What are the Primary Difficulties Associated with Rejuvenating the Omaha Plant - Assignment Example

Name of writer appears here] [Course name appears here] [Professor’s name appears here] [Date appears here] Summary of the case Omaha plant which manufactured and rebuilt hydraulic pumps comprised three businesses: vane pumps, piston pumps and remanufacturing services. The plant was organized by manufacturing processes and, with the exception of heat treating ovens, each product type had dedicated equipment. The plant was recently facing certain issues, which was creating problems for the revival of the plant such as problem with new product development as Omaha Plant had no contingency plan for the changing situation and they were unable to keep the pace with the moving industry, their employees were demotivated, plant and equipment was obsolete and they were facing tough competition from the external vendors and changing customer needs and requirements. Weber eventually decided to keep the Omaha plant in operation and make it a profitable entity by bringing in certain changes such as revamping the entire operation structure along with implementing new plant and equipment, training employees, building multi-functional teams, considering customer the king and meeting his needs and requirements and move from existing employee contract to new employee contract which offered profit sharing plan to the employee with yearly bonuses and reducing the number of job classifications from 35 to 10. What are the primary difficulties associated with rejuvenating the Omaha Plant? There were many issues which were associated with revitalizing the Omaha Plant and except a few of the problems most of them were internally regulated. New product development: It is crucially important for any organization in my point of view to keep its pace with the fast moving competitive business world. There’s so much competition and the customer demands are shifting in ways that one wrong move from an organization can easily bring it from level 10 to level 5 to restart again. Same was the case with Omaha Plant. In the past, even the customers used to purchase the products like pumps slowly and gradually and they preferred to fix the old pump rather than go and purchase a new one so the sale of one pump from the same customer almost took 20 years. In this scenario Vickers (operating the Omaha Plant) was always relax and new product development was always slow but with the passage of time customer demands changed but not slowly. These demands changed at an accelerating rate and only the companies that had already forecasted and were prepared for these changing demands could have survived and Omaha Plant had no contingency plan for this situation and they were unable to keep the pace with the moving industry. Customers changed their trend and they were only looking forward to maintaining healthy relationship with one or few suppliers and not everyone. Eventually the plant ended up facing tremendous problems and not only this but due to lack of planning, the process of new product development was haphazard as nothing was documented, properly planned, put in facts and figures and they were just following their thoughts and normal theme within the company of production. (Upton, p. 481) Due to this lack of planning and proper infrastructure, the new product development phase declined sharply and another problem new product development process faced was that the plant management was focusing more towards keeping pace with the competitor and due to this they lost their own track and the lack of focus towards their own long-term strategic position in the market. According to the case “New products were often designed with little consideration given to minimizing plant engineering and manufacturing costs. For example the plant currently manufactured 17 products using 147 different manufacturing components whereas according to estimation 49 different products could have been produced with around 197 different components. (Upton, p. 481) Competition: Even though competition was not given that attention initially but this lack of attention left gaps unexplored for the competitors to enter the market which included both big and small companies that were catering to market pretty well and build a strong position into the market. The reason being that the first competition that was a small but in my point of view a powerful source was the small family-owned pump shops that reversed engineered standard items from larger manufacturers and then sold these pirated products at much lower price. As these shops had lower operating and overhead costs so their margins were higher and another advantage that these small shops were offering to the customers was that even though the quality of their product was not matching that of OEM but these shops were located at close by arena to their customers and their mechanists were readily and quickly available incase any after sales service was required by the customer at any point of time. In short these shops were providing low price product with added advantage of close customer proximity and urgent service incase of emergencies (Upton, pp. 481-482) Another problem Omaha was facing with these shops was that they were building their clients at an accelerating rate because they were catering to companies that were small and start-ups, that didn’t have finance to initially invest in expensive pumps and other products. Eventually these small family pump shops drove away 20% of Omaha aftermarket sale pumps in 1994. (Upton, p. 482) Another threatening competition was the multinational companies like Mannesmann AG and Parker Hannifin that had a “Full spectrum of product line manufactured at cutting edge production facilities. Along with high quality products they also possessed the technical expertise to develop innovative solutions to the most advanced customer problems. Obsolescence of Technology: Another major issue associated with reviving the Omaha Plant was the obsolescence of the technology used at the operations because most of the equipment was around forty years old and infact there were some old-fashioned machines which were left untouched for years and a significant portion of these equipment were simply kept on the floor, unnecessarily filling up spaces and unfortunately to make things worse no one even bothered to remove these obsolete machinery from the floor and make the place more spacious and workable for the employees. To make matters worse the employees were equipped and trained for using this machinery and they had so much hands-on-experience of working with the equipment that they can make some minor changes easily to meet the design specification of the product. (Upton, p. 483) Employee Morale: I think lowered employee morale is the most difficult issue for any management to deal with because there are different reasons why employee can be demotivated in an organization. Same was the case in Omaha Plant that employee morale was lowered due to reasons like they had to simply repeat the same cycle and processes again, hence making their job monotonous. Activities were basically designed to be performed in a haphazard manner and there was no room for proper business planning and organizing which made the work redundant. Another major reason why employees’ morale was lowered because they felt the plant would either shut down and they would lose their jobs or in order to cut costs management would make lay-offs of the employees. (Upton, p. 483) Should the Omaha Plant be closed? I personally believe that, no, Omaha plant should not be closed down, because the problems that I have mentioned above are something that management can easily deal with and many organizations have dealt with