The Adoption And The Implementation Of Best Practice In Malaysia Biotech Manufacturing Industry.

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-EKNIKAL MALAY 'SIA MELAKA

FACULTY OF MANUFACTURING ENGINEERING

PSM

THESIS

HThe Adoption and the Implementation of Best Practice in

Malaysia Biotech Manufacturing Industry"

Name

:

WQNG PENG LIANG

Matrix

No.

:

B050410311

Course

:

Manufacturing Engineering (Design)

Year

:

2007/2008

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UTeM: Library (Pi11d.1/2007)

UMIVERSITI TEKNIKAL MALAYSIA MELAKA

JUDUL: THE ADOPTION AND THE IMPLEMENTATION OF BEST PRACTICE IN MALAYSIA BIOTECH MANUFACTURING INDUSTRY

SESl PENGAJIAN : 2007 / 2008

Saya

WONG PENG

LIANG

(HURUF BESAR)

mengaku membenarkan tesis (PSM/SarjanalDoktor Falsafah) ini disimpan di Perpustakaan Universiti Teknikal Malaysia Mela ka (UTeM) dengan syarat-syarat kegunaan seperti berikut:

1. Tesis adalah hak milik Universiti Teknikal Malaysia Melaka

.

2. Perpustakaan Universiti Teknikal Malaysia Melaka dibenarkan membuat salinan untuk tujuan pengajian sahaja.

3. Perpustakaan dibenarkan membuat salinan tesis ini sebagai bahan pertukaran antara institusi pengajian tinggi.

4. "Sila tandakan

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SULIT _{atau kepentingan Malaysia yang terrnaktub di dalam}(Mengandungi maklumat yang berdarjah keselamatan AKTA RAHSIA RASMl 1972)

TERHAD (Mengandungi maklumat TERHAD yang telah ditentukan

oleh organisasi/badan di mana penyelidikan dijalankan)

TIDAK TERHAD

Disahkan oleh:

$

$ J ! ! 7

(TANDATANGAN PENULIS) (TANDA GAN PENYELIA)

ZlkKEFLEE BIN ABDULLAH

Alamat Tetap: Cop Rasmi: Pensyarah

764, Taman Saga 11, Unwersltl Faktilli Kejurvteman Pembuatah Tekn~kal Malays~a Melaka

Jalan Aor Mengkudu, Kmng Behunci 75450 1200 Melaka Ayer Ke& 05400 Alor Star, Kedah.

Tarikh:

1

(t/5/3m%

Tarikh:

1

4

/s/''o

%

* Tesis dimaksudkan sebagai tesis bagi ljazah Doktor Falsafah dan Sarjana secara penyelidikan, atau disertasi bagi pengajian secara kerja kursus dan penyelidikan, atau Laporan Projek Sarjana Muda tPSM).

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DECLARATION

I hereby, declared this thesis entitled "The Adoption and the Implementation of Best

Practice in Malaysia Biotech Manufacturing Industry" is the results of my own research

except as cited in references.

Author's Name

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APPROVAL

This PSM submitted to the senate of UTeM and has been as partial fulfillment of the

requirements for the degree of Bachelor of Manufacturing Engineering (Design). The

members of the supervisory committee are as follow:

(EN

Z U L E K F I ~ ~ ~

BIN

ABDULLAH)

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Best practices are leadership, management, or operational methods or approaches

that lead to exceptional performance. Even though, there are a lot of researches and

findings show the success of benchmarking or best practice, but there are few- co~npanies

that not adopt or are not successfbl in the implementation of best practice. The purpose of

this study is to find the factors that most influence the manufacturers to adopt the best

practice in Malaysia biotech manufacturing industry. Therefore, focus could be paid on

these factors to find the right partner and avoid wasting resources while doing

benchmarking probct. Moreover, the relationship between implementation success of the

best practice that the organization had adopted and the performance improvement of the

organization as a result of implementation on these best practices is also to be found out.

