Critical Success Factors in Lean Operation for Small Medium Enterprise

This literature review discusses the critical success factors of lean operation for small medium enterprises (SMEs) using Agile management. It highlights how Agile ensures customer satisfaction and supplier collaboration, and the importance of lean leadership. The review uses the example of Nouri Restaurant in Singapore to illustrate the application of Agile in the restaurant industry. The subject is relevant for courses in business management, operations management, and entrepreneurship.

Running head: LEAN AND AGILE MANAGEMENT
Literature Review: Critical Success Factors in Lean Operation for Small Medium Enterprise
Name of the Student
Name of the University
Author note

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Abstract:
The discussion below shows that Agile has emerged as a requirement of every firm to reduce
wastage of capital and enhance profits. The discussion shows that Agile attributes the firms with
flexibility to adapt their strategies according to the market conditions. The method especially
proves effective under the present conditions in which customers’ preferences are dynamic. The
discussion also shows that Agile methods have cross functional teams which work towards
bringing out more customer effective products. The system does encourage high level of
innovation to cater to the customers more successfully. Finally it can be concluded that
application of Agile requires a strong leadership.

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Table of Contents
Introduction:....................................................................................................................................3
Part 1: Global Agile:........................................................................................................................4
Agile to ensure customer satisfaction:.........................................................................................4
Supplier collaboration:.................................................................................................................6
Part 2: Lean leadership:...................................................................................................................9
Part 3: Lean Operation:..................................................................................................................10
Part 4: Lean Customers:.................................................................................................................11
Conclusion:....................................................................................................................................12
References:....................................................................................................................................14

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Introduction:
Small and medium scale organisations today adopt lean operations to adapt readily to the
market changes. Today every organisation irrespective of size, business area and location is
subject to drastic changes in the market environment like availability of raw materials. The
developed and the emerging markets have large number of firms of catering similar and identical
products which give customers a lot of options to choose between the firms from which they
want to buy products. This availability of large number of products along with favourable factors
like increasing income and access to foreign markets through ecommerce portals have made the
customer demand trends extremely unpredictable. The small and medium size companies due to
this fast changing consumer demand trends have to face several challenges. The small and
medium sized firms owing to limited market size heavy to suffer heavy losses when their
products lose acceptance due to shift in customer tastes. These firms as a result have to face
heavy loss of revenue and the capital invested towards acquisition of the inventory cannot be
recovered. This effects their liquidity and business growth (Kuruppalil 2018). The small and
medium firms in order align their operations with customer demand trends and eliminate waste
of raw materials have adopted lean management using Agile method. The application of lean
operations focusses on the entire process as a collection of processes designed to transfer value
to customers and reduction of capital. The aim of the paper is evaluate the main attributes of
Agile strategy and lean operations. The restaurant sector has been taken as the substratum of
study with the Nouri Restaurant, Singapore as the example (Nouri.com.sg. 2019). The
restaurants often face inventory management issues and change in customer demand trends, thus
suffering huge wastage of inventory and financial losses associated with the loss of inventory.
The restaurants, especially in developed markets like Singapore have adopted Agile and lean

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operations to counteract this issue (Odhiambo and Nassiuma 2017). This fact makes the
restaurant industry justified to conduct the research on lean management and Agile operations.
Part 1: Global Agile:
Agile refers to the process of developing software with emphasis on the operational
teams and they these teams participate in cross functional activity in order to create maximum
value to customers and reduce wastes. Cooper (2016) defines agile is a software development
process which takes into account all the different operational components to develop the
software. The aim of the software development is to allow flexibility of the operations which
enable the employees in the organisation using the software to adapt to the changing market
demands. The Agile teams are cross functional teams which continuously carry out innovation to
create more appropriate business solutions. Abrahamsson et al. (2017) point out that the Agile is
based on four main pillars namely, interaction between teams and team members, software
which are aligned to the business requirements of the organisations using them, collaboration
with customers and response to changing. Papadakis and Tsironis (2018) mention that in
comparison to Waterfall Model, the agile method allows firms to adapt to the customer needs
and bring about changes according to the needs of the latter. In fact, waterfall model is sequential
and does not allow flexibility, thus making it unsuitable for use in organisation functioning in the
global market which is extremely dynamic. The Agile method allows higher degree of flexibility
to adapt to the market needs which has led the most of the firms in the global market to replace
waterfall model with Agile models.
Agile to ensure customer satisfaction:
The Nouri Restaurant, a middle scale restaurant based in Singapore uses Agile to cater to
the customers in the country. The graph below shows that Singapore has a huge population of

