Rolland's Manufacturing Company-The Potential Impact of Securing a Supplier Contract - Research Paper Example

Rolland's Manufacturing Company-The Potential Impact of Securing a Supplier Contract Table of Contents Executive Summary 2 Introduction 4 Potential Impact of Securing a Supplier Contract 4 Wal-Mart Supplier Requirements 5 Overcoming Challenges at Rolland 6 Implementing a Quality Management System 6 Lean and Agile Manufacturing 9 Inventory Management 12 Business Collaboration and Supply Chain Management 13 Environmental Impact and Ethical Considerations 14 References 15 Executive Summary Rolland is a manufacturer of medium-priced, stylish and technically advanced high quality outdoor wear. Rolland has an ambition to supply clothing products to Wal-Mart. A report has been prepared for Rolland’s Board on the implications of becoming a Wal-Mart supplier over the next five years, and effective strategies for becoming a “world-class” manufacturer have been discussed. The potential impact of becoming a supplier for Wal-Mart for Rolland is enormous, both financially and prestige wise. However, Rolland needs to implement certain changes to improve its manufacturing practices and work culture. Wal-Mart’s Every Day Low Prices strives to give customers what they want at the right time for the right price. Suppliers are bound by agreements, are expected to have the capabilities for participating in electronic systems, and expected to adapt to Wal-Mart’s lead time requirements. Rolland should deploy a QMS that will result in the production of products and services of good quality instead of detection of defects in products and services after their production. Rolland requires a TQM system comprising of a quality assurance system, quality tools and techniques. TQM at Rolland would addresses relationships with suppliers; involvement and the development of personnel; and determination of true costs of the quality of products and services. Lean manufacturing practices should be adopted to include elimination of activities with zero value; practice of continuous improvement; multi functional teams; just-in-time production and delivery; supply integration; flexible information system; no defects; involvement of the customer; flexible manufacturing; small batch sizes; flatter organisation structure; and automation in operation. Agile manufacturing practices include flattened organisation; autonomy; responsiveness; flexibility; adaptability; customer enrichment; increase in productivity; employees driven by knowledge; empowerment of employees; open management; improved response to customers; short product life cycle; continuous design improvement; shorter planning time; management of costs; automation; integration of information technology; business and technical process changes; efficient management of time; application of supply chain management; adaptable processes; virtualisation; reconfiguration; long-term gains; responsiveness; technology deployment; practice of continuous improvement; strategic view; adopting of innovative culture; and customer integrated processes. Inventory management involves maintaining adequate inventory for production and sales needs; provision of safety stock for unexpected delays or demands; carefully investing in inventory to avoid tying up excessive capital or space or borrowing and avoiding interest expense; and maintenance of up-to-date records. Rolland should implement a collaborative planning, forecasting, and replenishment relationship by investing in creating a data system, improving the quality of data and integrity, generating forecasts, and sharing that information. Use of state-of-the art technology in information systems, such as RFIDs, computer based applications, and wireless networks, could enhance competitiveness of Rolland. As a part of corporate social responsibility, all efforts should be made to support causes concerning the health, safety and environment of workers and the society. Introduction Rolland is a manufacturer of medium-priced, stylish and technically advanced high quality outdoor wear. Rolland has an ambition to supply clothing products to Wal-Mart. Initially the supply would be for the UK market through ASDA, Wal-Mart’s UK subsidiary, and within two years the supply would be expanded throughout the world. Wal-Mart is impressed by their product but has not been satisfied by their manufacturing practices, and Rolland would need to improve to become “world-class,” capable of operating on the world stage. A report has been prepared for Rolland’s Board on the implications of becoming a Wal-Mart supplier over the next five years, and effective strategies for becoming a “world-class” manufacturer has been discussed. Potential Impact of Securing a Supplier Contract According to Ward (2009), getting their products on the shelves of retailers, such as Wal-Mart is like winning retail Olympic gold, not only increasing business profits, but also opening the doors for other retail contracts. Having a product on the shelves of a big box retailer, such as Wal-Mart sends a message that the company’s products are winners. As a preparation for getting products on the shelves of retailers, such as Wal-Mart, Ward has recommended the following: building a track record; having a unique product; having a product line; being able to meet the retailer’s needs; and being prepared to do what it takes. However, there is fierce competition for the same. In an article published in the Wall Street Journal Online, it has been reported than from among 10,000 suppliers that applied for becoming vendors for Wal-Mart in the year 2004, only 200 were accepted. The potential impact of becoming a supplier for Wal-Mart for Rolland is enormous, both financially and prestige wise. However, Rolland needs to implement certain changes to improve its manufacturing practices and culture. Wal-Mart Supplier Requirements All suppliers to Wal-Mart sign a legally binding agreement. The agreement includes terms and conditions including