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Question:

Identify operational issues and challenges relating to quality and performance within an entity (Percentage allocation 50%)

Consider a range of techniques to apply for continuous improvement for efficient and affective performance of the entity

Research and discuss at least five challenges faced by Fonterra related to quality and performance that led them to adopt sustainability in their operations.

Briefly explain any two Quality Management Systems adopted by Fonterra. Identify and discuss the issues and challenges Fonterra may face during implementation of each of the Quality Management Systems.

Analyse and discuss at least four ways in which sustainability initiatives taken by Fonterra will help them to overcome issues and challenges discussed.

Identify and explain at least five initiatives taken by Fonterra to continuously improve their dairy operations.

Recommend the use of any five of the following tools of continuous improvement and discuss the methods and techniques used to apply these tools to Fonterra.

  • Kaizen
  • Kanban
  • Just In Time
  • PDCA Cycle
  • Value Stream Mapping
  • 5S Analysis
  • 5 Whys
  • Any other tools
 

Answer:

Introduction

Operations Management refers to area of the management that deals with designing along with controlling process pertaining to production which is involved in producing good or a service. It helps in ensuring the fact that business operations run in an efficient manner that helps in meeting the needs of the customer. Fonterra was created in the year 2001 with the merging of two co-operatives called New Zealand Dairy Group along with Kiwi Co-operative Dairies. Fonterra is a global dairy company that is owned by around 10,000 farmers along with their families (Fonterra.com., 2019). The company works along with the farmers in a partnership approach that helps in bringing about a difference in the community. Fonterra is the name of a $ 19.2 billion dairy co-operative that is owned by the farmers in New Zealand. The mission of Fonterra is to create pure and natural products that have a lot of potential. The mission of the company would be to come at the forefront of the dairy innovation for the coming generations. Their vision relates to sharing dairy with the outside world and they want to evolve as the top brand in relation to dairy products. The products of Fonterra are yoghurt, milk, specialty cheese and ice cream. The core value of Fonterra is to become natural source pertaining to dairy nutrition for everyone in the world. This report discusses about the challenges that is being faced by Fonterra in relation to quality that compelled them to adopt the notion of sustainability. The report also throws light on the quality management system that has been adopted by Fonterra in the present age. The report also elaborates on five initiatives that has been taken by Fonterra that has helped them in improving the dairy operations. The report also talks about five tools that can be applied to Fonterra for improving its operations.

 

Sustainability Challenge

Challenges of Fonterra

The challenge that was being faced by Fonterra that made them adopt sustainability relates to their global operating context that made them take recourse to the sustainability approach. Fonterra taking into account the factor of sustainability can help them in spreading their presence in the global sphere and create a name for themselves across the world. The food production system is undergoing transformation owing to the growing population along with the environmental limits. Challenge was faced by Fonterra owing to the fact that the customers wanted to know the source of their food and its impact on the environment. The source of the food being sustainable can help Fonterra in become a global brand. Fonterra wanted to transition to that of a low carbon future by making investment in the aspect of innovation (Haksever & Render, 2018).  The fourth challenge that was faced by Fonterra is in relation to acting as contributor to that of carbon footprint that was having a bad impact on the environment. The dairy animals like cows were producing methane at the time of digestion that was jeopardizing the environment. The methane is produced at the time of burping of the cows that causes harm to the environment. Nitrous oxide is released owing to the fact that urine of the cows along with the fertilizers are broken that releases greenhouse gas that threatens the global atmosphere. The fifth challenge was in relation to increasing use of the energy along with electricity within the farm operations (Hitt,, Xu & Carnes, 2016).  The demand pertaining to energy use has grown in the present age. It is being estimated that the demand of energy in the world would increase more than that of 70 % by the end of the year 2040. The energy is mainly produced from the non-renewable fuels that give rise to pollution.

Quality Management Systems and their implementation

International Organization for Standardization (ISO) helps in the creation of international standard that helps in giving specifications to the product, services along with systems. ISO 9001 has been adopted by Fonterra that helps in ensuring quality along with efficiency pertaining to dairy farming within New Zealand. It consists of standards that helps in the developing of quality system related to the organizations in the world. ISO 9001 can establish a global normative frame that helps in managing the services of a dairy company (Bozarth & Handfield, 2019).  ISO certification acts as an important strategy for Fonterra as it helped in providing confidence to the consumers of Fonterra.

The Hazard Analysis and Critical Control Point (HACCP) has been adopted in Fonterra that helps in carrying out the hazard analysis that helps in the identification of critical points in relation to process (Mahadevan, 2015).  This quality management system helped in the increasing level pertaining to product quality that helps in offering production to the customers of Fonterra. This system helps in taking care of the raw milk along with the temperature conditions that safeguards the health of the consumers.

