The effect of lean production on financial performance: The mediating role of inventory leanness

The purpose of this paper is to empirically investigate the relationship between lean production implementation and financial performance. Particular emphasis is placed on the mediating role of inventory leanness in deriving the financial performance benefits commonly associated with lean production. Moreover, the interaction among different lean practice bundles in affecting financial and inventory performance is assessed. Based on an analysis of a combination of survey and secondary data, the effect of lean production on financial performance is found to be partially mediated by inventory leanness. In addition, there is strong evidence that the concurrent implementation of internally-focused and externally-focused lean practices yields greater performance benefits than selective lean production implementation. Thus, this study contributes to the theory of lean production by providing insights into the mediated and moderated effects of lean production on inventory leanness and financial performance. (C) 2012 Elsevier B.V. All rights reserved.