Circular Economy Principles And Organizational Performance Essay.

The purpose of this assignment is to develop your ability to present the fundamental principles of the circular economy and critically discuss how the adoption of circular economy principles can help organisations and related supply chains to increase their economic, social and environmental performance.

You are required to discuss how companies that adopt circular economy principles increase their economic and social efficiency and minimise their environmental impact.

More specifically, you are required to write a report that provides two perspectives of the topic above.

Title: Lean Supply Chain management | Case study of TI Automotives

The aim of the study is to develop a concept on lean supply chain management. TI automotive of UK has been chosen as case study. The report discusses the features of lean practice and its application on an organisation. Lean practice is adopted by the organisations to increase operational efficiency and customer satisfaction for the growth of the organisation. Ultimate goal of the lean practice is to create perfect value for the customers and to reduce waste at zero level. Lean thinking can be used not only in the manufacturing sector but also in the service and agricultural sector (Pearce and Pons 2013). Hence, as inventory management is an important aspect of the lean practice, this process and its application is described in this report. The first part of the report reviews literatures on lean management and followed by the application of the lean practice on chosen company.

a. Characterising warehousing and related inventory management activities in supply chain

Roles of warehousing

Warehousing is a place and system for storing goods and materials used by a company. As pointed out by Christopher (2016), warehousing is the focal point between sources of production and supply to the beneficiaries. Therefore, it can be stated that the warehousing plays an important role in supply chain management for a company. This is the process of storing products for future consumption. Warehousing can be divided as global warehousing and field warehousing. Company or an organisation uses third party logistics for product storage while using global warehousing. Organisations require to use computer based information system to plan and manage data, supply of products. The main objective of the organisation is to use operational system in a cost effective and efficient manner (dlca.logcluster.org 2017). In contrary, field warehousing is storing product in a temporary building, which is not actually designed as warehouse. The inventory system in the field warehousing is mostly paper based (Redmond, Carret and Denis 2014).

Warehousing has numerous distinguishing features such as acting as a central location, adding value to the logistics system and bringing economic benefits. A warehouse is a central location, where a product arrives to be stored for time being. The responsible personnel at the warehouse need to ensure safety of the product. Efficient warehousing reduces the product cycling time and lowers overall cost in supply chain management (Monczka et al. 2015). Therefore, keeping inventory adds value to the logistics system. Along with reduction in logistics cost, warehousing reduces delivery cost. As products are delivered from a central location to the multiple locations, storage helps to manage demand and supply of product efficiently. This facility helps the business to remain competitive.

Roles of Warehousing

Related inventory management activities

A company needs to think about inventory management while considering meeting demand of the beneficiary. Inventory includes raw material, completely finished and unfinished products. Adoga and Valverde (2014) discusses that inventory management holds large costs including cost of inventory itself and the additional cost of transporting goods and warehousing. Cost minimisation is a role of the inventory manager. In order to minimise cost, the warehouse needs to be built in a manner so that it can store products in lean season and release products during peak demand maintaining the same quality. A warehouse needs to have capacity to hold stocks for meeting the demand in lead time or the boom period of the business cycle. As cited by Mathien and Suresh (2015), basic principles warehouse and inventory management are

• Location management
• Control of inventory
• Managing outbound delivery procedure
• Planning inbound receipt procedure

Wambua et al. (2015) opined that managing relationship with the supplier and vendors are critical aspect of supply chain management. In supply chain management process, inventory has strong relationship with the material flow time. Material flow time is the time, when the raw materials enter into the supply chain till its processing into the final product. Govindan et al. (2015) argued that excess inventory is harmful for business. Therefore, timely release of inventory is necessary for balancing demand and supply and to manage cash flow in the company. A company may face problems with excess inventory such as space problem, reduction in profit margin, increase in cost and wastage. As inventory depreciates in value terms, long storage of inventory reduces value of asset and hence, increases inventory maintaining cost and reduces profit level.

Concepts of lean management

Lean management system is getting growing importance in the modern business environment. Lean management is different from the modern management concepts. The distinguishing features can be presented as below:

Modern management	Lean management
Results	Process
Authority	Responsibility
Staff improvement process	Improvement process of team and line managers
Plans	Experiments
Decision made based on collected data	Decision made on spot with data and facts
Vertical focus	Horizontal focus

Table 1: Comparison between modern and lean management

(Source: Gattorna 2015)

Martinez-Jurado and Moyano-Fuentes (2014) stated that there is an inverse relationship between social intimacy and economic efficiency. In order to obtain economic efficiency, the company needs to be strategic and sometimes may take aggressive market expansion business model, which reduces social association. Gattorna (2015) argued that through lean management, both economic efficiency and social intimacy is possible to achieve. A high performing organisation can fulfil needs of the customers as well the wellbeing of the employees simultaneously.

