How Lean Management Improve the Value Stream of Tesco - Literature review Example

How Lean Management Improve the Value Stream of Tesco 2242 Table of Contents Table of Contents 2 Value Stream Mapping (VSM) 3 Literature Review 4 Concept of Lean Management 4 Operational Benefits of Implementing Lean Management 5 Lean Management Framework 7 Lean Management in the Next Five Years 8 Application of the Lean Management Concept in Tesco 9 Evidence Supporting the Proposed Changes 10 Conclusion 12 Introduction Lean management is defined as an approach through which continuous improvement is made in various activities conducted in various levels of an organisation to improve the work quality and increase the efficiency. The concept of lean management provides benefit to an organisation as well as consumers by eliminating wastage of money along with time in every stage of a business process. The steps that do not create any value to the customers are eliminated from the business process and thus, the resources can be utilised in those activities that may create value for the customers. However, the concept of lean management may be implemented in a company by using the method of Value Stream Mapping (VSM). It is a popular method of lean management. Generally, VSM is represented in the form of a flow chart that analyses every step in details from the manufacturing of a product until it is purchased by the consumers (Lean Enterprise Institute. Inc, 2009; ISixSigma, 2014). Contextually, the essay emphasizes the improvement of lean management based on which the Value Stream of Tesco can be enhanced. Value Stream Mapping (VSM) VSM is a method of lean management represented in the form of a flow chart, which analyses in details every step involved from the manufacturing of a product to the end customers (Strategosinc, 2014). It is an important tool for identifying wastes, reduce cycle times in a process and implement the required measures for the improvement of the process. The objective of VSM is to provide value to the customers by taking into consideration of certain factors that include minimal wastage in design, built and sustainability (Penton, 2014; Strategosinc, 2014). With the help of VSM, a broader range of information can be obtained as well as displayed in the form of a flow chart. Contextually, the process of VSM starts from the collection of raw materials for the manufacturing of a product to the delivery of the finished products to the customers. The value stream map for Tesco PLC is provided in Appendix. VSM not only considers the activities of the product, but also includes the information system as well as the management that support the whole process. In this regard, VSM of Tesco provides adequate information about the procedure based on which a customer is provided products and/or services (American Society for Quality, 2014; Rother and Shook, 2009). Literature Review Concept of Lean Management Lean management is an approach of continuous improvement of various activities conducted in every level of an organization in order to increase the efficiency and the quality of work (Zhao, 2014). According to Zhao (2014), it helps to find out the required improvements that are necessary for an organization through the application of various scientific methods. However, applying the concept of lean management is beneficial for both the consumers and an organization, as it eliminates wastage of time and money that are involved in various stages of the business process (Zhao, 2014). In this regard, Zokaei & Simons (2006) stated that it helps in reducing the steps not involved in creating any values for the customers. In addition, the tool assists in developing alternatives, which may be essential for creating values to the customers. With the elimination of wastes, the resources can be utilised and allocated in the activities, which can create value for the customers in terms of providing quality products and/or services (Zokaei & Simons, 2006). Additionally, the concept of lean management was first implemented by Toyota as a result of which the Toyota Motor Corporation turned into the world’s one of the largest automobile manufacturing companies from a small domestic producer. The objective of lean management is to eliminate the wastage of time and other resources within an organisation as well as in the supply chain (Kennedy, 2011). The article published by SkyMark Corporation (2014) implied that the concept of lean management is related to the scientific management that aimed at rationalizing the power of labour in an organisation through the fragmentation of the jobs into individual tasks (SkyMark Corporation, 2014). Based on the study of Begam & et. al. (2013), lean management improves performance, quality, delivery of the goods and reduces the cost of production, as the resources are utilised efficiently without any wastage. Lean management is considered as a multi-dimensional approach relating to certain management practices that include supplier management, work teams, cellular manufacturer, quality system and Just-In-Time (JIT) (Begam & et. al., 2013). Operational Benefits of Implementing Lean Management There are various types of wastes in the retail process, which can be categorised into certain classifications that include transportation and handling, inventory, movement, waiting, over supply, over processing, defects, and unused skills (Begam & et. al., 2013). These hindrances/wastes in the business processes of Tesco can be easily avoided by implementing the concept of lean management. Movement of inventory between