The population of the study is 64 companies that were registered under Biotech Division,

Ministry of Science, Technology and Innovation and ONLY 8 QUESTIONNAIRES

R E m D from the respondents

WERE

analyzed USING SPSS .From this study, it

was found that the three major factors that would affect the decision making in best

practice adoption were the perceived benefits (increase quality and improve overall

operational performance) of the best practice itself, organizational culture (change is

viewed positively) of the company and perceived outside supports (availability of outside

training). On top of that, the relationship between implementation success level and

performance improvement level as a result of implementing the best practices was found

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ABSTRAK

Teknik terbaik adalah kepimpinan, pengurusan, cara-cara perjalanan yang

menyumbang kepada hasil keputusan yang baik. Walaupun terdapat banyak kajian dan

keputusan menunjukkan pengajian teknik terbaps yang berjaya, malah ia masih terdapat

syarikat-syarikat yang tidak mengamalkan pengajian teknik terbagus atau gaga1 dalam

melaksanakan teknik terbagus itu. Penyelidikan ini adalah bertujuan untuk mencari

faktor-faktor yang paling mempengaruhi para pen@lang untuk melaksanakan teknik

terbagus tersebut dalarn industri biotek Malaysia. Selain tu, perhatian juga diberi kepada

faktor-faktor tersebut untuk mencari syarikat sekerja yang betul dan setenisnya

menghalang syarikat daripada membazir sumber-sumber semasa menjalankan projek

pengajian teknik terbagus. Dalam penyelidikan ini juga, hubung kait antara kejayaan

perlaksanaan teknik terbagus dan peningkatan prestasi syarikat hasil daripada

perlaksanaan teknik terbagus itu DIKENALPASTI. Populasi penyelidikan ini adalah 64

buah syarikat yang didaftarkan di Bahagian Biotek, Kementerian Sains, Teknologi dan

Innovation, dan 8 soal selidik daripada 8 buah syarikat dikutip d m dianalisakan.

Keputusan yang didapati rnenunjukkan tiga faktor-faktor utama yang mempengaruhi

keputusan untuk melaksanakan teknik terbagus adalah kebaikan yang dirasai

(peningkatan kualiti dan pencapaian operasi syarikat) daripada teknik terbagus itu

sendiri, budaya syarikat (pengubahsuaian dianggap positif dalam syarikat) dan sokongan

luaran didapati (keuwjudan latihan luaran). Di sarnping itu, kejayaan perlaksanaan teknik

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DEDICATION

To i11y father and 1110thel; teacl~ers, family's ~nembel-s and all iny friends who always

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A number of people have contributed to the coinpletion of this study. First of all, I

an1 grateful to Madain Nor Ratna Masrom, who is my inail1 supe~visor and she has given

m e so inuch sup go^? and guidance througl~out the entire process of this study. Her

inspirations and encouragement for excellence will permeate tllrougl~out my life as well as my career.

The endless support from my family's me~nbers, especially my parents plays an

important role in my continuous constant efforts in studying and contributing. Without

their physical and morale suppoi?, I might 11ave not enough energy to finish all illy

responsibilities. Their kindness will always b e lcept deep in my mind forever.

I11 perfoin~ing every job, I can really feel the cooperation fi-om all the personnel

involved. Therefore, the fixlit of this study is not ,mine, but all the people that had

sacrificed times and efforts to succeed the 131-oject. Many thanlts to all of then1 and inay

their lives will always be filled with joys and health.

Finally, I also appreciate the manager, all the staffs and the paiticipants in this

study that gave full helping 11ands in the progress of the 111-oject. Without their helps, the

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CHAPTER 2 : LITERATURE W V I E W

...

2.1 Definition.. .7

...

2.1.1 Biotechnology.. 7

...

2.1.2 Process and Practice.. .7

...

2.1.3 Bencl~~narking and Best Practices.. 8

...

2.2 Best Practice Factors.. 9

...

2.2.1 Codification..

.'.

..9

...

2.2.2 Complexity.. 9

...

2.2.3 Compatibility..

9

2.2.4 Perceived Benefits..

...

-10 ...

2.2.5 Cost I 1

...

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...

2.3 Organization Factors 12

...

2.3.1 Top Managemeilt Support 12

...

2.3.2 Absoi-ptive Capacity 12

...

2.3.3 Satisfaction wit11 t l ~ e Existing Practice 13

...

2.3.4 Innovativeness of Organization Culture 13

...

2.3.5 Organization Resource Availability 14

...

2.3.6 Existence of a Charnpion :

...

14

2.3.7 Size

...

14

...

2.4 Envirolm~ent Factors -16

...

2.4.1 Enviromnental Bal-riers 1 6

...

2.4.2 Vertical Linltages 16

...

2.4.3 Perceived Outside Support 16

...

2.4.4 Exte~nal Pressures 17

...

2.5 Best Practice Adoption 18

...

2.6 Iinplementation Success of Best P~.actice 19

CHAPTER 3 : HYPOTHESES

...

