The negative impact on workers in short-term manufacturing contracts

The use of temporary work contracts in manufacturing systems may bring short-term benefits, but long-term performance and social outcomes are negatively affected.

In a paper published in the International Journal of Production Research, Esade’s Cristina Sancha, Frank Wiengarten and Annachiara Longoni together with Smurfit’s Mark Pagell analysed data from the International Manufacturing Strategy Survey. They assessed the impact of two increasingly common working practices in manufacturing: lean manufacturing, where systems and processes are continuously optimised to achieve the best value, and temporary work contracts.

At face value, these methods are in stark contrast to each other. While lean manufacturing emphasises the value of workers, temporary work refers to precarious work arrangements that may harm workers’ commitment. However, the use of temporary workers might have a positive effect on the impact of lean manufacturing processes on performance.

Short-term gain affects long-term outcomes

“Managers can achieve higher benefits in the short term by employing temporary workers in terms of mix and volume flexibility performance,” explain the study’s authors.

“However, while the enhanced impact may be an incentive for firms to adopt this form of work, they should consider both the long-term performance and social implications of precarious work. Uncertain working conditions may negatively affect both society and the workers’ commitment to continuously improve and contribute to a company’s goals, thus hurting the company’s long-term outcomes.”

Firms should consider both the long-term performance and social implications of precarious work

The employment of temporary workers is a current and growing practice in high-income countries. Data from Eurostat reveals that the number of workers in the EU aged between 15 and 64 who report a temporary job as their main source of income has increased steadily.

While there is broad awareness of the implications of forced labour in the operations management context, less attention is paid to the effects of legally accepted and widely implemented practices such as temporary forms of work. Firms are using temporary work arrangements for their advantages to employers, using workers only when needed and reducing costs. These practices allow firms to increase or reduce their workforce based on their current and changing business needs.

Precarious practices

However, researchers and politicians have questioned the ethics of companies heavily relying on temporary work, which has been described as precarious due to its lower pay, uncertainty in the duration of the employee relationship and lack of social benefits. While it may allow firms to reduce costs, it simply places the risk onto the individual who can least afford to bear it. 

The unethical nature of the use of these practices is in stark contrast to the operational practice of lean manufacturing, which emphasises the value of workers and is constituted by practices to potentially improve both workers’ health and safety as well as operational performance.

More specifically, lean manufacturing practices are described as a bundle of practices that include human resource management, total preventive maintenance, total quality management and just in time practices. The lean manufacturing philosophy promotes the idea that practices need to be aligned with a ‘respect-for humanity’ perspective.

In their book The Toyota way fieldbook: A practice guide for implementing Toyota’s 4Ps, Liker and Meier acknowledge that those companies which generally employ temporary workers as a way to adapt to market conditions or meet return on investment targets will not become either a truly lean enterprise or a socially-oriented company. Lean philosophy emphasises respect for workers and workers’ wellbeing.

Operational performance

Since companies are relying more and more on temporary workers it is important to understand how their use affects the impact of lean manufacturing practices on operational performance.

Lean manufacturing requires skilled and committed workers, something that is seemingly inconsistent with temporary work. The lack of knowledge about the company culture, processes and practices that temporary workers have frequently results in negative impacts on operational outcomes, particularly quality.

The lean manufacturing philosophy promotes the idea that practices need to be aligned with a ‘respect-for humanity’ perspective

The results of the study have multiple significant implications for managers.

“Our work represents a realistic and significant on-going managerial dilemma,” say the authors. “Managers are continuously under pressure to increase operational efficiencies whilst simultaneously achieving other operational performance objectives, so temporary work is becoming a key practice. The increase in demand uncertainty and volatility due to shortening product lifecycles and an increase in globalisation make temporary work a pre-requisite for running competitive operations. This practice is only increasing so it is essential to combine temporary work effectively with existing high-performance manufacturing practices.”

Shifting risk

However, from a worker’s perspective the evaluation of temporary working practices are much less positive. Precarious work shifts many aspects of risks associated with a working relationship onto the worker and the majority of the benefits to the employer. This is especially true in manufacturing, where low-skilled and low-paid workers are forced into temporary forms of work.

“Managers need to be aware of the social aspects and impacts of using these precarious forms of work,” say the research team. “Whilst they might be beneficial for their company, they certainly might not be welcomed by the workers who have to carry the burden of flexibility on their side. Overall, we advise managers to consider workers’ well-being when implementing manufacturing practices.

Managers need to be aware of the social aspects and impacts of using these precarious forms of work

“While the objective of our research was to unveil the role of temporary workers on the performance impact of lean practices, managers should be aware of all the above-mentioned implications with the aim of achieving lean’s objective of ‘respect for humanity’” they conclude.

“We believe it is important that further research should not only focus on the operational consequences of employing temporary workers but should also adopt a social perspective to assess the potential negative consequences of these rising practices on workers and the more extended affected society.”