What Evidence Does the Case Offer Regarding Esterlines Success - Coursework Example

What evidence does the case offer regarding Esterline's success? What factors appear to have contributed to Esterline's performance? Esterline’s success is manifested through the following: improved total revenue and net incomeas shown in Exhibit 1; improved mean inventory turnover as shown in Exhibit 2; and most importantly achieving Tier-1 supplier status with two of its important clients, Boeing and Airbus in 2005. These items listed demonstrate that Esterline is reliable, trusted and has financial strength. Two factors are responsible for this improved performance by Esterline: (1) at the strategic level, internal new product development supplemented with targeted acquisitions and (2) at the tactical level, employment of lean production methods (Nolan, Brown, and Kumar 2). At the strategic level, Bob Cremin narrowed the company’s focus from 10 markets to two, commercial aerospace and defense. Under this strategy Esterline exited from its non-core businesses and re-invested through new acquisitions that would strength its targeted market-product position. This strategy choice was supported by the tactical deployment of an organization-wide lean manufacturing policy. The lean policy specifically enhanced Esterline’s performance through employee empowerment through training programs and diffusion of authority and ownership downwards from the top e.g. employees working at different locations were free to choose the lean manufacturing tool set that worked for them. Secondly, the lean policy charged each business with setting two additional annual goals that were specific to them in addition to the corporations three: profitable growth, return on investment and aggressive lean implementation. Employees at business units that achieved their annual goal would be rewarded. Finally, the move from batch-and-queue scheduling to simplified flow – a manifestation of lean manufacturing – reduced inventory costs, waste and increased throughput. 2. What is the central question being addressed in this case? Why is it important to Bob Cremin? What issues are raised in this debate? The central question in this case is whether IT systems are relevant in organizations practicing lean manufacturing; and if IT systems are relevant, what is their role in lean manufacturing? Skeptics argue that most of the advantages of ERP systems can be achieved through process simplification and lean production methods, without relying on these complex computer systems. From the case, Bob Cremin comes out as being not enthusiastic about IT. According to Bob, IT systems are complex, over relied upon by people and they mostly interfere with overall process innovation. The CEO’s reasoning is supported by Frank Houston’s Figure C which demonstrates the conflicts between lean concepts and enterprise IT. However, in as much as lean techniques enhance customer service and streamline productivity, they still lack the predictive capabilities of ERPs and the capability to produce all these data at a single place of reference. Bob acknowledges that incremental changes are vital for innovation and continued improvement (Nolan, Brown, and Kumar 2) yet he does not wish to offer IT the opportunity to change. He seems to be focused more on the failures of IT systems and forgets its successes such as Cerebellum’s successful results in combination with lean policy with regards to Cell#1 at Esterline’s Korry plant. Finding an answer to this question could also be important to Bob because some of the staff at Esterline saw enterprise systems as being essential to successful performance whereas others believed that these systems interfered with removing waste and simplify the manufacturing process (Nolan, Brown, and Kumar 1). This is a dilemma that only he as the CEO can resolve. 3. What is the role of an ERP system in a "traditionally run" manufacturing plant? Does it present conflicts for lean manufacturing? Why or why not? ERP systems are designed to standardize information entry and create central data repositories for information sharing across the organization. Therefore, in a “traditionally run” manufacturing plant an ERP’s role was to increase productivity, speed and performance through development of standardized information exchange formats, workflow synchronization of inter-departmental processes, business process automation and global decision optimization. An ERP system does not present conflicts for lean manufacturing. Both ERP and lean ideologies aim towards increasing productivity, speed and performance in a manufacturing plant while simultaneously reducing the direct and indirect production costs that arise from waste, inefficiency, inventory and so on. Moreover, whether an organization runs lean or not, it is impractical to operate a manufacturing company without a dedicated business application which is where the ERP system comes in handy. ERP’s greatest value to lean manufacturing is that it organizes, in a single place of reference, the information about products, production, facilities, resources and demand needed by a company seeking to implement lean. ERP and lean are not mutually exclusive. On the contrary, combining ERP with lean produces incredible results. 4. If you were Korry Electronics President Gary Dytrt, what decisions would you make about replacing the outdated MRP system? Would you just let it die and live without it? If you would replace it, what selection criteria would you use to identify a system with the best fit? The fact that Korry has implemented lean manufacturing does not justify doing away with the MRP system. The MRP is vital for the performance of back-scheduling in order to predict future labor, material and cash flow requirements at the plant. From Exhibit 3 we see that the MRP was important to extend level scheduling along the supply chain for Cell #1 and for driving the schedule at the bench-build area. Thus, I will replace the MRP system. To identify a system with the best fit I would do the following criteria. (1) I would refine Korry’s key business requirements which at present include looking for an IT solution that could support lean methods for office operations (e.g. customer service department) and interfacing, especially, with the big customers and suppliers. These business requirements will direct Korry Electronics on which MRP would be most suitable. (2) I would plan the staff and processes before implementing the new system because this would enhance the effectiveness of this system e.g. MRP has no role to play with regards to laying out production lines anew or training employees. 5. What advice do you have for Bob Cremin with respect to IT? Bob himself acknowledges that an IT system is a supporting tool and not a tool to control or limit lean manufacturing (Nolan, Brown, and Kumar 8). Following this line of thought I would remind Bob that beyond day-to-day business operations, lean principles such as continuous process improvement are also supported by IT systems. a good example would be the success of the IT system Cerebellum at the Korry plant where it increased productivity in Cell #1 by 30% and reduced average throughput time from 10 days to one day (Nolan, Brown, and Kumar 11). Another important point that Bob needs to know is that IT systems other than supporting standardization of business units, such as Esterline did with its financial and HR business units, they offer lee-way for a company to integrate these standardized elements with customized parts. Also, at the corporate level, Esterline’s executives would need a way of tracking and analyzing their current processes, something that IT systems can organize in a single place of reference. Finally, I would inform Bob that IT systems have evolved and continue to evolve such that modern ERP systems have lean applications as part of their standard manufacturing modules. IT therefore is a necessity both at the strategic level and at the tactical level for the organization. Works Cited Nolan, Richard L, Karen A Brown, and Subodha Kumar. “Esterline Technologies: Lean Manufacturing.” 3 May 2006 : n. pag. Print.  Read More