Improving Performance at Cool Foods - Case Study Example

Improving Performance in Cool Foods Report to the Board of Directors – Cool foods This Executive Report purports to enlighten the readers about the areas the company had to look into to strengthen the Cost and the Customer leadership, already established by the company and to sustain the position established by the company in the periods to come. For the purpose of achieving excellence in the total performance and to reach a world class position, the report also recommends the implementation of various quality control measures like Total Quality Management (TQM) and Six Sigma in addition to the practicing of EFQM. While the first part of the report details the areas which the management has to have a thorough review, the later part describes the relative merits and demerits of the application of the modern quality standards. The report is concluded with an outlook of the future of the company and the recommendations that may be considered for driving the company towards an accelerated growth. 1.0 Business Focus: While the company has already established a clear lead in the market, it becomes important that such a position is retained and at the same time the growth potential of the company is made use of. For this purpose, the company should have a clear business focus in the following two broad areas that determines the outstanding characteristics of any manufacturing enterprise. The areas are: Improved Manufacturing Performance and Clear focus on Market Development 1.1 Improved Manufacturing Performance: An improved manufacturing performance calls for: Product Innovation with a clear shift in the policies towards premium products where the margins are more and the customer recognition is high Enhanced Product Capability indicating increased production capacities at reduced overhead costs and improvements in manufacturing efficiencies through better processes and product mixes Implementing Advanced Manufacturing Strategies like plant consolidations if there is a possibility for that and Capital up-gradations by modernizing plant and equipments. With clear policies on the above areas the company would be able to achieve the maximization of the manufacturing platform which is at the root of the success of any organization. Apart from the above the company should also focus on the enhanced raw material sourcing facility for a drastic reduction in the manufacturing costs. 1.2 Focus on Market Development: Delivering outstanding customer service is an essential part of any market development exercise. In this area the company may look into the following areas which will enable the company to sustain the customer leadership established by the company: New product innovation and bringing them into the market before the competitors is the basic element in any marketing strategy. Hence much depends on the number of new premium and quality products that the company is able to focus on will further increase the market share of the company Brand Portfolio management is an area which needs the management’s attention to increase the brand loyalty of the customers to the existing brands and promoting new and attractive brands to expand the market for the company’s products The company can look into new streams of business in the areas of Dairy Products – Milk, Cultured, Cheese and Grocery products – Flour, Pasta, Spreads, Oils, Cake Mixes with a possibility to later on integrate these new streams of businesses with the existing Bakery Stream Another area that can be looked into the establishment of ‘Cool Food Fresh’ and Cool Food Home Ingredients’ to market the existing as well as the new streams of products in the existing and newly expanded markets where the company can introduce new products derived out of product innovations in any of the business streams identified. Market expansion to unexplored countries and markets with long shelf life products is clearly another area the company can consider. 2.0 Business Reengineering: Another area the company can concentrate on is the ‘Business Reengineering’ by which process the company may have the opportunity to have a re-look into the effectiveness of the existing facilities and capabilities. Such a process may include Shutting down of old plants which don’t add much to the profitability of the business. Similarly major capital programmes for moderinising the existing production facilities may be looked into. Product rationalization by having a review of the existing products and discarding non-profitable ones will also help improving the performance of the company. Bolt-on acquisitions of other existing smaller and medium ventures may increase the synergies by enhanced economies of scale Implementation of ERP system to integrate the whole activities of the company is definitely an area which will give an impetus for the programmed growth of the company. 3.0 Focus on Quality Systems and Re-organizing the Quality Standards: To remain quality conscious should be the virtue of any progressive thinking organization. This is all the more important for a company which is in the food and beverage industry where the customer satisfaction is more than directly related to the quality of the products. A combined effort of considering the options listed in the previous sections along with the newer quality concepts of Total Quality Management and Six Sigma would help the company to achieve its goals of attaining the world class. The features of these quality ensuring systems are described below: 3.1 Total Quality Management (TQM): The global corporate world has witnessed the spectacular success of large transnational companies like Motorola, Ford Motors, Philips and Toyota Motor Company by adopting the techniques of Total Quality Management, shortly known as TQM. TQM encompasses a quality spiral that shows that each element of the business process, each function not just the end product or service for the external customer is important Fitness for the use applies as much to in-process products and services as it does to the final product. Hence it is beneficial to look at the role of the TQM in the various functions that make up the production process. (Roberta S. Russell and Bernard W. Taylor 2006) The need for moving to TQM arises due to: TQM being a philosophy for perpetual improvement The ISO requires a quality system complementing the standards already set where the TQM will be of immense use The implantation process of TQM is greatly facilitated by the presence of the ISO standards, as the ISO already has put in place a majority of the requirements of TQM. 3.1.1 Basic Principles of TQM: The TQM is applied to organizations which are having the potential to have in place the following key principles underlying the efficient performance of TQM as a total solution to the quality issues: An unstinted commitment on the part of the management