3.1 Hypotheses -21

CllAPTER 4 : R'IETHODOLOGY

...

4.1 Methodology's Framewol.1~ 23

...

4.2 Sampling -25

...

4.3 Co~~struct Measurement -26

...

4.4 The Questionnaire 27

. .

...

4.5 Survey Ad~nl~listration 28

...

4.6 Analysis -29

CI-IAPTER 5 : RESULTS

...

5.1 General hlfor~llatioi~ About Respondents 30

...

5.2 . Best Practice Factors 32

...

5.3 Otganizatioll Factors 35

...

5.4 External Factors -39

...

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CHAPTER G : DlSCUSSION

6.1 Factors Affecting Best Practice Adoption Decision..

...

..43

6.2 Implei~~entation Success of Best Practice and Performance Improveinent..

...

45

CHAPTER 7 : CONCLUSlON

7.1 Conclusion..

...

-50

7.2 Co~ltribution and Limitation..

...

..5 1

7.3 Suggestion..

...

..52

REFERENCES

APPENDICES

A Cover Page of questionnaire.

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LIST OF FIGURES

1.1 Framewol-k of the Study 5

4.1 Flow Chart of Metl~odology 24

6.1 Gi-al)l~ of Iinple~nel~tation Success Variable Versus Perforllla~~ce 49

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LIST OF TABLES

General Info~-~nation about Companies and Best Practices Adopted

General Information Companies' Size and Employees

Best Practice Factors - Coclification

Best Practice Factors - Coinplexity

Best Practice Factors - Coinpatibility

Best Practice Factors - Cost

Best Practice Factors - Perceived Benefits

Organization Factors

-

Manageinent Support

-

Organizational Cultlire

Organization Factors - Absorptive Capacity

-

Satisfaction with Existing Practice

-

Available Resource Organization Factors

-

Existence of Leader

External Factors

-

External Pressures

Extellla1 Factors

-

Envirom~~ental Barriers External Factors

-

Perceived Outside Support

External Factors - Vertical Linkages

Imylen~entatioi Success

Peifos~llance Iml.~rovanent

6.1 Suinmaiy of High Selected Best Practice Factors' Results

6.2 Suini~~aly of Hi g11 Selected Orga~lizatioll Factors' Results

6.3 Surnlnaiy of High Selected Extellla1 Factors' Results

6.4 Sull~n~aiy of Hidl Selected lmplanel~tation Success and

Performance Iinprove~nent's Results

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LIST OF ABBRIEVIATIONS, SYMBOLS, SPECIALIZED

NOR/BENCLATTURE

APQC

et al.

etc

FDI

FMM

ICT

IS 0

MOST1

RMIC 9

SMI

TQM

UTeM

-

American Productivity and Quality Center

- and other people

etcetera (and so on)

Foreign Direct Investment

-

Federation of Malaysian Manufacturers

Info]-nlation and Communication Teknology

International Standardization Organization

-

_{Ministry of Science, Tecl~nologies}_{and Innovations}

-

Malaysian 9Ih Plan, 2006-201 0

- S n ~ a l l and Medium Industries

Total Quality Managenlent

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CHAPTER 1

INTRODUCTION

1.1 BACICGROUND OF THE STUDY

As the world recognizes that Malaysia nowadays is a developing countsy and the

nlanufactu~ing sectors contlibute a huge poi-tion of the econoiny of the count~y.

Therefore, Malaysians are in an industlial society, focusing in the production of goods.

However the enlelsion of neigl~bouring countiies, such as China, Thailand and Vietnam

where have the privilege of lower labour costs compared to Malaysia. Malaysian

gove~nlnent has foreseen the problem and struggled to remain the foreign direct

investment (FDI) in Malaysia. On of the possible ways to maintain the conlpetency of

Malaysia's products is through efficient production and ligh quality products. W li i le bc~ildi~ig i~poli established clusters of i~idustries to produce next generation products,

efforts \\;ill be ~iiade to enliance the clevelopme~it of new sources of 91-owth, largely science-based and innovation-basecl activities, especially bioteclinology and ICT

industries to diversify and bsoaclen tlie ~iia.nufactusing base. (liMI< 0: 2006;)

According to Ungan, M.C.(2002), one of the potentially efficient ways to

improve a process is to identify and adopt best practices that were developed elsewhere

and have produced superior results. This al~proach, cornlnonly referred to as

benchmasking, has been widely sclutinizecl by practitioners since the early 1990's.