Lean practice is all about creating customer value and eliminating waste from the production process. Waste of physical asset, financial assets and time all are included in the lean management. Wastage can be reduced through efficient utilisation of resources in production.

Related Inventory Management Activities

Building an efficient lean management system requires continuous improvement of the whole system. Improvement of total productivity management, team formation, and focus on 5s in the form of visual order, organisation, cleanliness and standardisation are methods of improvement process. Continuous improvement develops a value stream in the operation process (Wambua et al. 2015).

Continuous improvement: Identification of numerous opportunities for improvement is the central focus of the lean practice. This process needs to include a simple and single task for improvement and large task performed by many participants.

Identification of gaps and value: Lean management identifies gap in the operation and managerial process. Application of technology would be such that it can ensure forward momentum for the whole system. Lean system interconnects several partners associated with an organisation. It connects the upstream partners with the downstream so that cost can be reduced and value can be established by eliminating wastes (Ge?evska et al. 2015).

Reduction is waste: As suggested by Kreimeier et al. (2014), removing waste from supply chain results in less effort to put resources in production and supply process and leads to less use of space, capital, and reduction in lead time. As a result, quality improves and cost of increasing quality decreases. Introduction of flow and pull concepts in the system keeps the process in movement so that wastes are eliminated until perfection is not achieved.

There are several tools and methods used for lean management. An organisation needs to choose the lean management tool based on the organisation specific problem and situations.

Among several tools mostly used tools are value stream mapping, 5s, total productivity management (TPM), just-in-time pull system (JIT), SMED (single minutes exchange of dies), Heijunka, Kanban pull system and others. 5S tool is discussed here. 5S tool includes sorting, straightening, systematic cleaning, standardizing, and sustaining.

Sorting is the process of eliminating obstacles and unnecessary elements from the work process and prevention of the accumulation of the same. Effectiveness of the necessary items is evaluated with respect to cost. Straightening is the stage, when all the required elements are arranged for use. This process makes the workflow smooth, ensure product safety. Third stage is adopted to clean the workplace and prevention the rate of depreciation of the machinery and equipment (Filip and Marascu-Klein 2015). Fourth step is standardisation of the best practices in the organisation all the time. The last step is the initiative to bring sustainability through regular training of employees, regular audit and maintaining discipline in the work process. Nguyen (2015) mentioned that 5S can be applied not only in the manufacturing industries but also in the industries such as health care, education and governmental organisation.

Lean Management Principles, Tools and Concepts

Identification of issues in warehousing and inventory management

TI Automotives, UK manufactures, develops and supplies automotive fluid storage, carrying and delivery system to different countries. This company has five global divisions such as Fluid carrying systems, Power train systems, HVAC fluid system, Pump module system and Tank system (tiautomotive.com 2017). An automotive company such as TI Automotives may face following problems in warehousing and supply chain management.

Inaccuracy in inventory: As TI automotives has operation in the international market, the supply chain has multiple routes. Hence, proper warehousing is necessary for sustainability of the business (Gündüz 2015). If the company lacks proper insight about the demand for their product in the world market, excess supply or excess demand may arise. Too much stock or running out of stock, both decreases cash flow in the business. Automotive industries are often seen to suffer from insufficient inventory level in the IT system and warehousing management and hence, a demand and supply gap is created.

Lack of proper inventory location: Warehousing needs to be at a central location for inventory management in order to reduce cost of supply of product to the beneficiaries through different channels (dlca.logcluster.org 2017). Wrong site selection increases transportation cost and shipping time of the product. Proximity of beneficiaries to port, security in warehouse, site condition, availability of land size, floor weight all are important for company TI Automotive to look after while choosing inventory location.

Inefficient space utilisation: It may happen that TI Automotives has sufficient space to store products; however may fails to utilise space efficiently. Optimum use of space helps to avoid unnecessary use of labour.

