Operations Management of StarBurst Technologies - Case Study Example

Case Study – StarBurst Technologies Introduction The survival of firms in the global marketplace requires that organizational activities are continuously reviewed and updated using theories and views that have been sufficiently and appropriately tested – under real market conditions; innovation would be a vital criterion for the development of the relevant initiatives even if the risk involved could be high - especially when referring to markets that have been achieved a high growth within a rather short period of time, i.e. those markets which are not offered for a long term observation and evaluation. In any case, the policies adopted by managers in modern organizations are likely to meet the following criteria: a) achievement of the target set within the shortest possible time and using the lowest possible budget – it is assumed that the resources employed on the realization of a particular business project need to be as limited as possible, b) development of business plans that offer to the firm involved a competitive advantage over its rivals – at this point innovation of business projects is highly appreciated, c) the benefits expected through the implementation of a business plan would be more than the potential loss (expenses like payments to suppliers and so on). It is in the above context that the managerial decisions related with the supplier selection in StarBurst – the firm under examination – should be developed. Existing failures of the firm’s current suppliers could be effectively faced by introducing appropriate theoretical models and relevant empirical guidelines – it seems that a multi-dimensional process is required for the improvement of the specific sector taking into consideration that the competition in the global market is under continuous growth and any potential failure of the firm to respond to the expectations of its customers would negatively effect the firm’s profitability either in the short or the long term. 2. Recommendations for ST’s supplier strategy The strategy that the firm has initially developed regarding its cooperation with the suppliers, i.e. the concept ‘one component, one supplier, one market’s strategy’, seems as difficult to be applied – at least taking into consideration the current level of performance of the firm’s suppliers; in the long term, the development of this strategy could be successful – but it would require radical changes on the firm’s existing cooperation with its suppliers. A major issue regarding the potential recommendations on the restructuring of the firm’s existing supplier selection methods is the fact that the various components of the firm’s products – referring to the existing framework of cooperation between the firm and its suppliers – are developed by different suppliers who all fail – more or less - to meet the standards set by their agreement with the specific organization but also the standards set by the relevant codes and ethics – as in the case of the violation of the terms of the Australian Clean room code AS1386-1989 by the Australia facility in which the firm’s microchips are produced. In other words, the improvement of the performance of the firm’s suppliers would be achieved only if specific measures are taken – the use of the operations theory would be valuable at this point in order to understand the parameters of the plans required for the improvement of the supplier selection methods. The decision of the firm’s managers to proceed to the update of existing business plans – referring to the firm’s existing supplier selection methods – could be based on different criteria; the management of the firm’s relationship with its suppliers would be depended on the expected benefits and delays – taking into consideration the performance of suppliers up to now; the above approach would use the constraints that are expected to appear because of the cooperation of the firm with a specific supplier – in this context, the cooperation with suppliers that are not expected to perform in accordance with the standards set by the firm would be avoided. The theory of constraints (TOC) – as explained above – is explained in the work of Gupta et al. (2008); the above researchers state that ‘the TOC provides approaches to operations decisions that avoid pitfalls of local optimization by reaching across functional boundaries in organizations’ (Gupta et al., 2008, 991). The above described theory – theory of constraints – could be used for choosing the suppliers that could best respond to the firm’s needs; taking into consideration the suppliers’ performance up to now the firm’s managers could decide on the continuation or not of the firm’s cooperation with its current suppliers. The disadvantage of the above theory is the fact that there are no many options available to the firm’s managers – referring to the case that failures are identified on the products (components of the final product) delivered by the firm’s suppliers; in accordance with the above theory, the firm’s managers would decide to replace the firm’s existing network of suppliers – the fact that all the firm’s suppliers have been found to