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ethnic residents from other countries like China and India. The country also has a sizeable
population of Americans, Europeans and Australians. This means that the restaurant has to offer
food products according to the tastes of the customers of varied cultural origin. The restaurant
uses Agile to form its product strategy. The ‘Menu’ section of the restaurant clearly that it
changes weekly according to local markets and suppliers. The restaurant in the ‘ABOUT’
section clearly mentions that its food offerings are aspired by different cultures and involve high
level of innovation. The aim of the restaurant is to cater to the customers from different cultural
background (Nouri.com.sg. 2019). This approach of product designing at Nouri clearly points
out to the use of Agile. Babb et al. (2017) point out that Agile consists of modifying the
production process using software to cater to the customers more satisfactorily. As far as Nouri
in concerned, the restaurant communicates with its customers and suppliers on regular basis. The
restaurant using the social media portals like Facebook can gain information about the
expectations of the customers. Similarly, it communicates continuously with its suppliers and in
fact takes into consideration their abilities to supply raw materials before setting menus of
weeks’ time. Abrahamsson et al.(2017) can be reiterated in this respect that the ability to
integrate customer feedback and expectations with the product strategies enables firms to create
more values for the latter. The Nouri uses the feedback and responses of the customers it gains
on social networking sites to manufacture food products, thus creating value to the latter. Cooper
(2016) strengthens the opinion by pointing out that Agile process does not only involve
producing products according to the customers’ needs but also breaking down or deconstruction
the product component to create value to customers. The restaurant clearly mentions that it
‘deconstruct ingredients, techniques, and flavors to identify moments of connection between

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global food tradition’. This deconstruction of products to ensure satisfaction of customers clearly
shows that use of Agile at Nouri once again.
Figure 1. Ethnic population in Singapore
(Source: Data.gov.sg. 2019)
Supplier collaboration:
The second aim of Agile application is reduction of wastage of raw materials and
optimum use of the same to ensure minimum wastage. Girotto, Alibardi and Cossu (2015) point
out that restaurants have to invest immense capital to raw materials from a large number of
suppliers. The supply chains of restaurants consists of raw materials obtained both from local
markets as well as foreign markets. Ju, Osako and Harashina (2017) strengthens the opinion by

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mentioning that the restaurants can reduce their food wastage by using material flow analysis by
controlling the flow of raw materials into the production process according to the demands from
customers. These two aspects, namely reduction of raw material wastage and finished product
wastage can be clearly linked into Agile method. The restaurant on its official website mentions
that it changes the menu weekly in consultation with the suppliers. This ensure that the
production of food takes place as per the raw materials available. Secondly, the alteration of the
menu weekly enables the restaurant to mobilise the raw materials of greater variety towards
production of food products. This reduces wastage of raw materials. For example, if the
restaurant acquired raw materials of four categories namely, category 1, category 2, category 3
and category 4 and uses the raw materials to make food in the first week as shown. If in the
second week, the restaurant does not use Agile as shown in the second week and keeps the menu
same, it would lead to total exhaustion of some category of raw materials while others remain
underutilised. The second figure shows that category 1 and category 4 raw materials are
exhausted while category 2 and 3 remain underutilised.
Category 1 Category 2 Category 3 Category 4
Raw
materi
als
Amou
nt(kg)
Per
Unit
cost(
SGD)
Price
(SGD
)
Amou
nt(kg)
Per
Unit
cost(
SGD)
Price(
SGD)
Amou
nt(kg)
Per
Unit
cost(
SGD)
Price
(SGD
)
Amou
nt(kg)
Per
Unit
cost(
SGD)
Price
(SGD
)
Acquir
ed
quanti
ty(kgs)
1000
00 500
5000
0000
5000
00 200
1000
0000
0
2000
00 100
2000
0000
1000
00 200
2000
0000
Used
in
menu
of
week
1
5000
0 500
2500
0000
5000
0 200
1000
0000
5000
0 100
5000
000
5000
0 200
1000
0000
Closin
g
stock
5000
0 500
2500
0000
4500
00 200
9000
0000
1500
00 100
1500
0000
5000
0 200
1000
0000