The key challenge in relation to implementation of ISO 9001 was in relation to the fact that top management did not understand about the leadership requirement that was required in relation to the implementation of ISO 9001. Challenge was perceived in Fonterra due to the fact that it was difficult to consult along with participate at the time of implementation of ISO 9001 (Hitt, Carnes, & Xu, 2016).  Fonterra was facing problem at the time of implementing the HACCP on account of the fact that it created financial drain for the company and so they had to struggle so that they could maintain their profitability in the competitive environment of New Zealand. The diversion of the funds along with the resources had to be weighed against that of devastating cost that the company had to bear that created challenges for the company.

 

Sustainability Measures of Fonterra

Sustainability initiatives have been undertaken by Fonterra that helps them in overcoming various issues along with challenges. Fonterra takes care of the animals that are instrumental in production of high quality of milk. Cows are crucial in relation to dairy farm and the welfare of the cows are important for the company. Fonterra manages the animals in a responsible manner that helps in improving the welfare outcome (Choi, Cheng & Zhao, 2016).  Fonterra builds on that of the animal welfare legislation and also carry out work with the industry bodies that helps in delivering outcomes that are consistent with that of the animal welfare policies along with the standards. The standards of Fonterra are aligned with that of the international welfare standard that has been set by that of World Organisation for Animal Health.

Fonterra plays an important role in touching the lives of large number of people from that of family run farms to that of the international business. It makes a great amount of contribution to that of regional New Zealand along with national economy. They support the rural livelihoods and play an important role in relation to community development (Swink et al., 2017).  The dairy cows helps in providing daily source of food along with cash. Cows also play an important role in the generation of manure that is of value as fertilizer along with fuel. The money that is earned by Fonterra by exporting the dairy products across the world is returned to that of the farmer shareholders within the regions.

Fonterra has the Trusted Goodness quality seal that helps the consumers in knowing more regarding the company. The consumers in the present age look for the products that they can feed families. The pastures of Fonterra have clean air surrounding it and it enjoys sunshine that helps in making the animals healthy which in turn gives way to great milk (Ross, 2017). Fonterra takes care of the fact that the cows can graze outdoors so that they can feed on the grass. The diet of the cows comprise of grass silage, forage crops along with hay that helps in looking after the health of the animals.

Fonterra takes care of the fact that there is sustainable sourcing in relation to the palm products and they work so that they can improve the practices in relation to the supply chain. The company has Palm Products Standard that needs that the vendors of the palm products are committed to the policies that does not support the aspect of deforestation (Sanz-Calcedo et al., 2015).  The company engages with the vendors that help in supporting transformation of palm industry towards that of sustainable supply. Fonterra plays an important role in the production of palm oil that is certified.

Continuous Improvement

 

Initiatives of Fonterra for improving operations

Fonterra made use of sophisticated information technology that can help them in improving operations pertaining to the company. Information management capability that is superior was utilized by Fonterra that helped them in the creation of new business model that can help them in the aspect of their survival. Fonterra developed the digitized process that is appropriate for augmenting the agility. IT management capability helped them in achieving success. Fonterra took recourse to Internet Computing along with customer relationship management that helped them in serving the needs of the customer (Psomas & Antony, 2015).  The company managed the information technology in a manner that can help them in supporting the business processes along with the activities in an adequate manner.

Fonterra made use of Total Quality Management that has helped in improving the performance of the company. The organization is assessed externally that has helped them in enhancing the organizational performance. Total Quality Management has helped Fonterra in achieving competitiveness within that of the changing environment (Ingason, 2015).  This has helped Fonterra in differentiating itself from the rivals. The company lays stress on the aspect of quality that can help it in achieving long term success.

Fonterra used of liquid ring vacuum pumps that helped in the efficient running of the company. These pumps played a great role in the processing of foodstuffs, pharmaceuticals along with oil. It has a modular design along with that of integrated flow channel that makes the pumps compact. This device has got mechanical shaft seal that depends on that of pumping medium that helps in ensuring the fact that this device has long life cycle.

Fonterra used financial record keeping system that was instrumental in recording the milk weights and the milk samples are taken from the cows for the purpose of component analysis (Siva et al., 2016).  Fonterra took recourse to Excel along with spreadsheet program that helped them in the aspect of book keeping. Blank spreadsheet programs were used by Fonterra that helped in meeting the demands of the dairy company.

Fonterra used the herd management numbering system that helped in locating the cows. The tags should be imprinted by manufacturer so that it lasts for a long time (Stark, 2015). The numbering system was used with that of colour coding that helped in the arena of herd management of Fonterra. The herd management record reflected data that helped in managing the herds of Fonterra. The consecutive numbering system was used by Fonterra that helped in providing vital information about the herd.

