Hypergol Commercial Sector Operations: Analysis and Recommendations - Essay Example

Student’s Name] [Instructor’s Name] [Course Title] 7 May 2018 Hypergol Commercial Sector Operations: Analysis and Recommendations Preface Overall, while Hypergol Electronic Systems has a proven track record within its existing market, company processes and organisation exhibit some serious flaws that will present obstacles to its successful initiation of an independent commercial products division. The most significant shortcoming in the company’s planning for this is the lack of detailed analysis of the commercial products market. Undoubtedly, there are successful competitors in this market, but no effort has been made to examine these and their processes which are, presumably, quite different than those HES applies to its work in the Military and Civil Operations divisions, which are carried over with little adjustment to its Commercial Division. As such, this report can offer only a general assessment and recommendations related to HCD’s existing operation, without regard to how these recommendations will actually affect its performance in the market. Critical Areas of Concern for HCD An analysis of the assessment data and the comments of HCD’s managers reveals several critical areas of concern for the company that must be positively and proactively addressed: 1. Interdepartmental Coordination – Without exception, every manager described problems they perceived in terms of the activity of some other part of the organisation. It is clear that, within each department’s area of responsibility, the personnel are committed to producing results. But there is very little sense of coordinated effort. 2. Product Quality – In every measurement index related to quality, HES is below the sector average, and this is reflected in the comments made by most of the managers. The general trend and feeling expressed is one of declining product quality, rather than a consistently acceptable or improving level. 3. Inefficient Production Processes – This, as is the product quality issue, is really an extension of the problem of poor coordination between different parts of the company. The task objectives of each department are individualised, with little to no regard for an overall objective. Company Strengths 1. Customer Relations and Aftersales Performance – HES scores above the sector average in key areas related to customer relations and retention, customer growth, and handling of service, warranty, and other aftersales issues. 2. Product innovation – HES is a demonstrated technical leader in the market for its products, and the volatile nature of its core market has helped it develop that position. Ironically, much of the innovative ability of the personnel demonstrated throughout the production process is caused by its overall inefficiency. HES scores significantly above sector averages in the areas of innovative organisation, strategic role of innovation, and speed of development relative to completion. 3. Overall business performance – HES scores higher than sector averages in the areas of overall business performance and margins relative to the rest of the industry. Methodology for Assessing the Root Causes of Concern Areas Having determined that poor interdepartmental coordination is the most serious area of concern for HCD, a communicative approach such as that suggested by Six Sigma will be the most effective in arriving at suggested improvements. This is commonly known as the “5 Whys” approach, and is useful in cases where statistical data is missing or incomplete. Depending on the issue, more or fewer than five “whys” may be needed to arrive at the root cause of a problem. CRITICAL AREA OF CONCERN: Coordination between the different departments within HCD is poor, with different areas of responsibility seeming to work at cross-purposes or towards divergent objectives. Why? (1) The plans and objectives of different departments do not match the activities of other departments. Example comments from the managers along these lines: (Finance Manager) “What happens down there [on the factory floor] bears no relation to anything that has been planned.” (Manufacturing Manager) “Who agrees these delivery dates anyway? Raw material supplies are also a problem -it's OK for production control to give me an order for 100 parts, but if there's only enough material to make 50 what do I do?” (Sales and Marketing Director) “If they [the sales force] are offered an order they will take it and worry about delivery later. Besides, we nearly always manage to negotiate delivery 4 weeks from placement of order. How long does it take to make a Controller?” (Civil Programmes Manager) “... it is getting more and more difficult to catch all of the poor workmanship because everyone seems to be under such pressure to meet production deadlines.” (Procurement Manager) “We also have had some problems with suppliers refusing to deliver because bills haven't been paid. It's embarrassing, particularly as the first we know of it is when the supplier tells us.” (Technical Development Manager) “The planning that we have for the standard products should be adhered to. It really ticks me off when I walk through the factory and see someone doing a job that I know is not what the planning says. If they've got problems they should tell us.” (Maintenance Manager) “What people fail to understand is that all equipment must be maintained or there will eventually be catastrophic failure of plant with disastrous consequences on safety, capital budgets and, of course, production.” Why? (2) The planning and needs of each department are not effectively communicated