warranties, allowances, penalties, etc. Suppliers of products must participate in Retail Link, which provides product information allowing suppliers to plan, analyze and execute their business, enabling provision of higher quality of services. Electronic Data Interchange (EDI) is a system for exchanging information, such as purchase orders and invoices. Benefits of the system include better customer service, higher productivity and lower expenses. Suppliers are expected to have the capabilities for participating in the EDI system. Suppliers are expected to adapt to Wal-Mart’s lead time requirements. Lines of merchandise are planned for each season, and are a long-range process. Lead-times could be as short as sixty days to longer periods of a year in advance of the selling season. The supplier must be able to ship products in a reasonable amount of time, as late shipments could result in losses in terms of money and customer respect. Suppliers are expected to provide excellent products on time for the right costs. Wal-Mart’s Every Day Low Prices strives to give customers what they want at the right time for the right price. At Wal-Mart, customer safety is of paramount importance, and independent third party labs are used for testing products, such as food, children’s goods, apparel, pharmacy and home goods. Suppliers are tested comparative for competing products. Suppliers are expected to be able to comply with these requirements. Wal-Mart has a no gift or gratuity policy. Suppliers are expected to be knowledgeable about their industries and the products/service they provide. In an effort to provide the highest quality of products/services, a high level of communication and integrity is expected from the suppliers. Transportation and logistics must be efficient, and in co-ordination with the Corporate Traffic Department. Wal-Mart has an equal opportunity practice policy. The Office of Regulatory Compliance enables supplies meet regulatory requirements of specific countries. Wal-Mart uses security source tagging at manufacturing, packaging, or distribution to prevent thefts (“Wal-Mart Supplier Requirements Summary”). Overcoming Challenges at Rolland Challenges faced by manufacturing companies include greater competition, changing business relationships, demanding customers, changes in technology, distribution of design and production globally, environmental regulations, and economic and political factors. Manufacturing companies should respond by being responsive to changing needs, increasing customer focus, adapting to new situations, forming partnerships and alliances, managing the strategic supply chain, minimising product time-to-market, and use communication technologies (Bunce, 1996). Implementing a Quality Management System Lu et al. (2008) studied the ISO 9000 version approved in 2000 and analyzed the relationships between operations and project processes. A two-step method has been presented for the manufacturing industry for realisation of project quality as per ISO standards. The quality management models include organisation model, function model, process model and information model. Project processes and operation processes are harmonised by the models. Gunasekaran (1998) has proposed an integrated product quality management system by the integration of concurrent engineering and TQM concepts. This includes the consideration of quality management and improvement from early stages of product development, and incorporating TQM principles at various stages of design, and upstream and downstream activities for value addition. Efficiency in design, process and reliability have been carefully selected for the application of TQM. An effective quality management system (QMS) extends the customer-supplier interface beyond immediate customers and suppliers. QMS has been defined as “A set of co-ordinated activities to direct and control an organisation in order to continually improve the effectiveness and efficiency of its performance.” An important objective of QMS is in the definition of processes that will result in the production of products and services of good quality instead of detection of defects in products and services after their production. A QMS will ensure that customer and organisation’s requirements are met. The system will result in customers being confident that the organisation will be able to deliver the product and service to their needs and expectations. The organisations internal and external requirements would be satisfied by the optimum use of materials, people, technology and information and integration of all activities within the organisation. A QMS would result in meeting customer requirements; improvement in process control; reduction of wastage; lowering of costs; increase of market share; facilitation of training; involvement of workers; and improvement in morale. International Organization for Standardization (ISO) has developed the following standards for quality management systems: ISO/FDIS 9000:2000 – Quality Management Systems – Fundamentals and Vocabulary; ISO/FDIS 9001:2000 – Quality Management Systems – Requirements; and ISO/FDIS 9004:2000 – Guidelines for Performance Improvement. These standards have been built for business processes, and emphasis has been placed on satisfying customer requirements. The series allows implementation of a holistic management system, where quality, health, safety and environment could be integrated. Also, ISO standards have been aligned with the European Foundation for Quality Management (EFQM) excellence model. The EFQM excellence model was introduced in 1992. Concepts include results orientation; focus on the customer; leadership and consultancy of purpose; management by processes and facts; people development and involvement; continuous learning, innovation and improvement; partnership development; and corporate social responsibility (“European Foundation for Quality Management”). Requirements for a QMS have been specified in ISO 9001. Clauses include scope, normative references, definitions