Quality Management in SunEdisons Supply Chain - Case Study Example

Quality Management in SunEdison’s Supply Chain Student’s Name Institution Executive Summary This report explores the quality issues facing SunEdison one of the leading renewable energy companies in the world. The company faces quality issues in its supply chain management as it takes long for customers to get products delivered and installation services offered. Therefore, to ensure its success and competitiveness, the company must address these quality issues in its supply chain to attract and retain customers. The report begins by proving a brief background of quality and its importance in an organization. The report proceeds to define quality appropriate to the distribution process and proceeds to provide SunEdison background information and the problems it faces it its supply chain that require improvement to ensure customer satisfaction. Based on the problems identified in the company’s supply chain management, the report provides recommendations on the quality improvements that need to be implemented and their rational. The last part of the report describes the process change strategy and the expected quality outcome once the changes have been made. Table of Content Executive Summary 2 Context/Background 4 Definition of Quality Appropriate to the Process 4 SunEdison: Company Overview 7 Problem Statement 8 Recommended Process Improvements 9 Process Change Strategy 11 Expected Quality Outcome 13 Conclusion 13 References 15 Context/Background Quality is one of the most important things that attract customers to a brand. Therefore, managers must ensure that customers are provided with quality products and services all the time; otherwise they would switch their loyalty to competitor firms that assure them of quality. However, because quality means different things to customers and the management, Crosby (1979, p. 11) advises that it is important that the management looks at quality not just in their standpoint, but in the standpoint of the customers. In this respect, the management should understand what the customer needs and how they feel they should be served to ensure the passage of the quality test. Although every company understands the important of quality in attracting and retaining customers, at times companies fail to pay attention to issues that customers consider critical as part of quality. Distribution and supply chain are among the most critical processes in a company that has an impact on the quality of products and services that customers get from a company. Sun Edison is one of the companies that require an efficient distribution system to ensure customer satisfaction and success. SunEdison is an American multinational green energy company (Shah 2014). The primary business of the company includes the design, manufacture, operating and sale of solar and wind plants. Although the company has had many years of success, it needs to improve the quality aspect of its distribution system to ensure success. Definition of Quality Appropriate to the Process Crosby (1979, p. 7) argues that qquality is not an option for any business in the present day market place. Crosby proceeds to state that the days when companies ignored quality is long gone as no business enjoys monopoly anymore that allowed companies to focus on sales rather than quality. Because of the competitive nature of the marketplace, any company that seeks to success must ensure that quality is guaranteed to customers at the time. There are different views about quality from the management and the customer points of view. However, marketing experts argue that “quality is what the customer says is quality” (Selko 2005) and not what the management things of as quality. In the present day marketplace, quality is no longer confined to just a single department or discipline; rather is something that is embedded into every aspect of the organization. The Peratec Ltd (2012, p. 65) noted that what the management define and measure as quality might not necessarily be viewed as quality by the customer. The management often focuses on low defect levels when defining quality. By contrast, the customer expects the company to guarantee quality all the time, not only by ensuring free defect to the product or service, but also by ensuring that it is delivered in a timely manner. Armand Feigenbaum of General Systems Co. argues that a customer is seven to eight times likely to remain loyal to a company if the product meets their expectations (Selko 2005). Nevertheless, if a customer needs support or service with the product, 44% of the customers will avoid buying the product in the future from the firm (Selko 2005). As such, it is important for the management to ensure that quality is infused in all aspects of the organization. Distribution is one of the most critical processes in an organization. Distribution involves all the processes that involved in making the products or services available to the customer. Distribution is cited as an important marketing mix element because it ensures that the goods and services are made available to customers at the right place and at the right time (Garvin 1984, p. 25). There are different definitions of quality with regards to distribution process in a company. From the management or the producer’s point of view, quality means distributing the products in the right way, doing it right the first time without defects and without exceeding cost. However, as earlier noted, the customers’ view