have violated the standards set by the firm – or the relevant state legislation. A different criteria for the selection of suppliers is set by Westbrook (1994); in the specific study the issue of priority in the development of business activities is highlighted; in accordance with this concept – which is set as priority management theory – the choice of the firm’s suppliers should be depended on the priority of tasks allocated to suppliers; the specific theory would not be of particular value of the firm since all the components of the firm’s product are of equal priority – in order for the schedule related with the launching of the firm’s product in the market to be strictly followed. The development of the ST’s supplier strategy could be achieved by appropriately combined the methodologies included in the theories presented above; the use of additional tools that are based on the information technology – referring to the Decision Support Systems – would be also an option available to the firm’s operations directors. The specific approach is described in the study of Grau et al (2006); in the above study the use of a specific type of Decision Support Systems, the Bayesian classifiers is analytically explained; through the relevant research it is revealed that ‘contrasting with other methods from the artificial intelligence field, such as neural networks or support vector machines, Bayesian classifiers are white-box models that can directly be interpreted’ (Grau et al., 2006, 460). The above described Decision Support Systems could be used for the restructuring of the firm’s current supplier strategy under the terms that appropriate technology and resources are available – i.e. only in case that the specific project would be feasible taking into consideration the firm’s existing operational structure. 3. Recommendations on supplier selection methods The selection of suppliers is an important decision for organizations in all industrial areas; a series of different views has been developed in the literature regarding the criteria that managers in modern firms could set when having to choose suppliers; in accordance with Tahriri et al. (2007, 201) ‘the main objective of supplier selection process is to reduce purchase risk, maximize overall value to the purchaser and develop closeness and long term relationships’. At a next level, Tahriri et al. (2007) characterize the supplier selection process as a ‘multiple criteria decision making problem’ (Tahriri et al., 2007, 201). Due to its complexity, the above problem has been resolved by theorists using different approaches; in this context, a series of models have been developed aiming to show the priorities set by firms when searching for suppliers – the potentials of the firm to respond to the needs of a specific supplier can be also used as a criterion for the selection of suppliers of a particular organization. An indicative example is the case of categorical model in which suppliers are categorized using specific criteria (Petroni, 2000, in Tahriri et al., 2007, 202) – however, the validity or the effectiveness of the criteria set need to be carefully reviewed otherwise the assumptions made – referring to the supplier that best suits to the organizational needs – will not be credible. From a different point of view, the supplier selection of the firm could be decided in accordance with the size of the firm (Pearson and Ellram, 1995, in Moser, 2007, 11) or the firm’s performance within a specific period of time (Kannan et Tan, 2003, in Moser, 2007, 12). Other, well-known, models applied on the supplier selection field are: the Data Envelopment Analysis (Liu et al., 2000) – particularly effective in current market, which is characterized by continuous changes - and the analytical hierarchy process (AHP) – referring to the organizational environment (Yahya et al., 1999 and Akarte et al., 2001 in Rao, 2007, 322). A technique particular effective for the selection of suppliers that best suit to the organizational needs is the cost-analysis technique; through this technique - that can be developed through different methods – the suppliers cooperating with a specific firm are evaluated using as a basis the cost of their products – the latter can be measured through different methodologies. Indicative methods of this type are the cost – based pricing - where ‘the cost of suppliers is derived directly from their cost price’ (Weele, 2005, 272) and the market – based pricing – where the cost of suppliers is derived indirectly, i.e. from the market taking into consideration factors like the ‘demand, supply, stock positions and so on’ (Weele, 2005, 272). The cost analysis methods could be used in the case of StarBurst Technologies but under specific terms; the selection of the firm’s suppliers could be based on their cost price – measured by one of the relevant methods of cost analysis as explained above; the use of the cost analysis technique for selecting suppliers focuses on the cost price of suppliers and does not use other criteria – like the quality of the products or the ability of suppliers to meet deadlines – two issues that are of critical importance for ST which aims to have its product launched