About Organization: Latino engineering is engineering equipments manufacturing company based out of New South Wales in Australia. It has 300 employees working for it and has recently been acquired by an investor organization.
Products and Services: The Company provides designing, development, and manufacturing of engineering equipments for multiple industries including construction, oil and gas, utilities and infrastructure.
After the acquisition of the company by the investment organization, the company started to face decline in customer orders due to decline in the customer satisfaction and increase in complaints within 12 years after acquisition. The common complaints that were received from the customers included:
- Receipt of defective equipments
- Poor designing and development
- Long turnaround time
- Non responsive service team
- Wrong delivery of engineering equipments(Andersen, 1999)
The company is facing decline in the customer orders and increase in customer complaints causing rise in customer dissatisfaction which can be damaging to the company reputation as well as its business potential. Thus, there is a need to improve the existing processes as well as eliminate the existing problems of the company operations. In order to do this, a continuous improvement plan would be formulated for the organizing using lean six sigma approach to continuous improvement.
The sig sigma approach is used because it is a proven method in the case where the time available for improvement is very less as it works on the rapid improvement methods. As the company is already losing on customers and needs to get back to the track fast within 3 months, this method would be an appropriate method for the development of the continuous improvement plan ( Business Case Studies LLP, 2015).
The objectives of this continuous improvement plan would be:
- Elimination of defects in the engineering equipments to reduce defective equipment deliveries to customers.
- Improve the accuracy of order processing such that wrong deliveries are not made to customers
- Indentifying flaws in designing and development such that improvements can be made in the processes.
- Reduction in the turnaround time of the operational teams working in the company
- Improve the service delivery of the company(Bhojni & Raj, 2015)
Assuming the continuous improvement plan would begin to be implemented on 1st Oct 2017, the project would be completed on 31st Dec 2017 as the company has been given 3 months to carry out this improvement.
Identification of root causes behind the problems faced
5th Oct 2017
Development of a proposal for the elimination of the root causes of the problems
10th Oct 2017
Refining and Approval of a continuous improvement plan for the elimination or reduction of the problems
15th Oct 2017
Initialisation of the continuous improvement project by preparing for Six Sigma adoption
20th Oct 2017
Finalization of the continuous improvement plan including identification of all the required activities to be completed
25th Oct 2017
Approval of the continuous improvement plan
27th Oct 2017
5th Nov 2017
Order processing improvement
20th Nov 2017
Improvement of Designing and development
30th Nov 2017
Turnaround time reduction
15th Dec 2017
Service delivery improvements
25th Dec 2017
30th Dec 2017
Closure of the continuous improvement project
31st Dec 2017 (Baudart & Corp, 2016)
Major challenges that are faced by the company currently include:
Equipment defects: many customers of the company are receiving defective equipments after ordering which suggests that several defects in the equipments go unnoticed by the production unit employees. The defects produced are either manufacturing defects or design defects. In order to understand if the product is normal or defective, variation in the quality or output of production needs to be understood between what is normal and what is not which the company is unable to predict accurately (UNSD, 2009).
Decline in the efficiencies: The company is a facing a decline in its operational capacities especially with the productivity of the people. Misplacement of orders, delivery or wrong or defective products are some of the problems caused by inefficiencies in operations of the organization (CMS, 2005).
Designing and development: The staffs of the organization are unable to follow up sufficiently with the customers on time which is causing dissatisfaction in the customers (Tech-Clarity, 2012).
Turnaround Time: Turnaround time for the delivery of the engineering equipments is more than expected by the customers of the organization. The company uses a number of different applications for generating and exchanging data between people in the supply chain and if this information is not integrated, it can lead to inefficiencies which are the case with the company. Because of these inefficiencies, the performance of the company is affected and the response time is increased. This increased the customer churn and thus, the revenues are negatively affected (CSSP, 2007).
Wrong deliveries to customers: I some cases, the staff packed wrong equipments leading to wrong deliveries to customers.
Continuous Improvement Plan
Continuous improvement plan is developed on the foundations of lean Sig Sigma principles that identify three key aspects of continuous improvement. These include improvements in operating practices and procedures, total improvement, and training.
Root Cause Analysis
There could be several causes of the problems identified in the case such as:
Equipment defects: There could be several causes that could lead to defects in products and these can be introduced at the stages of designing or manufacturing (Vaidyanathan, 2012). As per six sigma methodology, a defect is seen as a variation in the product that goes beyond the acceptable limits. In order to identify defects, the acceptable limits are needed to be identified which a measurable target or the industry needs benchmark for a product. Thus, in order to identify the root causes, the benchmarks of individual equipments sold by the company have to be identified. The benchmarks can be obtained from the industry competitors (Baudart & Corp, 2016).
Inaccurate order processing: Delivery discrepancies can be caused due to inaccurate order processing. Several causes behind these inaccuracies can be many. Some factors that have influence on the order processing and deliveries include value of the goods produced, contracts, and size of delivery consignments. Some causes of wrong deliveries could be incomplete delivery address, missing address, lack of contact details of the recipient, order configuration errors, and changes in sales order to name a few (Jakobsson, 2010).