outlets and central warehouse due to the return or exchange of the goods by the customers or unexpected demand for the products and/or services in the local market of Tesco may result to the waste of resources. In this context, procurement of goods in excess to the demand in the market segments lead to storage of products in the warehouse, which is identified to raise issues relating to storage cost, wastage and damage among others (Domingo, n.d.). Moreover, the movement of the staffs and employees unnecessarily within the work floor in order to meet the requirements of the customer also involves wastage of time as well as distraction in the work procedure of Tesco. A delay in the previous supply chain activity results in the waiting of the customers or employees unnecessarily. Such as, if a product is out of stock, then it will increase the waiting time for the customers (Modi & Thakkar, 2014). According to Pereira (2009), if there is a delay in the delivery of goods from the central warehouse, there will be an increase in the waiting time for offloading the goods by the staffs of Tesco. Moreover, supplying larger amount of goods without considering the demand of the customers may results in excess inventory and selling of the goods in lower price and finally, the revenue as well as the profit margin of the company is reduced. If the goods are of bad quality and are not able to meet the tastes of the consumers, then the goods have to be sold below the cost price resulting to the loss of Tesco (Pereira, 2009). Subsequently, Namrouty & AbuShaaban (2013) noted that in a retail store, it is commonly recognised that the sales clerks are engaged in various tasks related to the in-house logistics and merchandising. In this respect, sales clerks with their engagement in different activities are identified to be ineffective in assisting the customers in making purchase decisions. Hence, it is necessary for the sales clerks of Tesco to assist the customers in purchasing the required commodity without been associated with other activities largely (Namrouty & AbuShaaban, 2013). Lean Management Framework According to Anand & Kodali (2010), the application of lean management is growing rapidly in various types of industries throughout the world. Among them, there are certain industries that are benefited by the implementation of the concept largely in terms of manufacturing operations and workforce management. In this context, inadequate understanding the concept of lean management by the management of a company as well as employees is regarded as one of the major reasons behind the failure of the same. Thus, in order to solve this issue, there are certain frameworks of lean management that can be adopted by an organization as per their suitability (Anand & Kodali, 2010). The lean management framework of a retail business generally comprises six basic elements that include ‘elimination of wastes’, ‘elimination of variability’, ‘elimination of inflexibility’, ‘total quality management’, ‘performance management and involvement of workers’. As per the principle of lean management, the waste may be from the idle time where the employees are identified to be waiting for work or unnecessarily spending extra time to mitigate customer expectations. Excessive research and testing on a particular subject also wastes time and thus, hampers the efficiency of the work (Mostafa & et. al., 2013). In an identical perspective, Wanitwattanakosol & Sopadang (2011) stated that elimination of variability refers to the removal of complexity of work among the members of an organisation. The framework of lean management suggests eradicating the variability in the work done in order to perform their activities smoothly. Similarly, elimination of inflexibility states to adopting a flexible working environment as well as the jobs performed by each employee. It suggests, utilising the resources properly and avoiding repetitive tasks that involve unnecessary wastage of knowledge and performance (Wanitwattanakosol & Sopadang, 2011). Another major element of the lean framework is the JIT. The aim of JIT is to bring efficiency in the supply chain of any organisation. It focuses on providing on-time delivery of the goods with an assurance of best quality as well as cost reduction and minimal inventories (Mejab, 2011). As stated by Stump (2008), performance management implies to computing and evaluating the performance of every employee of an organisation and provide suggestions and recommendations on a regular basis. This will help in enhancing their morale, resulting in the efficiency of performance. Moreover, the workers of an organisation should be able to understand the principles of lean management, as it is more of a psychology rather than a process (Stump, 2008). Lean Management in the Next Five Years The article published by MG (2014) implied that the concept of lean management is adopted by many organisations and most of them are benefited by adoption proper lean framework in their businesses, which has resulted to the reduction of wastages in the business process and make the work more efficient. In the next five years, the organisations implementing lean management concept will make remarkable change or progress in the working process for better sustainable and competitive performance (MG, 2014). Providing superior quality products to the customers with cheap price and minimal waste in the process is the aim of lean management. Invention of new technological equipment in the retail superstores like barcode reader plays an important role in reducing waste