in the market within a specific period of time. The issue of quality – crucial for the success of the particular product in the market – is further analyzed in the sections that follow; recommendations are made on the quality technique the firm’s suppliers could adopt and appropriate quality tools – for the implementation of the above technique – are suggested. The framework of the relationship between the firm and its suppliers is indicatively presented in Figure 1 (Appendix section); the firm could emphasize on the policies included in the particular graph aiming to improve its relationship with its suppliers; at a next level, this improvement could lead to the improvement of the quality of the suppliers’ products and the increase of their commitment on the development of the tasks which have been delegated to them by the firm – referring also to their ability to meet deadlines. It is made clear that if the firm’s operations managers would be able to effectively apply the plans and the policies suggested in Figure 1 there would be no need for implementing particular quality techniques – an issue analyzed in the sections that follow. 4. Suggestions and justification on the quality technique a supplier could adopt The firm’s suppliers can use the Total Quality Management (TQM) technique in order to improve their quality; the above concept, the TQM, – which was first introduced in 1970s – was created in order to support the performance of suppliers after the appearance of the computerized approach of commercial activities – i.e. the development of WWW – in Japan. Today, TQM is still the most effective quality technique being able to respond to the needs of firms with different organizational characteristics and structure. The application of the specific technique requires that the concept of quality is clearly defined in relation with a particular business activity; at a next level the needs of the firm involved are identified and appropriate quality assessment tools can be used for the successful implementation and development of TQM technique within the specific organization. A graphical representation of the TQM technique is presented in Figure 2 – Appendix section. In the literature, three systems have been characterized as the main parts of TQM concept: a) the social system – in which the relationships with suppliers are included, b) the technical system – referring to the technology used by a specific organization and c) the management system – referring to the leadership style and the management principles and plans promoted within a particular organization (Fernandez, 1994, 47). The introduction of TQM in modern organizations has been proved to be the most effective solution for facing the various problems resulted by the lack of supplier quality, a fact derived by the ‘nonconforming supplier quality which involves inconsistent communication and the resulting misunderstanding of specifications, expectations and requirements between supply chain members’ (Monczka et al., 2008, 279). At a next level it should be noted that the effectiveness of TQM is depended on the use of specific principles - referring to the emphasis on the prevention of the problem and ‘on process rather than the output’ (Monczka et al., 2008, 279), the appropriate allocation of responsibility among the members of the supply chain and the effort to improve quality in the first phase of the targeted process, the customer satisfaction and complaints, the employee involvement, the performance appraisal and so on; the successful implementation of a TQM is also depended on the appropriate use of specific TQM tools, as explained in the section that follow. 4a. Assessment of issues and problems related with the suggested quality technique – presentation of three – potential – quality assessment tools A series of tools are available to managers that seek to assess the performance of a TQM scheme; Benchmarking, the Quality Function Deployment scheme and the Total Productive Maintenance scheme are indicative tools of this type. The above TQM could be analyzed as follows: Benchmarking is a strategy based on the comparison of a firm’s options and plans against those of its competitors; however, the specific strategy can be differentiated across organizations – in accordance with the organizational goals and perspectives but also the resources available. Furthermore, three different modes of benchmarking have been identified in modern firms: a) the strategic benchmarking – referring to the comparison of market strategies followed by two different organizations, b) the operational benchmarking – aiming to lead to the improvement of a firm’s existing operational practices and c) the cost-activity benchmarking – aiming to support the choice of suppliers with the lower possible cost – without negatively affecting the quality of the products provided (Monczka et al., 2008, 729); this type of benchmarking – the cost-activity benchmarking - could be applied on ST in case that the application of a TQM is decided by the firm’s directors; this TQM tool would be in accordance with the policies suggested by Weele (2005) for the improvement of the firm’s existing supplier selection