of quality is what matters most because what the management might consider quality may not be viewed as quality by the customer. Therefore, to customers, quality with regards to distribution process means receiving the right product ordered for free of defects (Garvin 1984, p. 25). When customers orders a product, they expects that the company will deliver the right product that free of defects to ensure that they can be used for the purpose for which they are ordered. As such, to ensure quality, has no option but to ensure that the right product is delivered, taking care to ensure that it is free of defects or damaged in the course of distribution. Secondly, customers view the service and distribution process as being of quality when they are able to receive the products or services on time (Crosby 1979, p. 28). In this respect, customers expect that the goods or services they have ordered for are supplied to them at the right time. This implies that a company should ensure that customers are not kept waiting for too long once the goods have been ordered. Any slight delay in the delivery of products or services would be considered by customers as poor quality, which might prompt them to switch their allegiance to rival companies that are capable of delivering goods at the right time and place. Therefore, companies must ensure that their customers are supplied with the goods ordered promptly to ensure that they are satisfied with the distribution process. Thirdly, customers define quality of distribution process according to the feedback they receive once they made an order. In this regard, customers expect to be provided with prompt feedback on the orders they have made (Peratec Ltd 2012, p. 72). Whenever a customer requests for a product that they wish to order, they expect the supplier to provide them with prompt feedback so they can make arrangement on how to pay for the orders for them to be supplied. As such, delays in providing customers with feedback would be considered poor quality when it comes to the distribution process. Additionally, customers define quality of the distribution process when they are guaranteed of quality of the products they have ordered for through warrantee. Because customers are risk averse, they expect the suppliers to provide them with a warrantee for the product they have ordered for as a quality assurance (Garvin 1984, p. 25). This implies that companies should guarantee customer’s quality by providing a warrantee as this makes them feel safe that the quality that they are looking for would be met by a company. SunEdison: Company Overview SunEdison is American multinational renewable energy company. The company was founded in 1959 and engaged in the development and sale of photovoltaic energy solutions, which include solar and wind power (Shah 2014). Additionally, the company is involved in the production of silicon wafers. The firm operates in three segments namely Solar Energy, Semiconductor Materials and TerraForm Power. SunEdison owns solar and wind operating and development projects directly or indirectly. Currently, SunEdison ranks amongst the world’s leading renewable energy companies. The firm has a wide global customer base that falls under three categories, including commercial customers that comprises of retail chains, federal, state and municipal governments, as well as real estate property clients. The company currently operates in a wide geographical area, which includes Europe, Latin America, Canada, India and South Africa (Shah 2014). Installation and system development is the main focus of SunEdison at the moment, having sold its semiconductor business division (Shah 2014). The company has a teen of engineers that ensures that high quality solar panels are development and that effective wind power are harnessed to the clients. When it comes to distribution and installation of solar panels, the clients, which comprises of commercial customers, the government agencies and real estate clients are expected to make orders for the type of product they need (Nader 2010, 491). The company then delivers the solar panels to the client based on the terms of agreement and the mode of delivery. In case the client needs the installation, SunEdison dispatches its team of engineers to the client premises to install the solar panels. Problem Statement Although SunEdison has had many years of success, the company faces a challenge in its supply chain management that affects the quality of services received by customers. The major problem in the supply chain pertains to the delayed product and service delivery to clients. Normally, when a client has ordered for the solar panel delivery or installation, the company is not act with the speed it deserves. At times, it takes up to three days for the company to deliver solar panels or send it engineers to the client’s premises to install the solar panels (Nader 2010, 492). The company’s supply chain manager has tried many strategies to enhance the efficiency of the company’s supply chain management but the problem has persisted. The issues facing SunEdison supply chain can be summarized as follows: Slow response to customer requests Slow delivery of solar panels and installation Solar panels reaching client when some are broken and require replacement Recommended Process Improvements The above highlighted problems signify lack of properly quality control and adherence in SunEdison. This problem that exists in the company’s supply chain management affects the performance