to other departments. Why? (3) There are not effective channels of communication between the different departments. Why? (4) The management of HES has failed to build these channels of communication into their organization. This is reflected in the poor scores in the assessment indices in the areas of openness within the organization, elimination of waste, management style, and visibility and communication of standards. In an organisation where many divergent objectives and responsibilities are creating obstacles to productivity, one very useful tool for further analysis of the problems is the Ishikawa model, otherwise known as the “Fishbone.” (Simon, 2008) HCD should assemble quality teams for this purpose (which can later be made permanent as part of the TQM process described below) to identify root causes of the various concerns expressed by the managers. As a general rule, the Ishikawa method as it relates to manufacturing includes six concepts within which various causes for a problem are categorised; these make up the “bones” of the “fish.” The six general categories are Machines, Methods, Materials, Measurements, Environment, and People. (Simon, 2008) To best serve HCD’s needs, however, it may be worthwhile to expand the categories to also include those which are generally applied to service industries: Policies, Procedures, Plant, and Technology. As an alternative to the Ishikawa process, a related but sometimes more detailed method is Cause Mapping (Galley, 2008), which can be better tailored to specific circumstances, and is useful for identifying multiple causes for a single issue. It is not, however, as intuitive as the Ishikawa method, and in the case of HCD might be better used as a future process, once TQM has become part of standard procedures. CRITICAL AREA OF CONCERN: Product quality is decreasing, increasing waste and reducing production efficiency due to reworking or interruptions in the flow of components that meet quality standards. Why? (1) Delivery pressures are causing shortcuts in the quality of finished products/components. Why? (2) (Finance Manager) “The new product is going to require us to work too much tighter margins. We'll be given a cost target to work to and if we don't achieve it we'll suffer. It presumably is also going to require some capital investment, which will have to be recovered on sales.” (Manufacturing Manager) “Half the time we haven't got planning or material for the job until the week before it's due, then it's all hands to the pump and as much overtime as we can get to finish the job.” (Sales and Marketing Director) “We have built our reputation on supplying Quality products and on meeting order deadlines. It seems to me that both of these aspects of our customer service are beginning to slip. Production is constantly complaining about the orders we are winning and there is an increasing problem with customer complaints about Quality faults on the P and C models we are delivering.” (Civil Programmes Manager) “…I think that we have an attitude problem growing within the company, amongst middle management as well as the front line workers, which puts deadlines before quality.” (Procurement Manager) “We have a problem with supplier lead time -we either have to carry large buffer stocks or run the risk of stock out. We seem to have been singled out by the finance dept. -we've been screwed on budget and had to cut back on raw material holdings. It's a no win situation.” (Maintenance Manager) “Quite often production management will not release a piece of plant to us for servicing because of imminent delivery deadlines.” Why? (3) Delivery deadlines are unrealistic with respect to the present production capabilities. Why? (4) Delivery deadlines are based on market competition factors, and assume all production processes are working at a nominal level. Why? (5) In order to remain competitive, HCD must be able to deliver products within a competitive price, service, quality, and time framework. The organisation of HCD, described in terms of Hayes and Wheelwright’s Four Stages of Manufacturing Competitiveness, is at Stage I: it is considered to be “internally neutral,” that is, the market success of its products has been such that the processes of production are deemed unimportant, so long as the products are actually produced. Because of the lack of specific market data, the concentration of the company at this time should be on developing a Stage II model: the manufacturing process should be “externally neutral,” following the standards of production and quality of industry competitors, and relying on the proven reputation of their products to give HCD a competitive edge. (Hayes & Wheelwright, 1984) CRITICAL AREA OF CONCERN: Production processes are inefficient, with component and material parts not being available when they need to be, an unacceptably high level of waste, and too much completed work on hand awaiting delivery. Why? (1) Procurement processes are lowest-cost oriented for components and materials rather than best-cost oriented. This is characterized by the adherence to a manufacture order procedure and long (90-120 day) accounts payable cycle. Why? (2) Component and material costs will be directly reflected in the price of the finished product, and in order for the product to remain price competitive, should be kept as low as is feasible. Recommendations Hypergol Electronic Systems does not have a corporate culture of openness or communication, but rather one in which separate areas of responsibility assume an adversarial role, and pursue narrow objectives with little regard, or knowledge of, any overall goal. This is an