and terms, quality management systems, management responsibilities, management of resources, realisation of product, measurement, analysis and improvement. Issues to be considered while setting up a QMS include design, system building, control, deployment, measurement, review and improvement. QMS being a strategic tool should have a process approach, whereas the management should have a systems approach. Rolland should develop a QMS, which must be reviewed periodically. The review should consider results of audits, feedback from customers, conformity of processes and products, preventive and corrective actions undertaken, follow up action, changes affecting QMS, and recommendations for improvements. Such a review process would result in resources utilisation, product, process and QMS improvements (“Quality Management Systems”). TQM has resulted in improvement of operational performance and customer satisfaction. TQM includes techniques and procedures which are implemented to reduce or remove variation from a process. This results in improvement of efficiency, reliability and quality control of processes where TQM methods have been applied. TQM concepts encompass qualitative elements, such as customer orientation, employee involvement and teamwork in addition to traditional statistical and engineering methods (Cheah, 2009). TQM addresses relationships with suppliers; involvement and the development of personnel; and determination of true costs of the quality of products and services. TQM success depends on organisational commitment to pursue a long term strategy of continuous improvement involving all employees. This requires a systematic approach, and people systems and ongoing training is required. Rolland requires a TQM system comprising of a quality assurance system, quality tools and techniques. Quality tools and techniques include Quality Function Deployment (QFD) involving all functions in improving the product. Other tools include the deployment of statistical tools to monitor processes, and manage variation in processes. The culture of Rolland could result in obstructions of changes and improvements. This would require a change in attitude of individuals. Studies have shown that savings in improvements of quality offset costs of achieving quality. Costs could be classified into prevention, appraisal and failure. A quality improvement program seeks to shift costs from failure to prevention. The role of a quality assurance manager in a TQM environment involves systems, people and techniques to achieve organisational objectives. The manager has to determine the relevance of data collected, and assess the ease of data collection and improvements in processes requiring greater changes (Keogh, 1994). Lean and Agile Manufacturing Barton et al. (2008) studied the relationship between lean manufacturing, agile manufacturing and sustainability. Criteria for lean manufacturing include elimination of activities with zero value; practice of continuous improvement; multi functional teams; just-in-time production and delivery; supply integration; and flexible information system; production flow of single piece; no defects; involvement of the customer; flexible manufacturing; small batch sizes; flatter organisation structure; and automation in operation. Criteria for agile manufacturing include flattened organisation; autonomy; responsiveness; flexibility; adaptability; customer enrichment; increase in productivity; employees driven by knowledge; empowerment of employees; open management; improved response to customers; short product life cycle; continuous design improvement; shorter planning time; management of costs; automation; integration of information technology; business and technical process changes; efficient management of time; application of supply chain management; adaptable processes; virtualisation; reconfiguration; long-term gains; responsiveness; technology deployment; practice of continuous improvement; strategic view; adopting of innovative culture; and customer integrated processes. Criteria for sustainability include use of lesser energy; presence of lesser hazards; lesser emissions and less toxicity. Economic advantages could be gained by manufacturing operations taking lesser time; having higher value added products, and minimum costs. Lean manufacturing has been defined as manufacturing without waste. The objectives of lean manufacturing are reduction of waste, materials, inventory, labour and management of capital. Management of supply chain includes complementing lean manufacturing by driving out excess inventory. Techniques for lean manufacturing are not confined to production, but extend to receiving, management of materials, inventory, and distribution. Rolland needs to implement lean manufacturing including the following elements: just-in-time receipt of input materials without intermediate storage and shipping; cellular manufacturing; pull based systems for replenishment and scheduling work; and quality function deployment and total quality management. Measures of lean manufacturing effectiveness include inventory turns and asset utilisation, and the benefits of carrying fewer inventories are well known across businesses. Agile manufacturing is also known as flexible manufacturing and is influenced by the desired outcome. The lean manufacturing technique at Rolland should be extended to agile manufacturing as the product mix is complex and customer demands are highly variable. Common practices in agile manufacturing include build-to-order manufacturing; optimising the assembly point; cradle-to-grave product tracking; just-in-sequence, just-in-time delivery; delivery in smaller batches; management of events real-time; and collaboration in managing supply chain. Manufacturers that have been successful have minimised their dependencies on economies of scale and operate smaller multiple production facilities near customers, work on shorter lead times, offer product customisation, produce products just-in-time, and follow