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Used
in
menu
of
week
2(sam
e as
week
1)
5000
0 500
2500
0000
5000
0 200
1000
0000
5000
0 100
5000
000
5000
0 200
1000
0000
Closin
g
stock 0 500 0
4000
00 200
8000
0000
1000
00 100
1000
0000 0 200 0
Figure 2. The Nouri does not use Agile
(Source: Author)
The third diagram shows that the restaurant uses Agile and the menu changes in the
second week which is in fact mentioned in the official website of the Nouri. Thus as evident
from the figure that the company is able to maintain stock of raw materials of all the three
categories without exhausting and over utilising them.
Category 1 Category 2 Category 3 Category 4
Raw
materi
als
Amou
nt(kg)
Per
Unit
cost(
SGD)
Price
(SGD
)
Amou
nt(kg)
Per
Unit
cost(
SGD)
Price(
SGD)
Amou
nt(kg)
Per
Unit
cost(
SGD)
Price
(SGD
)
Amou
nt(kg)
Per
Unit
cost(
SGD)
Price
(SGD
)
Acquir
ed
quanti
ty(kgs)
1000
00 500
5000
0000
5000
00 200
1000
0000
0
2000
00 100
2000
0000
1000
00 200
2000
0000
Used
in
menu
of
week
1
5000
0 500
2500
0000
5000
0 200
1000
0000
5000
0 100
5000
000
5000
0 200
1000
0000
Closin
g
stock
5000
0 500
2500
0000
4500
00 200
9000
0000
1500
00 100
1500
0000
5000
0 200
1000
0000

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Used
in
menu
of
week
2
3500
0 500
1750
0000
3500
00 200
7000
0000
1000
00 100
1000
0000
2500
0 200
5000
000
Closin
g
stock
1500
0 500
7500
000
1000
00 200
2000
0000
5000
0 100
5000
000
2500
0 200
5000
000
Figure 3. Closing stock at the end of week 2 using Agile
(Source: Author)
Thus it is evident that Nouri uses Agile to manufacture food using Agile method. It uses
the method to cope up with unexpected changes in consumer requirements and make advantage
of market opportunities to earn high revenue.
Part 2: Lean leadership:
Leaders play a very significant role in leading lean management and Agile operation
systems. Holweg and Maylor (2018) mention that leadership plays a very important role in Agile
operations. Odhiambo and Nassiuma (2017) can be reiterated in this case to mention that the
process requires integration of several processes to ensure customer satisfaction. It can be also be
mentioned that the cross functional teams in Agile methods have to find out solutions to manage
unpredictable movements like change in product preferences. Mishra et al.(2017) contradicts the
opinion of the previous authors to point out that every company has limited resources and has to
direct their customer solutions in an optimum manners. The aim of Agile is to reduce wastage of
resources however, haphazard and uncontrolled research would lead to wastage of technological
capital and financial capital invested in technology. This is where the lean leadership comes into
play. The leaders direct and control the Agile teams so to develop solutions to meet customer

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requirements by using resources in optimum ways. Thus, it can be pointed out that leadership
plays a very important in mapping the operational ways according to the vision of the company
so as to develop new solutions aligned with the customer requirements.
As far as the Nouri is concerned, the restaurant in Singapore operates under the
leadership of Ivan Brehm, the executive chef and the owner. Mr. Brehm has experience of
working in different markets like New York, the United States and London, the United
Kingdom. The secomd leader namely, Matthew Chan has experience of working in the capacity
of Restaurant and Beverage Manager is a certified Sommelier. This means that these two leaders
are experienced leaders capable of leading staff efficiently after the values and mission of the
restaurant. Thus, it can be inferred that the leadership plays a very important role in ensuring that
cross functional employees of the firm achieve the Agile targets.
Part 3: Lean Operation:
Lean operations contribute towards production of high quality goods and services capable
of ensuring satisfaction to customers. Burkill (2015) defines that term product as anything
intangible and tangible which firms can offer customers to meet requirement of the latter and
earn revenue. Chung, Song and Lee (2017) narrow down the opinion of the previous author to
apply to the type of industry under research. They point out that as far as restaurants are
concerned, they offer both goods and services. The food products constitute the goods, the
services offered by the waiters and the ambience consist of the service aspect of the restaurants.
This is because both the food and the services attract costs. Thus, the sales price of food which
customers have to pay include both direct expenditure, the food preparation expenses as well as
services and ambiance costs, indirect expenses. Jogaratnam (2017) on the other hand defines
product as anything which a company sells in the market to generate revenue. Ryu and Lee

