Operations and Quality Improvement Strategies - Coursework Example

?Operations and Quality Improvement Strategies Operations management (OM) has been a very important factor in the improvement in productivity in business across the world. By improving operations, businesses can increase effectiveness thereby leading to increased profitability and at the same time establishing a competitive edge. Creating a competitive advantage through operations can only be attained by carefully understanding “how operations functions contribute to productivity growth” (Jacobs, Chase and Aquilano 2006 ). With the ever rising competition, even the best operation is required to improve. Organizations can apply a set of skills and tools to reduce operational cost, increase efficiency and productivity, and improve the quality of their processes, products and services. 1. Lean Manufacturing. Critically discuss the differences, using examples, between the Lean and Mass (Traditional) Production strategies. A. Rationale: Lean Manufacturing, a Japanese philosophy, gained attention at the beginning of the 1980’s when the western leaders could not stop wondering the inimitable industrial advances and permanent employment of the Japanese businesses (A to Z Management Concepts and Models 2007). It has been described as “the most fundamental change to occur since mass production was brought to full development by Henry Ford early in the 20th century” (Hindle 2008). Lean manufacturing has been established as one of the crucial factors for Japanese success. There are two basic concepts that are involved here: making the management work to give lower cost per unit produced which directly enhances productivity, secondly, striving for continuous improvement (kaizen). Workers are expected and encouraged to adopt a new approach to their work and reap the benefit of it (A to Z Management Concepts and Models 2007). Generally, in lean production systems employees are organized in teams and each worker must be able to do all the tasks required of the team. “These tasks are less narrowly specialised than those demanded of the worker in a mass-production system, and this variety enables the worker to escape from the soul-destroying repetition of the pure assembly line” (Hindle 2008) B. Evolution: In 1776, Adam Smith in the Wealth of Nations described that mass production is based on the principles of specialization and division of labour. To design products and to set up production systems highly skilled labours are used whereas to produce standardized components and assemble them the labours used are highly unskilled. The latter are disposable and can be laid off depending on the situation. In mass production, parts used are often manufactured elsewhere and then put together on a moving production facility called assembly line. “The result is a standardized product made in a fairly small number of varieties, produced at low cost and of mediocre quality.” If a problem needs to be corrected at any point in an assembly line the entire process stops (Hindle 2008). Lean production system requires the components to be delivered just-in-time and each worker is allowed to stop production when a fault is discovered. This is the basic difference from classic assembly line process where stoppages are expensive and should be avoided at all costs. With a mass production system the worker learn nothing because all the faulty products are put aside to be dealt with later. They are replaced immediately, from the large stock of spares, without causing any hold-ups. In case of lean production, problems are immediately resolved when a stoppage occurs and gradually this diminishes the number of stoppages. Eventually, a mature lean-production line stops a much lesser number of times than a mature mass-production assembly line (A to Z Management Concepts and Models 2007). Yet another advantage of lean production is that designers, workers and suppliers work hand-in-hand with production which never happens in a mass-production system. A separate team of insiders or specialists participate in designing which jeopardizes the feedback system. Gaining feedback from everybody involved becomes a very tedious process. Thus, communication is linear in mass-production whereas there is a two way interchange in case of a lean production system (A to Z Management Concepts and Models 2007). Japanese car manufacturers have achieved much lower unit costs of production as compared to those of traditionally organized European and American manufacturers with twice their volume. At the same time, Japanese cars have also been market leaders with regards to speed and efficiency, a skill so crucial in the business where time to market is an important competitive advantage(A to Z Management Concepts and Models 2007) . C. Future: With the falling market share of the U.S. automotive industry, lean manufacturing would be a driving force. Joseph Day, president of automobile parts giant Freudenberg NOK said, “Companies that don't adopt lean manufacturing practices "won't make the automakers' purchasing cut," "It won't take very long for that requirement to cascade down the tiers of the supply chain because each company's leanness ultimately depends on the leanness of its own suppliers." He also commented that not every company fully grasps the concepts of lean production system. It is very critical for all the sub-tier suppliers to understand and apply in their operations. Also, a company does not become lean overnight. Day also argues that only the lean culture can unleash the creativity of the employees, remove the bottlenecks and ensure that everyone is looking for improvement every single day (manufacturing and technology news 2000). 