unaccountable and unacceptable shortcoming in a modern company seeking to enter a new competitive market, and should be management’s highest priority. In the assessment, five functional areas within the Commercial Division are identified: Purchasing PCB Manufacture Casings Component Assembly Testing and Dispatch In addition to these, there are four other key areas: Finance Design Sales & Marketing Plant Maintenance Perhaps the most effective method to break down the barriers to communication between these different components of HCD would be to adopt a TQM approach, assembling one or more Quality Teams with a representative from each of these nine areas. In addition to management participation, input must also be sought from within the workforce, an area where HCD has scored lower than the industry standard. In other applications, this has been shown to increase employee satisfaction and staff responsiveness, indirect but very beneficial results of a quality focus, and two indexes where Hypergol has particularly low marks. One thing that is abundantly clear in the comments of the department managers is that there is little understanding of the needs and functions of other areas of the company. Part of a TQM approach is to provide a level of “cross-training” among management and employees, so that every person will have an understanding of how his activities affect the whole. On another even more practical level, cross-training of floor employees in different areas of production and in related functions such as maintenance and quality control reduces specialization and creates a more flexible, as well as more informed, workforce. In terms of specific recommendations to respond to some of the problems expressed by managers and found in the assessment, it appears that the largest problem is within the procurement processes. EOQ and EBQ need to be adjusted to better meet the market cycle, and if there is a chronic supply problem for production, FOQ settings and/or other processes for maintaining inventory levels need to be examined. Since HCD is a large customer, other methods of establishing supplier relationships rather than adversarial, price-based ones should be considered, such as quality-incentivized ordering. The accounts payable cycle of 90 to 120 days is also unreasonably long and should be shortened, and where possible, pricing incentives tied to reduced invoice payment times should be sought. These steps will not only improve existing supplier relationships, but also help make smaller suppliers available, particularly in the countries where Hypergol’s other facilities are located. In line with a focus on a TQM regime, end-of-line Quality Control should be eliminated. Quality control procedures should be built into the production process, which will help to reduce the amount of reworking, scrap, and other production inefficiencies that now exist. Likewise, maintenance processes need to be completely reconfigured, and included as part of the production process. Some capital investment in new equipment with lesser maintenance requirements may be considered. These steps are part of what is known as the Deming PDSA (Plan, Do, Study, Act) Cycle (12Manage, 2008), and are a continuous process that should be incorporated into HCD’s operations. In a volatile global market that has not been studied in detail, it can be expected that quality and process improvement initiatives will need to be continually examined and updated for HCD to maintain competitiveness. This summary report of the process assessment of HCD has concentrated heavily on different models – specifically, the Six Sigma “5 Whys” model and the Ishikawa “Fishbone” model -- which might be employed to identify and derive solutions for production, quality, and communication deficiencies. This might seem at variance with the request by HES management for this report to make those identifications and recommend solutions, but in fact, it is the only course this report can take. The lack of a structure within the company for self-analysis is its most critical problem. Therefore, the best solutions that this report can offer are those which will help HES develop processes for problem resolution within its organization, rather than relying on outside consultation. This is one important area where HCD can move into the Stage II level under the Hayes and Wheelwright model, which will put it on par in this respect with its market sector competitors. And finally, a detailed analysis of the market and competing producers for HCD’s products needs to be completed and incorporated into any further assessment of company processes, and sales and production forecasts. The assessment does a very good job of explaining what HCD does and can do; however, no assessment of what the market actually needs HCD to do has been made, and that should be a part of any further studies. References “Deming Cycle (PDSA)”. (2008) 12Manage. (Internet) Accessed 15 May 2008. Galley, Mark. (2008) “Improving on the Fishbone -- Effective Cause-and-Effect Analysis: Cause Mapping®″. ThinkReliability. (Internet) Accessed 15 May 2008. Hayes, Robert H., and Wheelwright, Steven C. Restoring Our Competitive Edge: Competing Through Manufacturing. New York: John Wiley, 1984. “Ishikawa Diagram.” (2008) Vanderbilt University: The Quality Library. (Internet) Accessed 15 May 2008. < http://mot.vuse.vanderbilt.edu/mt322/Ishikawa.htm> Simon, Kerri. “The Cause-and-Effect Diagram (a.k.a Fishbone).” Six Sigma v 3.0lb. (2008). Accessed 15 May 2008. < http://www.isixsigma.com/library/content/t000827.asp>. Tague, Nancy R. The Quality Toolbox. (2nd Ed.) Milwaukee: ASQ Quality Press, 2004. Read More