Meeting customer expectation: At the competitive market edge, a company needs to create special labels for the customer. Failing to meeting customer demand before the competitors may lose profits in the business. Therefore, the company requires a warehouse system, which can accommodate the customers automatically. A large organisation like TI Automotives does not have enough time to create label every time in supply chain activity (Belekoukias, Garza-Reyes and Kumar 2014). Therefore, an in-built warehousing labelling system helps to draw potential customers.

Improvement of activities through lean application

Lean application can resolve this mentioned problem through number of processes. As suggested by Nguyen (2015), a project based inventory management system needs to be adopted to meet demand and supply in the market. TI Automotives need to bring high level of flexibility in the supply chain to identify and fulfil needs. In order to bring quality and efficiency in the supply chain management process, TI Automotives needs to bring transparency in supply chain inventory level, location and demand forecast to facilitate effective decision making and reduction in cost.

Application of 5S

TI Automotive can use sorting method to identify elements creating obstacles and unnecessary elements from the supply chain. It may happen that some resources are not needed in short term, however incurring cost for maintenance. Selling out the inventory can increase space for utilisation and reduce cost of depreciation. Excess supply of equipment may hindrance production process. Next process that the company can adopted is to arrange items that are easy to use and matched with the capability of the existing staffs. Any difficulty in using equipment reduces productivity (Wolniak and Skotnicka-Zasadzien 2014). TI Automotive can label the unnecessary items to put them away. Any defective parts needs to be identified before use in direct production and for reduction in waste of human energy, waste of time and waste of excess inventory.

Straightening is the third stage when every element is arranged together every day for keeping the work process and workplace clean. Clean workplace can keep five division of the company especially fluid carrying, tank and pump system in smooth use. Any leakage in these systems will be resulted in a big loss for the company (Ge?evska et al. 2015). Hence, as discussed above, a proper labelled warehouse system with high security is required for the company. Proper maintenance of the machinery reduces the rate of depreciation of the machinery and equipment.

Fourth step is standardisation of the best practices such as advancement of engineering application, use of advanced material, use of proper inventory management techniques. FIFO method is useful in inventory management (Wambua et al. 2015). Decrease in the time of inventory turnover increases the cash flow and chances of growth in revenue as assets are properly utilised at the right time. Lastly, the practice of suitability can build a habit of use of correct procedure in management of warehousing and inventory and may lead the company to achieve zero waste in long term.

The benefits of use of 5S lean practice by TI Automotives are raising quality, reduction in cost in the supply chain management, inventory management, bringing safety, developing customer confidence, lowering repairing cost in the product developing process. As opined by Filip and Marascu-Klein (2015), value stream mapping can be used in the 5S process to analyse the quality of materials, manufacturing or maintaining process and flow of information across the different layers of supply chain.

The objective of the organisation is to reduce wastage of resources, implementing efficiency promoting tools in the organisation. One way to improve lean practice is simplification of manufacturing task.  It is necessary to understand the working method and possible outcome effectively by the workers in order to reduce waste and to aware them about the best use of the resources. It can be recommended to the TI automotives organising the manufacturing floor and working flow for increasing efficiency. Orderly work flow helps the employees to complete work comfortably with positive attitude, which can generate positive outcome. The company can be recommended to reduce error in the operation by recognising and taking initiatives for error reduction. TI automotives needs to arrange training to raise the interpersonal communication skill so that they can efficiently take part in the waste management and continuous improvement process of the company.

Conclusion 

Implementation in lean practices such as suggested 5S is effective for organisations in order to improve quality of products or service. However, keeping sustainability in business is difficult task for many organisations. It can be concluded that continuous improvement activity requires a regular monitoring process in all segment of supply chain. However, every organisation cannot monitor all the process minutely because of absence of skilled labour. The problem identified in warehousing and inventory management for TI automotives are inaccuracy in inventory, lack of proper inventory location, inefficient space utilisation, not meeting customer expectation. It has been studied that collaborative team having efficient team member is essential for proper application of lean management and continuous improvement process. Another problem faced by the organisation in terms of waste elimination.

As there are different types of wastes in an organisation, employees and managers need to understand and identify them in proper time. Waste cannot be identified without engagement of workforce actively. It may happen that the goal and objectives of the organisation are not clear to the staffs. In this scenario, it is not possible for the organisations to put 5S strategy into practice effectively along with value stream mapping in the absence of any discipline. The 5S strategy may fail without proper leader who can motivate team members. Moreover, the organisation has to identify the unnecessary element in from the work process; otherwise use of this lean management may not be effective to improve quality of the product and services of the organisation.

References

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