2. The organisational, operational and human barriers that may need to be overcome in order to ensure a successful implementation of the Lean Manufacturing strategy. A. Organisational barriers : The article, Change Management- ignore your people and your lean journey will run out of gas, Berger(2002), argues that if real behavioural change does not take place at all levels of the organisation while implementing lean production than their plant would revert back to old and familiar ways. A solid change management programme would be mandatory for the successful implementation of lean manufacturing. Management’s lack of humane approach towards the workers can be a very big hurdle. Clear communication would be very necessary for the employees to understand the changes and work towards a common goal. Generally, workers tend to think that lean production system leads to layoffs. Organisation must ensure proper training, develop an effective feedback system and implement a proper measurement system. Moreover, organisation must understand that change cannot happen overnight, sufficient time must be given for the entire workforce to come on board. Neglecting all of the above would certainly be a tremendous hurdle towards implementing a successful lean production system (Singh 2010). B. Operational Barriers: Rapid change and a complex manufacturing environment can be substantial operational barriers. Multiple product lines, several production routings, dynamic customer demand, and competition among products for the same production resources can all contribute to a chaotic manufacturing. “These multiple product lines with independent value streams and routings create overlapping requirements for the same resources – machines, people (skills), tools and materials - creating spurious, moving and often hidden constraints” (Rio, 2007). Technology must be adopted to tackle all of the above mentioned constraints. Upcoming constraints must be tactfully resolved before bottlenecks and other problems occur. A common awareness of plans, status and defensive moves would ensure a smooth operation (Singh 2010). C. Human barrier: The employees’ lack of understanding of the concepts of lean management would be the greatest obstacle. Employees are required to stop in case of any fault and resolve the problem right away. If they are not aware of this and are not expert enough to fix the problem than the whole system would collapse. Employees must also have the team spirit and should fulfill the requirements needed to be in that particular team. In times of difficulty giving each other a hand would be important. Striving towards continuous improvement, coming up with new approach are also other expectations. As it has already been mentioned, workers tend to see that lean manufacturing leads to downsizing, management must approach this issue in a humane way and encourage a well lubricated communication system.(Jacobs, Chase and Aquilano 2007) 3. Ford and Six Sigma Ford Inc., an American multinational automotive company, was established in the year 1903 by Henry Ford. The world’s fifth largest car company also owns other brands such as Mercury, Lincoln, Volvo and a small stake in Aston Martin, England and Mazda, Japan. In the 1980’s Ford Motor Co. made “Quality Is Job 1” a household slogan as it used Total Quality management and introduced new products to drive down costs and increase market share (Paton 2000). However, the ongoing issue of quality has resulted in customer dissatisfaction and an obvious fall in market share. Ford also fell behind arch-rival General Motors Corp. in overall quality and became the last among the big seven automakers. The company finally decided to overhaul its quality process after having faced a great deal of very public quality problems. The fact that Ford makes $180 billion in annual and some odd 345,000 employees are scattered around the world were a huge challenge. More time would be required to show results. Moreover, this corporation has been the pioneer of assembly line and therefore in order to bring about a substantial change in terms of operation a change of processes and culture in the organisation would be the key (Paton 2000). On January 1st, 1999, Jacques Nasser took over as the CEO of Ford and he clearly understood the importance of customer satisfaction. Nasser said that in order to become World’s leading consumer, the company must focus intensely on their customers and must make customer satisfaction as their highest priority. Nasser knows that improving customer satisfaction translates directly into improvements in the bottom line. "Our data show that customers who are highly satisfied remain loyal," says Louise Goeser, Ford's vice president of quality. "In fact, one and a half points of customer satisfaction drive about one point more loyalty. In North America alone, this translates into more than $2 billion in incremental revenue and roughly $100 million in profit."”