INDUSTRY 4.0 ADOPTION AND LEAN MANUFACTURING PRACTICES FOR MANUFACTURING PERFORMANCE

Abstract

The performance of its manufacturing companies could positively influence a province's economic development. Industry 4.0 is one factor that can enhance manufacturing companies' performance. The adoption of Industry 4.0 is intended to make the production process more efficient to reduce production cost inefficiency. To maximize the benefits and potential of Industry 4.0, manufacturers must implement Lean Manufacturing Practices effectively. The lean manufacturing concept aims to reduce lead time and increase output upon implementation by eradicating waste in manufacturing companies. Therefore, adopting Industry 4.0 and lean manufacturing practices can help companies achieve optimal manufacturing sector performance. Utilizing the Structural Equation Modeling – Partial Least Square (SEM-PLS) analysis, the effect of Industry 4.0 adoption and lean manufacturing practices on manufacturing performance was determined quantitatively. The data was collected by disseminating questionnaires to 35 manufacturing companies in the province of North Sumatra. Using a purposive sampling method, 135 respondents from 35 companies participated in the survey. The results indicated that lean manufacturing practices alone had the most significant impact on enhancing manufacturing performance, followed by adopting Industry 4.0. In addition, embracing Industry 4.0 can mediate the relationship between lean manufacturing practices and manufacturing performance, indicating that this will contribute to better performance improvements for the company's growth.