However, in Malaysia alone, Inany research-based studies were done, but the adoption

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industries (SMI). Althougl~ there is enough research evidence that scores of conlpanies

are involved in bencl~marl~ing to identify best practices, these organizations are

generally not willing to adopt or are not successful in implementing their findings (The

Benchmarking Exchange, 200 1, Davies and I<ochar, 1999).

The tell11 of best practices used in benchnlaiking is not absolute and it is a

relative tenin. According to the American Productivity and Quality Centel; APQC (1 993),

best practices are leadership, mai~agement, or operational methods or approacl~es that

lead to exceptional perfol~~~ance. Examples of best plactices includes : Total Quality Management, Quality Management Systems, Leain Manufacturing, Cellular

Manufacturing, Sy~lchronized Scheduling, Six Signla, ... etc. Based on the 1itel-atul.e

(Rogers, 1983, Tornatzky and Fleischer, 1990), the context of a best practice adoption

factols are: (1) cl~aractelistics of the innovation or best practice; (2) cl~aracteristics of the

envirolllnent in which the organization operates; (3) characteristics of the organization;

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1.2 STATEMENT OF

THE

PROBLEM

For developed countries such as US, benchl~aliting is widely used by companies.

Many Fortzii~e 500 conlpanies and other large organizations have enlb~aced benclunasking as an impostant, systematic nlethodology for achieving the organization's

stl-ategic objectives (APQC, 1995). According to a sulvey conducted by Icumar and

Chandra (2001), 50 out of 93 US ~nanufactu~ing conlpanies had been involved in

bench~nxlcing. However, only half of 1498 benclima~king projects ended up with actual

process i111p1-ovelnent (Benchmxlcing Exchange, 2001).

In Malaysia, the situation is not clear, wl~etl~er the local manufacturers are not

aware of the possible benefits brought by the ilnplelnentation of best practices or there

are reasons that blocking t l ~ t m to adopt best practices in their organizations. From the

study done by Ungan, M.C., 2002, three unpoltant research questioas wele raised:

(i) Pylint factors have an ir71pact on tile adoptioi? decision o f bestpr-cictices?

(ii) FW7at .fiicto~-s Izuve nrt ii~pcict on tlie iinlylemerztcition szlccess o f best

practices?

(iii) Does best pr-cictices in1ple17zerztcitio1z lead to yerfornicirzce inpr-overri.entY

For the Ninth Plan period of Malaysia, in meeting a more challenging and

competitive global environnlent, a crucial goal will be to upscale the ~nanufacturing

sector towards higher value aclded activities and upgsacle capacity in tke provision of

related sewices (RMK 9, 2006). For Malaysia to become one of the filst choice

countlies in asia pacific region that p r o d ~ ~ c e high quality product that will satisfy the end

u s a s and for the meanwhile maintaining the con~petency as a developing country with

attracting operation costs to attract foreign investment, lllore local companies should

adopt best practices in their organizations. This study aim to provide a reference for

decision makers to adopt the best practices by taking into account several factors

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1.3 OBJECTIVE

OF

THE

STUDY

The pul-poses or the main objectives of this study are :-

a) To identify major factors that most affect the best practices adoption

decision in biotech inanuf%cturers in Malaysia and consequently prevent

co~npanies ii-om wasting their resources in doing bencl~~narlting projects.

b) To find the relationship between iinplelllentation success and

perfoiinance improva~lent as a result of implementation on these best

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1.4 FRANIEWORIC

OF

THE STUDY

.

Ccdificat~on

-

Camptex~ry

-

Cornpuibility

-

Rrceit.ctd hcnefits

-0pcnrlonat bcncfits

.Businen knefits

-

cost

Organizational Factors:

Ac'ngtlon kcision of

Besr Practict

r>rrg;1nir~1tional cu!~urc

I

-

S ~ Z C

-

Orpanizrrrianal raource

avi!at;ili~y

[image:19.568.112.483.107.497.2]

-

Exiwcncc of Champion

Figure 1.1 : Framework of the Study

(Source : Reseal.ch model above adopted from Ungan, M.C.,2002)

Enuimmnt;tl b a i c r s I

-

Vcnical linhgcs

Pcrccived ou~ridz

suppsn

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1.5 SCOPE OF

THE

STUDY

The demographic data as well as the gender of t l ~ e participants in tlis study are

neslected. Therefore, the histoiical background, hoinetocvn cultural and previous

expeiiences of each participant, who represented the organization to answer the

questionnaire, are not taken into account in this study. The data is collected in biotech

n~anufactu~ing industries selected in Malaysia. Thus, the result analyzed is applicable to

that paiticular industiy as reference only. For other industiies, there migl~t have

happened bias in the result found. As time passes by, the selection of participant might

change due to changing external factors and consequently the result analyzed before is

not appropriate enougl~. The study needs to be carried out regularly to update and follow

