Case Study: Improving Operations Performance in a Major Producer/Distributor of Household Electrical

Case Study:

A major producer/distributor of household electrical and hardware products suffered from poor customer service, manufacturing bottlenecks and organizational & functional inadequacies. New ownership was disappointed with financial performance and realized that significant improvements were necessary. Customer service metrics hovered below 70% (Orders shipped complete in 3 days or less), and a bloated SKU base included nearly 100 out of stock items. Inventory planning was ad-hoc and the forecasting process was inadequate.

Ownership decided that immediate relief to service performance was required. DHC was retained to develop process improvements in the forecasting and planning areas, including organizational recommendations and IT integration. Solution DHC led a client management and other third-party consultants to develop and implement process improvements throughout the organization. With specific responsibility for improvements in Planning, Forecasting and Customer Service, DHC developed and implemented the following solutions for those areas:

• Methodologies for SKU Rationalization, ABC Item Classification, Customer Segmentation and Inventory Analysis were developed and introduced to the planning organization.
• A replacement for the inadequate demand forecasting application was researched, identified and recommended. Business processes were developed to strengthen the relationship between the Planning, Finance, Operations, Marketing, and Sales organizations. New software was installed and integrated into the business process. Results:
• In customer service, system capabilities constricted order flow, reporting was inadequate and associate roles and responsibilities were not mapped for optimal service. A major restructuring of the Customer Service organization was developed and implemented. Several ERP system enhancements to improve order management capabilities were designed and implemented.

Our client was able to significantly improve customer service as a result of the improvements implemented. Compared to the same period one year ago:

• Orders shipped complete within 3 days improved to 98%, a 40% improvement.
• Active SKU base was reduced by 37%, dramatically reducing working capital and activity costs in support of unproductive items.
• Number of Items out of stock realized a 97% improvement.

Part 1.

Assessed PLO: To recognize the contribution of operations management to an organization’s strategic goals

Q1. List 6 ways in which the poor operational performance in the case company was impacting the overall success of the company.

Q2.  Using the framework learned in class, give examples of factors influencing capacity in the case company, using the six categories presented in class.

Q3.  Based on your analysis of the situation, why could the company improve their performance so dramatically with the ERP implementation? What could have been the original challenges? 

Part 2.

Assessed PLO: Identify and use the tools for TQM 

Q1. List examples of waste that the company could have had in the 8 categories of waste.

Q2. Propose means how the company can improve in the various six dimensions of quality.

Part 3.

Assessed PLO: Compare and evaluate the use of different decision-making strategies useful in operation management 

Q1. What kind of decisions could the case company have used the break-even analysis for? List 4 items.

Q2. How could the company use statistical quality control? Name 4 items

Q3. How did the methodologies for SKU Rationalization, ABC Item Classification, Customer Segmentation and Inventory Analysis help the company to make decisions on SKU reduction and improved customer satisfaction?