(Paton, 2000) Ford Motors made a conscious decision to turn to Six Sigma in the late 1999. Six Sigma, originally developed by Motorola, is a statistical measurement for product and services that promises to increase customer satisfaction by reducing defects and eventually defect-free processes and products. Phong Vu, a six sigma czar of Ford, recalls, "I was looking for a way to improve our quality faster than we were," The first phase of Six Sigma process was launched in January, 2000 that focused on immediate customer satisfaction issues. During the first year Ford trained nearly 10,000 employees who became the backbone and the master black belts, black belts and green belt of the Sigma process. The company invested $6 million in purchasing the training license from Six Sigma academy (Paton 2000). The initial phase was not an easy ride for Ford. Several roadblocks were hit such as employees’ skepticism, resource allocation and data availability. Only time and the success of Six Sigma could change employees’ mindset and understand the true value of this process. The other major hurdle was the data stock. Ford did not have the adequate infrastructure to handle Six Sigma. The latter required a lot of data and internal measures for completing the projects which were not there. To mitigate this issue by interacting with the black belts and building a database that will enable them to share data. Mike Stock, a Ford Master Black Belt, commented, “Six Sigma is transforming the corporation from looking at variation from something that's going to get you into trouble to something that's going to give you an opportunity to improve” (Paton 2000). Mustang Owner’s dissatisfaction was one of the first issues that Ford resolved by applying Six Sigma. Customers complained that they had to make extra effort to close the hoods on their vehicles. "They like to get under the hood," says Mike Stock, a Ford Master Black Belt. "But in some cases, they had to drop the hood from as high as 20 inches in order to get it to latch" (Paton 2000). Consumer-driven Six Sigma made them trace the root causes. The data that was obtained helped them understand the key contributors. The next phase was the measure phase where the team used design of experiments that simulated the effects of other parts that could be used. For example, the team used a gage to measure hood-drop heights that showed the effects of closing from various distances (Paton 2000). The third phase is called, improve or control phase. The team finally came to a conclusion that the major problem in the Mustang hood-closing system involved the angle at which the latch and striker met. “The team found the solution by changing the geometry of a support bracket to allow for expected variations”. Ford managed to save $283,000 per year in reduced scrap, rework and non value-added activity caused by hood issue and vehicle-warranty work. Consequently, Mustang owners showed a high rate of satisfaction (Paton 2000). Ford has been constantly using Six Sigma since 2000 and has resolved several quality related issues. It must be noted that even a huge company like Ford may be weak enough to implement a major restructuring in terms of quality, processes, customer satisfaction by using its people. Without the support of the work-force, Six Sigma can never be initiated (Paton 2000). 4. Some of the key approaches : Kaizen – Kaizen is a Japanese term for good change or continuous improvement. It was first used in Japan after the Second World War to restore the Japanese industry. Kaizen thrives for “continual improvement of machinery, materials, labor utilization, and production methods through applications of suggestions and ideas of company teams”.( Jacobs, Chase and Aquilano 200) . The Toyota Production system is known for kaizen where the moving production comes to a halt if the line personnel’s find any abnormality is found. The next step is to look for solution and fix the problem. The cycle of kaizen activity involve - standardizing an operation, measuring the standardized operation (find cycle time and amount of in-process inventory), gauging measurements against requirements, innovate to meet requirements and increase productivity, standardizing the new, improved operations and the cycle goes on. Just-in-Time: Lean manufacturing, also known as just-in-time or JIT, was being used by Japanese industry as early as the 1930s. However, it was not evolved until the 1970s, when Tai-ichi Ohno of Toyota Motors used JIT to speed up delivery time and improve quality of the Toyota cars. “In the 1990s, many companies adopted the term lean in place of JIT to emphasize the goal of systematically eliminating waste throughout their operations”. In JIT, as the name suggest, components arrive just during the time of production. Consequently, companies that use JIT, especially automobile manufacturers, do not have stock holding units of any kind. To fit their specific needs, JIT might need to be personalized for their type of company. JIT can be very difficult to set up and demand extensive planning and communication. (Jacobs, Chase and Aquilano 2006) Total Quality Management (TQM): The first principle of TQM is to focus on customers’ needs and satisfaction. Customers must get the value of the money spent for products or services. A company that provides value and quality for what customers buy is likely to get repeated business. TQM can also be applied for internal customers who directly or indirectly influence the wages of workers. The latter must have the mind set of satisfying internal customers for raise, promotion or job retention. Each company has a chain of customers and the employees must concentrate until the ultimate customer is satisfied (Kurtus 2001). The second TQM principle is to keep the suppliers satisfied from who companies buy good and products. Supervisors must provide good working condition for the suppliers and reward for job well done. If the company desires to provide quality then the good or products supplied must good as well. The third principle is to strive towards continuous improvement. Companies must continuously improve their processes, products, quality or services because of growing competition and competitors are always capable of coming up with better services (Kurtus 2001) Six Sigma: Six Sigma’s methods include the application of certain statistical tools to measure the quality of products and services. The value indicates how often a variation or anything that dissatisfies customer is likely to occur. The higher the value of Sigma, the lower is the variation expected to occur. The steps followed in Six Sigma methodology are define measure, analyze, improve, and control (DMAIC) cycle. Six Sigma focuses on eliminating variance in the process whereas Lean focuses on eliminating wastes. Six Sigma requires extensive research and long analysis. It is also customer-oriented and focuses on parts of the process. Application of lean leads to the improvement in flexibility and speed of the process. The results are almost instantaneous which focuses on the system at large. “Six Sigma is the philosophy and Lean is a technique that can be used to apply Six Sigma”(Benzaza, 2010). Both Lean and Six Sigma can be applied in case of TQM which focuses on customer and supplier satisfaction as well as continuous improvement. Kaizen focuses on continuous improvement also as contrast to Six Sigma which is a statistical value that measures variation from perfection. All of the above when applied suitably will bring about positive outcomes and save money and increase efficiency. Conclusion With the changing business scenario and growing competition, companies need to continuously improve their products and process. Customer satisfaction is the priority as it directly affects the bottom-line. Organizations can apply a set of skills and tools to reduce operational cost, increase efficiency and productivity, and improve the quality of their processes, products and services. Lean Manufacturing focuses on making the management work to give lower cost per unit produced which directly enhances productivity and striving for continuous improvement. Lean, also known as Just-in-Time, encourages workers to stop the production line if they find any fault and repair it immediately. Components are also brought just before production starts and thus, there is a total absence of surplus stock. In case of mass production, companies will always have a huge stock. When there is a stoppage, the faulty ones are immediately replaced from the stock and are left to be checked later. As a result, workers do not learn about the defects and more wastage is produced in due course of time. Less stoppage in the production line occurs in case of lean manufacturing because problems are immediately resolved and precautions are taken for the future. Thus, lean is a way of continuous improvement. During late 1999, Ford Motors decided to overhaul its quality process when they faced serious losses and criticisms from the customers. This company has been the pioneer of traditional assembly line because of which adopting a new process like Six sigma. Human, operation and organizational barriers had to be mitigated carefully. Even for a huge organization like Ford motors, implementing a whole new process can be difficult. Kaizen is another key approach that focuses on continuous improvement from top to bottom. Total Quality Improvement (TQM) focuses on customer and supplier satisfaction as well as continuous improvement. Reference A to Z Management Concepts and Models 2007 Benzaza, S 2010, Difference between Six sigma and Lean, viewed 3 May 2011, Hindle, T 2008 Guide to Management Ideas & Gurus. Jacobs, RB , Chase, FR, Aquilano, NJ 2006, Operation Management For competitive Advantage, 11th edn, McGraw Hill, New York. Kurtus, R 2010, Basic Principles Of Total Quality Management, viewed 3 May 2011, http://www.school-for-champions.com/tqm/principles.htm Manufacturing And Technology News 2000, Leam Manufacturing Will Be The Only Way To Ride Out Calming , viewed 3 May 2011, < http://www.manufacturingnews.com/news/00/1222/art1.html> Paton, S M 2000, Consumer-driven Six Sigma saves Ford $300 million, viewed 3 May 2011,< http://www.qualitydigest.com/sept01/html/ford.html> Rio, R 2007, Moving through the barriers Of Chaotic Marketing, viewed 3 May 2011, Singh, Dr. S 2010, Lean manufacturing, viewed 3 may 2011, Read More