methods – section 3 above. As for the next TQM tool, the Quality Function Deployment, this is a concept developed in Japan in 1966; the specific concept ‘provides specific methods for ensuring quality throughout each stage of the product development process, starting with design’ (Akao, 2004, 3). In ST, the use of the specific concept would refer to the improvement of the quality of the product’s components – which are provided by different suppliers; there would be no issue of changing the product’s design – Stroll has been already recognized as an innovative product in the global market. However, changes would be made on suppliers’ existing functions – referring to the standards of production, the appropriate packing and transportation of the product and the time of delivery. The use of another TQM – the Total Productive Maintenance (TPM) – could further enforce the effectiveness of the TQM technique if the firm’s suppliers would decide to use TQM in order to improve their quality. The TPM focuses on a series of maintenance practices that are implemented and monitored by all employees (Wireman, 2004, 1); in the case of ST the use of TPM would be related with the adoption by its suppliers of maintenance policies – aiming to improve equipment and maintenance effectiveness (Wireman, 2004, 2), achieve a high performance of equipment used in the production of Stroll components and increase the skills of employees through appropriate customized training sessions. In other words, TPM would refer to the improvement of the employees and equipment used by the firm’s suppliers in order to respond to their obligations towards ST – as explained analytically above. 5. Conclusion One of the most important reasons for the delays in the development of ST’s strategic plans – referring especially to the efforts for launching its new product in the market – seems to be its relationship with its suppliers. The latter have been proved to be unable to follow the terms set by the firm’s operations directors in relation with the production and the delivery of the specific product’s components. On the other hand, the time framework available for the improvement of the above described relationship seems to be limited; the implementation of Total Quality Management – using the tools described in the previous section – has been found to be a potential solution for the increase of the suppliers’ quality; in this case, quality does not refer only to the quality of the product delivered but also to the ability of suppliers to meet all requirements set in their agreement with ST – mainly the delivery of the product’s components within specific deadlines. It should be noted that the ability of the firm’s managers to respond to the needs of the Total Quality Management project is a prerequisite for the success of the particular initiative. The employees of the firm would also have a major role in the success of the specific project; an improvement of the existing internal organizational relationships – referring to the communication and the cooperation between managers and employees at lower levels of the organizational hierarchy – would be necessary if the relationship of ST with its suppliers is to be improved. References/ Bibliography Akao, Y. (2004) Quality Function Deployment: Integrating Customer Requirements Into Product Design. Productivity Press Chary, S. (1995) Theory and problems in production and operations management. Tata McGraw-Hill Fernandez, R. (1994) Total quality in purchasing & supplier management. CRC Press, 1994 Grau, M., Aranda, D. (2006) Operations strategy and flexibility: modeling with Bayesian classifiers. Industrial Management & Data Systems, 106(4): 460-484 Gupta, M., Boyd, L. (2008) Theory of constraints: a theory for operations management. International Journal of Operations & Production Management, 28(10): 991-1012 Monks, J. (1996) Schaums outline of theory and problems of operations management. McGraw-Hill Professional Monczka, R., Handfield, R. (2008) Purchasing and Supply Chain Management. Cengage Learning Moser, R. (2007) Strategic Purchasing and Supply Management: A Strategy-based Selection of Suppliers. Springer Pooler, V., Pooler, D., Farney, S. (2004) Global purchasing and supply management: fulfill the vision. Springer Rao, V. (2007) Decision making in the manufacturing environment: using graph theory and fuzzy multiple attribute decision making methods. Springer Tahriri, F., Osman M. (2008) A review of supplier selection methods in manufacturing industries. Journal of Science and Technology, 15(3): 201-208 Weele, A. (2005) Purchasing & supply chain management: analysis, strategy, planning and practice. Cengage Learning EMEA Westbrook, R. (1994) Priority Management: New Theory for Operations Management. International Journal of Operations & Production Management, 14(6): 4-24 Wireman, T. (2004) Total productive maintenance. Industrial Press Inc. Appendix Figure 1 – Supplier relationship management (source: http://www.massin.eu/2007/12/a-supplier-relationship-management-srm-graph/) Figure 2 – Total Quality Management – graphical representation (source: http://www.businessballs.com/dtiresources/total_quality_management_TQM.pdf) Read More