to a great extent. New technologies are expected to be implemented in the retail stores in the next five years that will help in improving the quality of service provided by the retail stores to customers (Amnis, 2011). Moreover, Miller & et. al. (2010) noted that the use of modern technical devices like tablets, laptops and other handhelds would help in easy approval of repairs and other decision-making, which in turn will save potential time and revenues. The use of GPS in tracking the location of the goods in transit and use of robotics in carrying the goods from warehouse to the store has minimised the waste of time. Another technology that is expected to be implemented in the coming five years as a tool of lean management is the 3D printer. The materials that are wasted during manufacturing process will be used to produce an item with the help of 3D printer (Miller & et.al, 2010). Application of the Lean Management Concept in Tesco Tesco is the largest retailer in the UK and operates in twelve countries with a team of 500,000 employees (1Tesco, 2014). It serves the needs of more than thousands of customers every day. Thus, it is necessary to provide the customers the best quality of goods and services to retain their loyalty. The satisfaction rate of the suppliers with respect to Tesco was much lower i.e. 33.5 per cent (2Tesco, 2014). In this regard, it is necessary for the company to take measures that will improve the relationship with the suppliers. Moreover, the customer service provided at the retail outlets should be improved, as customer satisfaction is the main objective of any business. Thus, in order to overcome the problems in the supply chain, the concept of lean management is to be implemented by Tesco for reducing waste in the overall process and establish better relationship with its suppliers as well as focus on customer satisfaction by providing best quality products at economical rates (2Tesco, 2014). There are many ways based on which the cost can be reduced and at the same time, efficiency can be increased. Increasing the utilising rate of machines, minimising the touch points as well as reducing the lead-time may be the effective way. Tesco may adopt a continuous replenishment system, as it depends on point of sale data, which provides information of sale in real time. This will allow Tesco to replenish its goods for several times a day on the basis of orders, which will benefit the supply chain of the company in terms of reduction in the inventory holding, minimisation of cost, guarantee quality of the food and improvement in product availability (EAN International, 2000). In addition, Tesco can implement pull system in order to replenish the products. Implementing this system, Tesco can replenish products timely as well as continuously according to the demands of the customers. As Tesco is standing in a highly competitive retail market, the availability of products and/or services is of great importance and it can even influence the customer’s decision of making purchase from Tesco. The price of the products in Tesco is comparatively lower with respect to other retail store, which is regarded as a major competitive advantage of the company (2Tesco, 2014). However, there is a need of improvement in the supply chain in order to establish good relationship with the suppliers for providing best quality products and prompt services to the customers with reduction in cost and this can be achieved by applying the concept of lean management that will remove the waste in the supply chain of Tesco (Zhao, 2014). Evidence Supporting the Proposed Changes As per the annual report of Tesco (2014), the relationship of Tesco with its suppliers is 33.5 per cent out of 100 per cent, which is considered much lower for the company. Moreover, the company is using traditional replenishment system that was inefficient in providing real time information regarding sales (2Tesco, 2014). In order to overcome the problem, it is suggested to adopt the continuous replenishment system that provides on the point data of sales and time sales information. Moreover, certain problems were identified in the logistics department that are assumed to be solved by applying the pull system. If the current problem in the supply chain persists, then there will be waste in the process and thus, the efficiency of work will be negatively affected. Accordingly, it will be difficult for Tesco to maintain the quality of goods and services provided to the customers. In this context, by adopting the continuous replenishment system, the real time information regarding sale can be obtained, which will help the company to replenish the products for several times in a day as a result of which the revenue and profit margin will also increase. Similarly, by using the pull system, the goods can be replenished according to the demand of the customer and thus, there is no chance of wastage of products, which will reduce loss in revenue (1Tesco, 2014). Potential Action Benefits Benefits High=3 Med=2 Low=1 Costs Costs High=3 Med=2 Low=1 Ratio Benefits/ Cost Rank Implement continuous replenishment system in the supply chain. Provides information of sale in real time. Reduce inventory holding, minimise cost, guarantee the quality of the food and improves the availability of products. 3 Storage cost, distribution cost, merchandise cost and process costs. 2 1 2 Implement Pull system of replenishment. Goods can be replenished timely according to the demand of the customers. 2 Direct Costs, Process costs, Technology costs. 