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(2017) affirms here that the main aim of lean operations aim to ensure operations so as to
enhance customer satisfaction and higher revenue. As far as the Nouri restaurant is concerned, it
is evident from an analysis of the business of the firm that the management uses lean
management to ensure customer satisfaction. First of all, the official website of the company
clearly gives details about the business of the restaurant as well as its products. The customers,
suppliers and the stakeholders of the restaurant can gain idea about the business of the Nouri. de
Andrade Gr&acia et al.(2016) mention that this informative attribute of the website provide
substantial information about the restaurant to the stakeholders like customers and suppliers.
Crowder and Reganold (2015) on the contrary mentions that suppliers in order to take decisions
to enter into procurement contracts with the restaurant cannot take proper decisions solely on the
basis of the menu and the experiences of the main executives. Financial parameters like profit,
amount of assets and capital of owners speak volume about the financial capacity of the firm to
give generate high revenue and pay high returns to suppliers. Oviedo-Ocaña et al. (2017) in this
respect assert that the financial capacity of the firms show their power to offer quality food
products to customers. It can be said in other words quality and quantity parameters reflect each
other. As far as the Nouri is concerned, it can be pointed out that the firm’s official website
provides qualitative information about the food offerings. The smart and well managed
presentation of the firm does provide a strong idea about the ambience and superior customer
services which are available at the outlet of the Nouri. However, the website does not provide
any information about the financial position of the firm. Thus, it can be inferred that though the
website speaks about the degree of lean embracement of the restaurant, unavailability of
financial reports however, weakens the lean operations projection.

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Part 4: Lean Customers:
Lean operations means channelizing the core operations of the firm to ensure satisfaction
of the customers. Piercy and Rich (2015) mention that companies following lean approach to
operations aim to create value to customers. Chavez et al. (2015) mentions that lean management
is dependent of use of technology like Agile since without technology managing the immense
amount of customer data is not feasible. This is because firms in order to embrace lean
management have to gain information about the expectations of customers. As far as the Nouri is
concerned, the restaurant gains customer information like expectations of customers from it
using the social media portals like Facebook. The restaurant integrates this customer information
in its product strategy to ensure high level of satisfaction to consumers. Thus, it is evident that
the Nouri understands the customers’ values using social media portals. Then the firm focusses
on the key processes like preparation of food products for customers using the customer insights.
However, in the absence of financial data, the capability to use lean management to create value
for customers remains inconclusive.
Conclusion:
The discussion brings into light several salient facts regarding Agile and lean
management. First of all, Agile aims to modify the operations of the firm to create value to the
customers. The key attributes of Agile are controlling of products and process to create value for
consumers. The agile process allows firms to flexibly control their production process. Secondly,
the small and medium sized firms can use this technique to make optimum use of their resources
to cater to customers. Moreover, since these firms have limited resources, it requires them to
channelize the resources more judiciously to reduce wastage of resources and the consequent
financial losses. Thirdly, it can be pointed out from the discussion that Agile is not restricted to

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production of goods and includes production of services as well. This has been exemplified by
the use of Agile by the Nouri which is a restaurant in Singapore. The firm provides evidence of
use of Agile right from its procurement strategy to production strategy. Fourthly, the use of
Agile requires application of leadership. This means that top executives control the application of
Agile technique in order to ensure that the employees utilise the resources optimally to ensure
production of high quality products. The restaurant qualifies on this parameter as well as the
owner as well as the restaurant and beverage manager have deep experiences of working in
different markets like the USA and the UK. The food product strategy which they make bears
influences of both resident and foreign food cultures. Thus, the product strategy of the restaurant
is well aligned with the population profile of Singapore which includes residents and foreigners.
The presence of the restaurant on the social media websites like Facebook enables it to
communicate with customers on regular basis to gain information about their expectations of the
restaurants. This invaluable customer information finds application in the very food products
strategy making of the Nouri, once again heralding its application of Agile. However, it can also
be pointed out that the small and medium firms usually not have public limited status which does
not mandate them to publish financial data before the public. This aspect is actually a limitation
in exploring the use of Agile and its impact on the operations of the firms like the Nouri. Thus,
on the whole it can be concluded that the restaurant adopts Agile method.

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