European Journal of Business and Management www.iiste.org ISSN 2222-1905 (Paper) ISSN 2222-2839 (Online) Vol.6, No.18, 2014 187 Lean Manufacturing and Profitability of Manufacturing Firms in Uganda Noah Mwelu 1 , Donatus M. Rulangaranga 2 *,Suzan Watundu 3 ,Cathy K. Tindiwensi 4 1. Department of Procurement and Logistics Management of Makerere University Business School 2. P. O. Box 1337, Jinja Campus, Uganda 3. Department of Management Science of Makerere University Business School, P. O. Box 1337, Kampala Uganda 4. Department of Entrepreneurship of Makerere University Business School, P. O. Box 1337, Kampala Uganda *Email: donatusmugisha@yahoo.com, dmugisha@mubs.ac.ug Abstract This study was carried out to following the new wave of lean manufacturing within manufacturing firms in Uganda. The main aim was to establish whether the lean manufacturing indeed had any influence on the level of profitability and hence business continuity and success. The unit of analysis was composed of a set of manufacturing firms in Uganda engaging in production of goods for sale within and outside the country. Two respondents were selected from each of the 80 (sample size) manufacturing firms. Data collection was carried out by means of a questionnaire which was self administered by the respondents. Correlation and regression analyses were carried out to address the main aim of the study. Findings indicated that lean manufacturing within manufacturing firms in Uganda had a positive correlation with increase in profitability levels. Additionally, the lean strategies were found to have a positive influence of up to 41.4% of the changes in levels of profitability in Uganda. With these findings, it is recommended that manufacturing firms in Uganda already practicing lean manufacturing strategies should continue doing so. Likewise, those manufacturing firms that have not yet started practicing manufacturing, they should prepare to do in order to tap the positive benefits the strategies can have as far as increase in profitability is concerned. This however should be in line with other factors that significantly impact the level of profitability in these manufacturing entities in Uganda. Keywords: Lean manufacturing, profitability 1. Introduction Profitability is an important aspect in business operations. Even if it is not the most important objective for existence of businesses, a business cannot continue operating if it is making losses (Smith et al, 2010). There is therefore need to assess the different factors that affect profitability in a business. In this paper, the concept of lean manufacturing is assessed to check its relationship with and influence on levels of profitability of manufacturing firms in Uganda. This paper is divided into six sections including the introduction section, theoretical review, methodology, data analysis and discussion of results, conclusion and finally the references section. 2. Theoretical review Lean manufacturing is generally referred to as a business model or a set of business strategies that aim at continuous improvement as well as reduction in wastes. Lean manufacturing strategies focus on waste reduction, helping firms eliminate non-value adding activities related to excess time, labour, equipment, space, and Inventories in the manufacturing process (Corbett and Klassen, 2006). Such strategies enable manufacturing firms to improve quality, reduce costs, and improve service to customers (Larson and Greenwood, 2004). Lean initiatives enable only demanded products and volumes to be produced and flow through the supply chain but not the safety stock and extra inventory associated with non-lean strategies. Reduced volumes of inventory needs to be sourced, produced, transported, packaged and handled, which also minimizes waste hence increasing profits (Jones and Hines, 1997). However, lean strategies that employ just-in-time (JIT) delivery of small lot sizes can require increased transportation, packaging, and handling which contradicts with the above statement. Thus when manufacturing firms recognize this conflict, they may find a trade-off or develop solutions that mitigate undesirable consequences (Corbett and Klassen, 2006) and (Mollenkopf, 2006). Lean processes create value through the elimination of “waste” in manufacturing (Disney et al., 1997), including the production of goods not yet ordered, waiting time, rectification of mistakes, and excess processing, movement, transport, and stock. Lean manufacturing literature highlights the application of lean practices (Manrodt et al., 2008), integrates lean and agile operations (Mason et al., 2000 and Goldsby et al., 2006). Unicorn Consulting Associates (UCA) finds that Lean Manufacturing is the backbone of profitable manufacturing and is critical to the success of manufacturing firms. Lean manufacturing involves identifying and removing waste from all operations; more precisely, lean manufacturing involves eliminating costs customers do