources optimises energy and low in emissions goes hand in hand with a sense of responsibility which is exercised worldwide. Based on the above, this study provides empirical evidence to support conceptual and prescriptive statements in the literature regarding the impact of MP for SMPs implementation.

The awareness of SMPs has become an important element in manufacturing industry. A number of researchers have attempted to refine this broad array of SMPs into the framework. Similarly, to support the continued growth and expansion of the manufacturing industry, SMPs are the best approach (Seliger et al. 2008; Yuan, Zhai, and Dornfeld 2012). In the Malaysian business environment, in order to increase sustainability scoring methods for SMPs, PROTON for example utilises the products and processes, predictive models and optimisation technique (PROTON Annual Report 2011).

4.3. Environmental management

The next important factor for successful SMPs implementation in Malaysian automotive manufacturers is EM, which is significant part of quality of life and nature.

Theoretically, Mikler (1998) similarly sees the attraction for EM sustainability in world car industry which is an increasingly concern for the EM. Based on the Fifth Toyota Environmental Action Plan, Toyota could reduce the environmental impact at all stages of vehicle life cycle from development and design, procurement, production and logistics, sales to waste and recycling and promote EM (Olugu and Wong 2012). However, explaining the actions of the automotive industry particularly in Malaysia with respect to EM sustainability requires further research within coincide with sustainability principals (such as strategic planning, strong vision, holistic focus and devolved and consensus decision-making).

4.4. Supply chain management

The organisation face challenges in implementing SCM. The challenges can be considered as barriers for organisation in implementing an effective SCM.

Due to the structure of the data, SCM is viewed by the automotive manufacturers as the crucial factor that would not be sustained, easily. A recent study by Olugu and Wong (2012) found that the level of perception for SCM is lowest than other (leadership, customer focus, just in time). Moreover, SCM factor was given less attention to developing countries particularly in Asia. When implementing SCM practices, company need to recognise other factors such as local norms, physical infrastructure and IT infrastructure. The author further states that SCM practice concepts are still limited implementation in most Asian environments. Thus, investigating the SCM practices in Asia specifically in Malaysia will increase the literature on sustainable SCM practices.

5. Conclusions

For Malaysian automotive industry itself, CSFs for SMPs strategy must consider four components: MP, SCM, SR and EM. Through the SMPs constructs, four factors of analysis as measurement for SMPs constructs demonstrated a good fit and proved that this was valid and reliable for Malaysian automotive industry.

By implementing SMPs in Malaysian automotive industry, it can assist company to improve the quality of management. Automotive industry needs to implement SMPs in order to increase the quality in Malaysian automotive industry. This research will provide new insights not only related to the automotive industry, but also to several parties such as practitioners, academic, country or other industry. Agenda for future research, the authors are looking at the relationship between SMPs, SLI and SP in Malaysian automotive industry.

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes on contributors

Nurul Fadly Habidin , PhD, is a senior lecturer at Universiti Pendidikan Sultan Idris, where he teaches industrial management, management accounting and business engineering. His main research interests are lean, six sigma, quality/business engineering and continuous/performance process improvement.

Anis Fadzlin Mohd Zubir , is a full master’s student of Management Accounting at Universiti Pendidikan Sultan Idris. Her main research interest is sustainable and lean manufacturing in automotive industry.

Nursyazwani Mohd Fuzi , is a PhD student of Management Accounting at Universiti Pendidikan Sultan Idris. Her main research interest is sustainable in automotive industry.

Nor Azrin Md Latip , PhD, is a senior lecturer at Universiti Pendidikan Sultan Idris, where he teaches management and business administration. His main research interests are supply chain management.

Mohamed Nor Azhari Azman , PhD, is a senior lecturer at Universiti Pendidikan Sultan Idris, where he teaches technical and vocational education. His main research interests are technical and vocational.

Acknowledgements

The researches would like to acknowledge the Ministry of Higher Education (MOHE) for the financial funding of this research thought Fundamental Research Grant Scheme (FRGS), and Research Management Centre (RMC), UPSI for Research University Grant (RUG).