just-in-sequence delivery. Processes and applications at Rolland enabling lean and agile manufacturing require accurate and timely information about inventory, labour and production. To achieve this, automated data collection and real-time communication are required from manufacturing, material handling and distribution. Scheduling, materials management and manufacturing execution systems could be achieved by the deployment of radio frequency identification (RFID), industrial computers and local area networks to collect and feed data. Material handling activities, such as receiving and shipping could be expedited by the use of RFID tags and software application. The data collection system could be interfaced with inventory control, warehouse management, and ERP systems. This would enable seamless integration of automated receiving with material handling and management, providing real-time visibility. The materials management system could be integrated with kanban enabling material flow directly to the floor. Efficient execution of cellular manufacturing requires real-time communication of material orders, accurate identification of parts and work-in-process, which could be enhanced by a wireless data collection system. Use of kanban techniques could be automated by the data collection system and computer generated signals for replenishments. Work-in-process tracking, shipment verification and asset management could be similarly automated (Intermec Technologies Corporation, 2007). Inventory Management Inventory management strives to maintain raw material and products at certain levels, such that they are not too low resulting in lost sales or delays in production or too high holding up capital and space. Inventories include finished goods, work-in-process and raw materials. Inventory management involves maintaining adequate inventory for production and sales needs; provision of safety stock for unexpected delays or demands; carefully investing in inventory to avoid tying up excessive capital or space or borrowing and avoiding interest expense; and maintenance of up-to-date records. Control of inventory investment is achieved by establishing policies and guidelines; identifying overstocks and eliminating them promptly; replenishing inventory according to production and customer demands. Inventory ratios; turnover rate or equivalent monthly sales or usage permits allow comparison with industry averages, previous period inventory levels, and inventory policies. Adoption of such inventory management practices will allow Rolland provide the customer with the right goods at the right place on time (“Business Basics: Inventory Management- Manufacturing/Services”). Business Collaboration and Supply Chain Management Collaborative planning, forecasting, and replenishment is a business practice, where partners use information technology and business procedures for combining their intelligence to plan and fulfil customer demands. Retailers, such as Wal-Mart have successfully deployed CPFR with suppliers to share point-of-sale, inventory, promotions, strategy, and production information. This minimises distortion of demand information, resulting in lesser stock-out situations and reduction of inventory costs. Rolland should implement such a relationship by investing in creating a data system, improving the quality of data and integrity, generating forecasts, and sharing that information (Mahoney, 2006). Few organisations have successfully practiced supply chain management from a partnership perspective, but those who have excelled have entered into partnerships with suppliers enabling them to achieve mutual gains and goals. Integrated partnerships contributing ‘best of breed’ products and services have become the new supply chain model, replacing the traditional buyer/seller relationship in the older version of vertically integrated companies. Rolland should pursue an integrated strategy to optimize planning, sourcing, manufacturing and delivery of products. Planning includes demand/supply planning, assessing supply resources, managing inventory, capacity, etc. A customer service strategy is desirable, which has the following considerations: levels of service expected by customer; response to customer expectations for maximising market share and revenue; delivery, flexibility, quality and life cycle management; services and specific needs. A demand strategy should be formulated including levels of production and inventory, flexibility and responsiveness, cost demands, product life cycle management, resource planning set up, service levels, and inbound/outbound needs. A sourcing strategy should include organisation and management of production, capacity and flexibility of geographical location. Formation of collaborative networks will help add value for existing customers and increase the opportunity for gaining new customers and market share. Such integration should be supported by information and decision integration; inventory integration; and operational and technical integration. Information such as long term forecasts, technology roadmaps, quality improvement programs, etc. Inventory integration should achieve higher availability of parts, lower inventories, etc. Operation and technical integration includes product and process design, design for manufacturing, product life cycle, new product information, technology road maps, operations transfer of knowledge, etc (Lindsay, 2002). Rolland should adopt drivers of supply chain quality: supply chain competence; critical success factors; strategic components; programs; activities; and practices to develop and adopt a supply chain management program (Kuei, 2008). Environmental Impact and Ethical Considerations As a part of corporate social responsibility, all efforts should be made to support causes concerning the health, safety and environment of workers and the society. Wal-Mart has encouraged the use of green products and technologies to conserve the environment. 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