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CHAPTER

2

LITERATURE REVIEW

2.1 DEFINITION

2.1.1 Biotechnology

The United Nations Conventio~l on Biological Diveisity (1992) 11ad coine up

with one of the definitions of biotechnology is it means any tecl-inological application

that uses biological systerns, living 01-ganisms, or delivatives thereof, to inake or modify

PI-oducts or pl-ocesses for specific use. It is a popular tell11 used in 21" centuly, new

tecllnology based on biology, especially when used in agicul ture, food science, and

medicine. Many people find biotecl~~lology to be beneficial fi-om an ecollonlic and

biological pel-spective (Conko, 2003, McGlouphlin, 1999). Accolding to The

Bioteclinology Market Outlook (2005), the biotech sector has shown rapid growth in

year 2000 to 2004, with global revenues rising fi-om $22.7 billions in 2000 to $44.3

billions 111 2004.

2.1.2 Process and Practice

A process is si~nply a sequence of work steps that desciibes what is done to meet

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Alllericall Productivity and Quality Centel; APQC (1993) stated that business practices

are methods or approaches that facilitate the execution of a process. For an exanlple

given by Ungan, M.C.(2002), internal assessment is a business process. A business

practice is to base the criteria for internal assessment on the Malcolm Baldrige National

Quality Award Criteria. Another business practice is to use I S 0 9000 as the standard for

assessnlent of product quality assurance. The other example is the developlnellt of new

product design is a process, while ensuring that custonler input is used to define product

features is a practice (APQC, 1993).

2.1.3 Benchmarking and Best Practices

According to Watson (1993), benchmailting is a continuous search for, and

application of, significantly better practices that lead to supetior corllpetitive

performance. A more operational definition of benchmarlcing is "the process of

co~~tinuously measuring and comparing one's business processes against coinparable

psocesses in leading organizations to obtain infollnation that will help the organization

to identify and implement oppostunities (Andersen and Petterson, 1996). The objective

of any benclunxlcing ei~deavor is to identify and adopt best practices to improve process

and perfo~rn~ance. For the meaning of "best practice" stated before, Amel-ican

Productivity and Quality Center, APQC (1 993) had defined best practices are leadership,

management, or operational methods or approaches that lead to exceptional pelforlnance.

In another study of the American Procluctivity and Q~lality Center (1995), best practices

are recognized as the cause of best performance and it is noted that studying them

provides the geatest oppoltunity for gaining strategic, operational, and financial

advantage. However, best practice is a relative term instead of an absolute standard. It

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2.2 BEST PRACTICE FACTORS

2.2.1 Coclification

According to Hansen (1999), codification means the degree to which the

ltnowledge is fi~lly doculllented or expressed in writing at the time of transfes of

ltnowledge between a subunit and the receiving element in another subunit. He also

stated that knowledge with a low level of codification COI-responds closely to the concept

of tacit Imowledge: that is, ltnowledge that is hasd to articulate or can only be acquired

through experience. Codification, which is the degree to wl~ich knowledge associated

wit11 the best practice can be written clown and mapped out, if done properly might ease

knowledge transfer between subunits.

2.2.2 Complexity

According to Betty, Shim, and Jones (2001), complexity is defined as the degree

of difficulty in understanding the innovation. When the best practices are complex, the

knowledge associatecl with them is dispe~sed across lllany illdividuals, routines, and

techniques, therefore they may be hard to understand and difficult to implement.

However, Pre~nkumar (1999) found that complexity was not a significant va~iable in

clisclinlinating between the aclopte~s and non-adopters in the adoption decision of

telecoinin~~nication tecl~~ologies.

2.2.3 Compatibility

Thong (1 999) studied the facto~s influencing the adoption and extent of adoption

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which an innovation or practice is perceived as consistent with the existing values, needs, work practices, and past experiences of potential adopter. He found that cotnpatibility was positively related to information systeln adoption in small business. This is undeniable that co~llpatibility llas becon~e one of the key issues to examine whether the practices will actually WOI-lc in the adopting organization during the evaluation of the best practices.

2.2.4 Perceived Benefits