1 1 1 Simple Cost Benefit Analysis Conclusion From the above discussion, it can be comprehended that the concept of lean management helps to eliminate waste in the business process and thus, ensures the efficiency in work as well as provides best quality goods and services to the customers. In this respect, Tesco reflects the inefficiency in the supply chain management. It has been identified that relationship with the suppliers has been inappropriate and the customers are not satisfied with the service provided by the retail outlets. Accordingly, certain alterations in the system of Tesco related to the supply chain management have been recommended that can make the supply chain more effective and efficient to over the shortcomings of the previous adopted systems. Respectively, lean management that include pull system and continuous replenishment system have been suggested to be applied in the supply chain of the company that can remove the waste in the process for reducing cost as well as increase efficiency. References American Society for Quality, 2014. Profitable Applications of Value Stream Mapping Tutorial. Article. [Online] Available at: http://asq.org/learn-about-quality/lean/overview/value-stream-mapping.html [Accessed December 27, 2014]. Amnis, 2011. A Review of the Historic Impact of Lean on UK Manufacturing And How it May Be Made More Effective In The Future. Lean Manufacturing Review, pp. 2-24. Anand, G. & Kodali, R., 2010. Analysis of Lean Manufacturing Frameworks. Journal of Advanced Manufacturing Systems, Vol. 9, No. 1, pp. 1-30. Begam, M. S., & et.al, 2013. Current Trends on Lean Management – A Review. International Journal of Lean Thinking. Vol.4, No. 2, pp. 16-20. Domingo, R. T., No Date. Identifying and Eliminating the Seven Wastes or Muda. Asian Institute of Management, pp. 1-4. ISixSigma, 2014. Value Stream Mapping. Article. [Online] Available at: http://www.isixsigma.com/dictionary/value-stream-mapping/ [Accessed December 27, 2014]. Lean Enterprise Institute, Inc, 2009. Principles of Lean. What is Lean. [Online] Available at: http://www.lean.org/WhatsLean/Principles.cfm [Accessed December 27, 2014]. Mejabi, O. O., 2011. Framework for a Lean Manufacturing Planning System. Wayne State University, pp. 1-17. MG, 2014. The Future of Lean Manufacturing. Article. [Online] Available at: http://www.manufacturingglobal.com/lean/191/The-future-of-lean-manufacturing [Accessed December 27, 2014]. Miller, G. & et. al., 2010. A Case Study of Lean, Sustainable Manufacturing. Journal of Industrial Engineering and Management, Vol. 3, No. 1 Modi & Thakkar, 2014. Lean Thinking: Reduction of Waste, Lead Time, Cost through Lean Manufacturing Tools and Technique. Lean Thinking: Reduction of Waste, Lead Time, Cost through Lean Manufacturing Tools and Technique, Vol. 4, No.3, pp. 339-344. Mostafaa, S. & et. al, 2013. A Framework for Lean Manufacturing Implementation. Production & Manufacturing Research: An Open Access Journal, Vol. 1, pp. 44-64. Namrouty, K. A. & AbuShaaban, M. S., 2013. Seven Wastes Elimination Targeted By Lean Manufacturing Case Study “Gaza Strip Manufacturing Firms”. International Journal of Economics, Finance and Management Sciences, Vol. 1, No.2, pp. 68-80. Penton, 2014. Best Practices for Using Value Stream Mapping as a Continuous Improvement Tool. Article. [Online] Available at: http://www.industryweek.com/lean-six-sigma/best-practices-using-value-stream-mapping-continuous-improvement-tool [Accessed December 27, 2014]. Pereira, R., 2009. The Seven Wastes. Skill Builder, Vol. 5, No. 5, pp. 1-2. Rother, M. and Shook, J., 2009. Value Stream Mapping. Article. [Online] Available at: http://courses.washington.edu/ie337/Value_Stream_Mapping.pdf [Accessed December 27, 2014]. SkyMark Corporation, 2014. Frederick W. Taylor: Master of Scientific Management. Article. [Online] Available at: http://www.skymark.com/resources/leaders/taylor.asp [Accessed December 27, 2014]. Stump, G. B., 2008. An Integrated Framework for Applying Lean Manufacturing and Other Strategies in Mass Customization Environments. University of Kentucky Masters Theses, pp. 1-117. 1Tesco, 2014. About Us. Tesco PLC. [Online] Available at: http://www.tescoplc.com/index.asp?pageid=6 [Accessed December 27, 2014]. 2Tesco, 2014. Annual Report and Financial Statements 2014. Tesco PLC. [Online] Available at: http://www.tescoplc.com/files/pdf/reports/ar14/download_annual_report.pdf [Accessed December 27, 2014]. Wanitwattanakosol, J. & Sopadang, A., 2011. A Framework for Implementing Lean Manufacturing System in Small and Medium Enterprises. Department of Industrial Engineering. [Online] Available at: http://preet.sesolution.com/iclt2010/Full%20Papers/Production,%20Operation,%20and%20Maintenance/0182-Jirapat.pdf [Accessed December 27, 2014]. Zhao, S., 2014. Analyzing and Evaluating Critically Tesco’s Current Operations Management. Journal of Management and Sustainability, Vol. 4, No. 4, pp. 185-187. Zokaei, K. & Simons, D., 2006. Performance Improvements through Implementation of LeanPractices: A Study of the U.K. Red Meat Industry. International Food and Agribusiness Management Review, Vol. 9, No. 2, pp. 30-53. Strategosinc, 2014. Value Stream Mapping. Article. [Online] Available at: http://www.strategosinc.com/value_stream_mapping1.htm [Accessed December 27, 2014]. EAN International, 2000. Continuous Replenishment. How to Use the EAN•UCC Standards. [Online] Available at: http://www.gs1.org/docs/EDI0002.pdf [Accessed December 27, 2014]. Appendix DESIGN AND RE-DESIGN Receipt and Test of materials Production, Assembly, Inspection Tests of processes, machines, methods, costs. Customer Read More