Tools for continuous improvement

There are tools that can be used in Fonterra that can help in bringing about improvements in the dairy company. The tool of Kaizen can be used that stresses on the continuous effort given by each employee so that it can bring about improvements in all processes along with systems of an organization. Fonterra can lay emphasis on the element of team work that can help in improving performance of employees of the company. The employees of the company should be capable of organizing the things well that can help in the proper running of the company (Mahadevan, 2015). The method that helped the company in the aspect of organization was their organizational culture that has played an important role in transforming the business. There should be set policies in Fonterra that can help in increasing efficiency of performance of employees of organization.

Just in Time can act as a useful tool for Fonterra that can take care of the fact that the products are supplied when they are needed and in quantity in which it is needed. The pasture based model of Fonterra helps in production of best milk within the world at that time when the consumers want to pay premium for the food which has been produced in a responsible manner. The technique that can help them in the application of these tool is by being demand driven that can help in the production of high value products. PDCA is indicative of a management method that is used in the business for improving processes along with the products (Choi, Cheng & Zhao, 2016).  Fonterra can implement the Food Safety and Quality System that can help them in the area of delivering safe along with high quality of product across the world. The marketing of the products of Fonterra are carried out in an honest manner that is integral in helping people lead a balanced lifestyle.

Value stream mapping can be used by Fonterra that can help them in analysing their current state and the designing of the future state. Value stream can help the company in focusing on the areas that can help in adding value to a product. Riparian management is the method that can be undertaken by Fonterra that can help them in improving the quality of the water and enhance the ecosystem health. Another method that can be applied to Fonterra is 5s Method that can help the company in sorting, standardizing along with sustaining (Ross, 2017).  The new financial tool of Fonterra can help the farmers in gaining certainty regarding what they would be paid for their milk. Fixed Milk Price can act as a boon for Fonterra that can help the farmers in making investments in the farm. It can help the Co-operative in the aspect of standardization tht can help them in achieving certainty.

 

Conclusion

Operations Management is indicative of the designing of the controlling process that involves the production of a good. It takes care of the fact that business operations run smoothly which can help in meeting needs of consumer. Fonterra had to face challenges since they had to operate in the global arena that compelled them to use sustainability approach. Consumers wanted to know source of food and this posed challenges for the company. Fonterra implemented the ISO 9001 that ensured quality of dairy farming of their brand. Fonterra used information technology that was useful for them for improving the operations. Fonterra took recourse to record keeping system that can record information pertaining to milk samples which have been taken for serving the purpose of that of component analysis. They used spreadsheet programs that offered them help in the arena of book keeping. Fonterra used the superior capability pertaining to information management that gave birth to a new model of business model which can ensure their survival. Kaizen can act as a useful tool for employees of Fonterra that can improve systems pertaining to the organization. Fonterra can use value stream mapping that can help them in designing of future state.

 

References

Bozarth, C. C., & Handfield, R. B. (2019). OPERATIONS AND SUPPLY CHAIN MANAGEMENT.

Choi, T. M., Cheng, T. C. E., & Zhao, X. (2016). Multi?methodological research in operations management. Production and Operations Management, 25(3), 379-389.

Fonterra.com. (2019). Retrieved from https://www.fonterra.com/nz/en.html

Haksever, C., & Render, B. (2018). Service and Operations Management. World Scientific Books.

Hitt, M. A., Carnes, C. M., & Xu, K. (2016). A current view of resource based theory in operations management: A response to Bromiley and Rau. Journal of Operations Management, 41(10), 107-109.

Hitt, M. A., Xu, K., & Carnes, C. M. (2016). Resource based theory in operations management research. Journal of Operations Management, 41, 77-94.

Ingason, H. T. (2015). Best project management practices in the implementation of an ISO 9001 quality management system. Procedia-Social and Behavioral Sciences, 194, 192-200.

Mahadevan, B. (2015). Operations management: Theory and practice. Pearson Education India.

Psomas, E., & Antony, J. (2015). The effectiveness of the ISO 9001 quality management system and its influential critical factors in Greek manufacturing companies. International Journal of Production Research, 53(7), 2089-2099.

Ross, J. E. (2017). Total quality management: Text, cases, and readings. Routledge.

Sanz-Calcedo, J. G., González, A. G., López, O., Salgado, D. R., Cambero, I., & Herrera, J. M. (2015). Analysis on integrated management of the quality, environment and safety on the industrial projects. Procedia Engineering, 132, 140-145.

Siva, V., Gremyr, I., Bergquist, B., Garvare, R., Zobel, T., & Isaksson, R. (2016). The support of Quality Management to sustainable development: a literature review. Journal of Cleaner Production, 138, 148-157.

Stark, J. (2015). Product lifecycle management. In Product Lifecycle Management (Volume 1) (pp. 1-29). Springer, Cham.

Swink, M., Melnyk, S. A., Hartley, J. L., & Cooper, M. B. (2017). Managing operations across the supply chain. New York, NY: McGraw-Hill Education.

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