The complete empowerment of employees through rigorous training Appropriate decision making process based on the facts Continuous improvements in the various processes and functions Concentrated focus on the customer satisfaction (Khurram Hashmi) 3.1.2 Merits of TQM: The implementation of TQM results in a complete quality control of the products, processes and components which gives the firm a competitive edge. Reduction in the overall cost of production is another distinct advantage of TQM. Innovative products and production processes are largely facilitated by the existence of TQM. 3.2 Six Sigma: The Six Sigma Improvement encompasses the following features: A more quantitative version of Demings PDCA (Plan-Do-Check-Act) Process Improvement methodology was developed to implement this statistical approach -- it is commonly referred to as MAIC. Measure; Analyze; Improve; Control Key product-process performance variables are measured, analyzed, improved, and controlled using statistical methods. The simple "statistical" quality tools that were popularized in the Total Quality era are reinforced with Design of Experiments (DOE) and more sophisticated Statistical Process Control techniques. Process sigma is the primary unit of measure. It is determined from an analysis of the number of defects observed in a process. Performance is compared to the Best-In-Class sigma for that process to determine whether the process needs to be improved or the product / service needs to be re-designed. When improvement is necessary, Design of Experiments (DOE) is used to determine which product or process parameters are most important and specific parameter values that will give the best performance. SPC is used to continually monitor product and process performance. Comparable to the problem-solving models where an initial step to define the problem was frequently added, some practitioners prefer to precede MAIC with a Define step. They feel that selecting and defining the right process is critical. Effort can easily be wasted working on poorly selected, ill-defined processes -- as illustrated by many TQM failures. 3.2.1 Merits of Six Sigma: The relative merits of Six sigma are more or less the same as that of TQM, like ensuring the quality of the products from the design stage to completion of manufacture, ensuring total customer satisfaction through timely delivery and of superior quality products and also inculcating the quality consciousness from the top management to down the line. 3.3 World-Class Performance: By ensuring world class performance the company is able to strike a balance of efficiency and effectiveness that is having the potential to achieve the business goals and make the firm emerge as an operating model. World class efficiency is often charaterised by the ability of the company to establish and practice furthering the operations of the company in the lowest cost manner that may be possible for the company. On the other hand the world class effectiveness is characterized by the ability of the company to utilize all their means to evolve a strategy that makes it possible for the company to deliver the maximum possible levels of value and service. Spreading the ownership to all levels of management enabling the employees at all levels to take part in the decision making process and also delegating the responsibilities for such decisions taken will produce world class performance and results. Increase in the total knowledge base and building confidence with accomplishments will go a long way to assure the company a world class performance. 3.4 EFQM: The EFQM excellence model is a standard framework for management systems in the organizations promoted by European Foundation for Quality Management. The Foundation has introduced the quality frame work to be assessed through nine basic criteria consisting of five ‘Enablers’ and four ‘Results’. While the enablers represent the action of the company the results are the achievements based on such actions. “The Model, which recognises there are many approaches to achieving sustainable excellence in all aspects of performance, is based on the premise that: Excellent results with respect to Performance, Customers, People and Society are achieved through Leadership driving Policy and Strategy, that is delivered through People, Partnerships and Resources, and Processes.” (EFQM) 3.5 What Cool Foods Should Do to Implement These Quality Frame Works and Tools? Basically the following may be enumerated as the requirements on the part of Cool Foods to successfully implement any or all of the above quality standards: The total commitment by the management is the essential prerequisite for the successful implementation of the process of these quality standards Sufficient training and orientation of the employees of the company towards the adherence of the strict quality standards prescribed by these systems is also essential Advanced communication and information technology to support the operation of these systems should be organized at the time of implementation of the system. Changes in the production designs, production processes and the product itself may necessitate the approval of the customer at the initial stages as the product should meet the acceptable standards of the customer A consideration of the cost effectiveness of the introduction of the changes in the systems and processes should be taken into account by the management at every stage to avoid last minute surprises of negative results The changes in the outlook of the top management should be followed unquestioningly by the employees down the level and sometimes it may need a re-look in to the organisational hierarchy for effecting necessary changes for the systems to remain effective and efficient. 4.0 Future Outlook: Having considered the different aspects of the quality improvement systems, certain strategic moves on the part of the company coupled with the introduction of these quality systems will result in a considerable improvement in the organisational performance. Foe building management capabilities and combat the changing business environment with the growing competition the Cool Foods may think of the following s Strategic Platform: 1. Cost Leadership 2. Customer Leadership Strategy: 3. Growth Strategy: With these strategic measures Cool Foods will meet challenging trading environments in the wake of increased competition and the company is sure to win over not only the existing but also the new entrants to the market in the periods to come. References: 1. EFQM The EFQM Excellence Model http://www.efqm.org/Default.aspx?tabid=35 2. Khurram Hashmi Introduction and Implementation of Total Quality Management (TQM) http://www.isixsigma.com/library/content/c031008a.asp 3. Roberta S. Russell and Bernard W. Taylor III (2006) Operations Management Edition IV Prentice Hall of India Private Limited PP 624 Read More