even more serious issues than these and they have revived and are the leading class organizations now such as Nissan. So when they can do it even Omaha can easily be revitalized. Another reason the plant shouldn’t cease to operate because opening a new one at a new place would cost around $35 million for the entire set-up and merging it with some other operations will cost an additional investment of $18 million for the necessary equipment required. So the best idea is to keep the Omaha Plant in operations and work things out in this and make it successful. Will Weber’s turnaround plan work? Yes I strongly believe that Weber’s turnaround plan will work because the changes he wish to implement are not something out of the blue moon but activities that every organization be it the competitor or an organization from another industry were following are crucially important for the plant to survive in the competitive environment. Weber’s vision was the “realignment of three dimensions: product scope, product quality and service performance.” (Upton, p. 484) In short he was basically trying to solve the problems issues I have already mentioned above to make Omaha plant work. I would be discussing the changes he wanted to implement and their significance for Omaha Plant. Customer is the King: The first and foremost idea that Weber brought in the organization was that in order to revive the plant and meet the competitors challenge, Omaha plant had to definitely meet the needs and requirements of the customer. As I strongly believe on the notion “Customer is the King” so giving birth to this statement in the company was the most important thing to do so that the employees and the management had their perspective clear that whatever steps they will incorporate in the near future will not be for crisis management but to gain stronger long-term strategic position in the market. In order to accomplish this “The Engineering Laboratory was to begin developing a series of products to cover the entire vane and pump market” (Upton, p. 484) All these efforts would go in vain if the customer did not add the Vickers in their list of few suppliers. So the plan for this important step was to make to design the products that met all the needs of the customers but the main motive anyways was not to generate products that simply met the needs and requirements of the client but even that they should be so unique and distinctive in nature that they cannot be easily copied by the small family pump shops and sold at low prices and quality as the Vickers. This strategy would offcourse create barriers for their minor competitors to enter the market and would also generate sales, while helping Omaha plant to capture lucrative “after market” sales of replacement plants. (Upton, p. 484) Upgrade Equipment and Operations: In order to meet the above changes it was also important that Omaha plant should also change its obsolete and forty year old machinery which eventually Weber decided in his plan. According to the plan that Weber made “improvements were divided in two sections: manufacturing apparatus and process and employee mindset. The plant required a new set of testing equipment, at an estimated cost of $400,000. This equipment was equally important for Omaha plant as the existing testing equipment was offcourse outdated and it also did not meet the current quality standards of the product and could only detect minor problems and defect in the pumps produced. In order to reduce the rework cost and variability in the pumps introducing new testing system was important. (Upton, p. 484) Organizing teams: Weber also decided to introduce Statistical Process Control which was important to reduce material handling costs and batch cycle time. Current manufacturing layout was to be rearranged into sets of work cells named “focus factories” organized by product type or design. The individual cells would manufacture separate components, while a set of linked cells would produce a specific pump. This decision was important because now the multi-functional teams were formed and each employee was properly assigned a job to do and accomplish under one team and as linked cells manufactured a specific pump, they eventually could see the end product in front of their eyes and feel proud accomplished which was important for better productivity and high motivational level of the employees. (Upton, p. 484) Training employees: With so much to do it was imperative that employees’ mindset should be changed and in order to meet the changing needs of the customers plus meeting the new technological advancement it was crucial that employees be given training in diverse array of skills from operating to conducting mundane maintenance activities on different equipment. (Upton, p. 485) They had to be trained to work in multi-functional teams to achieve the main objective and they were trained in the manner that they should be their own judge and self-inspect their own work. Excellent product and service quality: All these activities will offcourse eventually lead to better customer service and lower manufacturing costs, allowing Omaha plant to offer competitive priced product to the customers. As restructuring the plant manufacturing processes will increase consistency and flexibility, lower the lead time and meet delivery commitments would lead to better customer service and high quality product will give Omaha an opportunity to expand its operations and provide more product warranties. Employee management: Weber realised that the existing contract with the employees did not meet the changing terms and conditions and it should be changed. Existing contract had 35 different job classifications whereas Weber in the new contract brought the number down to 10 by combining job functions and permitting shared duties which would eventually reduce bottlenecks and give management the chance for job rotations. Omaha plant external equity was higher as they were paying base wage of $15.15 per hour with premium pay for weekend work so there was no point that employees be dissatisfied for this factor and management also offered profit sharing plan to its employees with year end bonuses tied to financial performance of the plant. Suggestions and Recommendations All the strategies that Weber has included in his turn around plan would definitely be successful as these will eventually lead to the revival of the plant. One point that I would like to focus on is that this company should open their small customer services outlet with proximity to their clients so that incase they need any emergency customer service to work on some problematic machine to the problem can be solved within a matter of few hours. Another strategy that I would like to recommend is that since Weber is looking forward to move step-to-step with the changing world, he should develop a separate Human Resource Department which is considered to be an integral part of any organization now. This would assist the Omaha plant because all the issues related to an employee, be it their training, designing their compensation plan, rewards, employee relations, union management will be all covered and managed by one department. In this manner the entire system will be integrated and the most important asset for an organization its “Employees” will be taken care by one Human Resource Department which will have all the rules and regulation, policies and procedures well documented and rotated around the entire plant as to everyone will be clear of their job description, their responsibilities and the end result of the activities they would be performing at their job. Bibliography Upton, David “Vickers Incorporated: Omaha Plant” from book: “Designing, Managing, and Improving Operations” pp. 481-485. Read More