of the company because it results in loss of customers (Folinas 2012, p. 173). Therefore, the company should move with speed to correct the problems in its supply chain to enhance the quality of products and services that the company delivers to its clients. The first and immediate action that SunEdison should take to improve the quality of products and services delivered by its supply chain management is to ensure that the company has enough engineers on standby to ensure that installation to clients is done on a timely manner and effectively. As things stand, the delay in the speed with which the installation services is done to clients is majorly attributed to the fact that the company is not well staffed with enough engineers, yet the firm has many clients to serve at any given time (Rushton 2007, p. 26). This results in a situation where sometimes all the engineers are engaged with some clients, creating a situation where other clients have to wait for the engineers to complete working for some clients of the company before they could be assigned to the clients on waiting. It is important for SunEdison management to understand that customers do not just define quality in light of the product delivered; rather they also define quality with regards to the speed with which the product or service is delivered to them. As such, the management of SunEdison should ensure that any request for installation services is done promptly as this will enhance the satisfaction level of clients, thereby enabling the firm to attract and retain a large customer base both in the U.S. and beyond (Garvin 1984, p. 25). Alternatively, SunEdison can consider outsourcing installation services to experts in the market. Outsourcing installation services is a good alternative as the company will en sure that the services are given to experts that will ensure that SunEdison’s clients are not just provided with quality installation services, but also served on time. Outsourcing installation services to experts is also of great benefits to SunEdison as it will give the company the opportunity to concentrate on other core businesses, such as product development, thereby resulting in the delivery of quality products to clients (Folinas 2012, p. 173). As highlighted in the problem statement, SunEdison is suffering quality problem in its supply chain because of the slow delivery of solar panels and other products. At times, it takes the company more than 3 days for the clients to get solar panels delivered to them. In far flung areas, the products can take as long as one month or more for customers to get their products and this greatly affects quality in the company. Customers want that, ones they order solar panels, they get delivered in the shortest time possible (Nader 2010, 492). This implies that any delay in the delivery of the solar panels is viewed as poor quality. Besides the delay, the solar panels sometimes reach the clients when they are broken and have to be replaced that results in more delays. Fortunately, there are a number of things that SunEdison can do to enhance quality in this regard. Firstly, the company can improve quality by enhancing its delivery processes by creating a policy that requires that clients get their products within 24 hours of orders or one week in cases of far flung areas. To achieve this, the company will have to acquire more resources, such as delivery vans (Rushton 2007, p. 34). Secondly, the company should consider opening up more distribution stores in major towns and cities, where its clients are concentrated as this will ensure that they are easily reachable in the shortest time possible. This move will also help SunEdison minimize its distribution cost, thereby resulting in cost saving in addition to enhancing customer satisfaction. Other than running its own distribution system, SunEdison can consider outsourcing its distribution to distribution firms. For instance, SunEdison can consider outsourcing its product distribution to reputed logistic firms, such as Wells Fargo or DHL to distribute its products to customers on time and without defects. These logistic firms operate worldwide and have expertise, resources and network in place that will ensure that customers get their products in a time and proper manner (Folinas 2012, p. 173). Moreover, the company will benefit from the service outsourcing as it would not be able to concentrate on its core businesses to ensure high quality product development. Process Change Strategy Changing from the old system of doing things to a new system is not an easy thing. Therefore, to make the transition position, various strategies will have to be adopted to ensure a smooth transitioning. Firstly, as much as making changes to SunEdison’s supply chain management system will be of immense benefits to the company and its customer through improve quality; the changes highlighted above will bring issues and probably see some people, such as managers and engineers try to resist the change. As such, the first hurdle that the company will have to overcome to ensure effective implementation of the process changes is overcoming resistance to change (Cameron and Green 2012, p. 43). There are many reasons why people resist change. They include among other things, fear of losing their jobs, fear of looking the privileges they enjoy based in their positions, as well as the fear of the unknown. Therefore, to overcome the resistance to change and promote smooth transition, the management will have to ensure that the changes to be made in the company and in the supply chain in particular is clearly communicated to the employees who will be affected by the change. In this respect, the management will have to explain to them why the change is being introduced and how it will benefit the company, the employees and the customers (Cameron and Green 2012, p. 47). Explaining to the need the need for change will make the employees understand the need for change and support it. Secondly, SunEdison will have to ensure that all the stakeholders that will be affected by the process change are involved in the implementation of change. Because SunEdison cannot succeed in implementing the process changes on its own, it will have to involve all the stakeholders, including customers, sponsors, managers, employees and suppliers in the change process (Garvin 1984, p. 25). Additionally, SunEdison will ensure that the infrastructural facilities needed in the implementation of the process change in the supply chain are put in place. For instance, the company will have to identify the regions where to open up more distribution stores to bring the products nearer to its client. This would require that the management of the company allocate resources necessary for the undertaking (Peratec Ltd 2012, p. 84). As indicated above, the company will have to hire more engineers to ensure faster delivery of services to clients. To make this possible, the human resource department of the company will have to allocate funds for hiring and training additional staff to ensure that customers’ needs are met through prompt and effective product and service delivery. Expected Quality Outcome Quality is regarded as one of the most important things that customers look for in a brand. In fact, studies have shown that customers are sometimes willing to pay extra price just to get quality products and services. Therefore, any company that intends to succeed and gain a sustainable competitive advantage must ensure that quality is maintained all the time by adopting Kaizen, which is a Japanese quality principle meaning continuous quality improvement (Coimbra 2013, 13). The above described changes to SunEdison’s supply chain management will result in a number of quality outcomes. Firstly, the improvements recommended will ensure that installation in done to customers promptly and professionally, thereby resulting in increased customer satisfaction. Secondly, opening stores closer to the clients or outsourcing delivery to logistics companies will ensure that customers receive products on time and in the right state without defects. These quality improvement outcomes will ensure enhanced client satisfaction, thereby improving SunEdison’s position in the market by not only attracting many customers to the brand, but also building loyalty with its already existing bread customer base (Peratec Ltd 2012, p. 88). Conclusion Quality is a critical element that the management of a company must assure all the time to ensure company success. It is important for managers to understand that quality is what customers consider to be quality and not what managers think it is. In most cases, the management focus on the elimination of defects assuming that quality is achieved once the defects are eliminated. However, to customers, quality means more than just the provision of defect free products. To customers, quality extends to other aspects, such as the speed with which the goods are delivered as customers believe that quality is assured when the product or service is also delivered on time without delay. However, as described in the report, SunEdison is facing a challenge in its supply chain department as there is lack of efficiency with which the products and services are delivered to customers. It not only takes long for the products to be delivered to customers, but it also takes long for the company to send engineers to do installation services to clients. Therefore, to ensure success, SunEdison should implement the recommendation highlighted above as this will go a long way in enhancing efficiency in the supply chain, thereby resulting in enhanced customer satisfaction with the company products and services. References Shah, S 2014, SunEdison - Why it is one of the best positioned solar companies globally, viewed 20 April 2016 http://seekingalpha.com/article/2668965-sunedison-why-it-is-one-of-the-best-positioned-solar-companies-globally Cameron, E., & Green, M 2012, Making sense of change management: a complete guide to the models tools and techniques of organizational change. Kogan Page Publishers, New York. Coimbra, E 2013, Kaizen in Logistics and Supply Chains. McGraw Hill Professional, London. Crosby, P B 1979, Quality is free: the art of making quality certain. McGraw-Hill, New York. Folinas, D 2012, Outsourcing management for supply chain operations and logistics service. IGI Global, Los Angles. Garvin, DA 1984, 'What does "product quality" really mean?’ Sloan Management Review (pre-1986), vol. 26, no. 1, pp. 25. Nader, L 2010, The energy reader. John Wiley & Sons, Upper Saddle River, NJ. Peratec Ltd 2012, Total quality management: the key to business improvement. Springer Science & Business Media, Cambridge, MA. Rushton, A 2007, International logistics and supply chain outsourcing: from local to global. Kogan Page Publishers, New York. Selko, A 2005, Quality is what the customer says is quality, viewed 20 April 2016 http://www.industryweek.com/companies-amp-executives/quality-what-customer-says-quality Read More