Designing and development follow Up issues: The issues of follow up could be because of inefficiencies in the ability of the staff to have sufficient information availability. Common issues that are faced in designing and development of equipments as products include controlling of changes, management of product complexities, information management, and accommodation of globalization. It is essential that these challenges are overcome failing which these issues can lead to customer dissatisfaction (Vaidyanathan, 2012).
Turnaround Time: Turnaround time is the time taken between the receipts of the order to its delivery to the customer premises. This includes a list of organizational processes including:
- Reading of the available stock items
- product designing in case product is unavailable in stock
- creation of the parts list
- make or buy decision making
- development of the list of items to be taken from the vendors
- Information to the vendor about the products and the parts required
- Receipt of items from vendors or suppliers
- Assembling for the production of the final product
- Testing of the product(Capgemini, 2017)
- Dispatch of the equipments to the customer
- Transportation and delivery of equipments(Chakraborty, Kumar, & Malguri, 2016)
The company needs following improvements in its operations:
Controlling order management process: if the order management can be control, it can help the company solve its daily operational problems like duplication of orders, wrong order deliveries, errors in order processing, and help monitoring the sales channel.
Turnaround time reduction: The turnaround time of the company is very high for designing and development processes that makes the customers dissatisfied and thus, there is a need to enhance the process cycle of the product development such that this turnaround time can be reduced (Chakraborty, Kumar, & Malguri, 2016).
Improvements in the service delivery systems: Delays in deliveries, wrong deliveries, defects, difficulties in follow up cause dissatisfaction in customers such that there is a need to improve the services of the organization.
Reduction in Defects: Customers are receiving products with defects and thus, the company needs to take appropriate measures for quality management such that defects are either eliminated or reduced.
Controlling order management process through centralization: To establish control over the order management processes in the organization, the organizational structure has to be right with right people having right capabilities. The first step to establishing this structure would be creation of a centralized office that would manage order lifecycle, product and catalogue management, pricing management, and customer information management. With the centralization of systems, following benefits would be achieved by the organization (Sarma, 2017):
- Increase in operational efficiencies: There would be a reduction in order processing cost with reduction in the order and quotation errors. This would also result into an increase in the number of orders processed per employees of the company(MindTree, 2017)
- Reduction in the turnaround time: Turnaround time would be reduced through reduction in order cycle times. With the information and the business processes are integrated while some of the processes are automated, the turnaround time to respond to the customer orders can be reduced. A query based application may be implemented in the company for recording and forwarding orders. This application can include automatic allocation of tasks to people based on the orders and notification can be sent to the respected person responsible for the task to speed up the work (MindTree, 2017).
- Improved product and service quality: The accuracy of orders would be increased and consistency of business processes would be improved which would enhance the quality of products and services of the organization. With this, the customer profiling can also be done which would help managers understand the buying patterns of the customers to understand their preferences and needs that would be useful for making strategies for exploring the cross-selling and up-selling opportunities(Capgemini, 2017).
Reduction in process cycle time: A number of steps can be used for reducing the process cycle times by elimination of the bottlenecks such as -
- Perform some of the order processing activities parallel instead of doing them sequentially which would reduce the waiting time for each activity. For example, concurrent engineering can be adopted in the manufacturing organization which would integrate the teams to run multiple processes simultaneously including conceptualization, deigning, creation of bills of materials, and process mapping. Concurrent engineering has the potential to reduce the cycle time by 80%(Chakraborty, Kumar, & Malguri, 2016).
- Sequence of activities can be changed to further reduce the cycle times. For instance, documentation process including submissions and approvals are often sequenced between different departments multiple number of times such that the documents keep moving from one department to another. IF the sequence of this documentation process is changed in a way that most documents are approved at the same point, the cycle time would reduce further(Bhojni & Raj, 2015).
- Reduction in interruptions:delays in order processing and deliveries are often caused by interruptions such as phone calls to working employees, customer requirement for change of order or complaint.
- Several production and processing activities are completed in the company consuming a lot of time and if this time can be reduced then the timing of order processing can also be improved(Andersen, 1999).
Continuous improvement plan would help the company is several ways by improving its operational efficiencies and reducing its cycle time to bring up the customer satisfaction in the company. The company needs to execute the plan within 3 months of its finalization. However, before it can be used in practice, an extensive training of the employees would be required on six sigma processes as the plan is prepared on the foundations of lean six sigma (TCS, 2015).
The company would take the Awareness-Motivation-Competency-Implementation approach for the implementation of the continuous improvement plan which begins with the creation of awareness about the lean six sigma in the organization and is followed by providing motivation to employees, development of competency to deal with the plan in the company employees by providing them training and lastly, the actual implementation of processes and practices identified. Developing competencies in people is very essential failing which the improvement project can also fail (Tech-Clarity, 2012).
Awareness: Awareness would be created in employees first on the way lean six sigma processes work and how they are going to affect the operations of the organization. There are several methods that can be used by the organization for creating awareness in the employees such as poster campaigns, suggest boxes, screen savers, benchmarking results publishing and improvement newsletters (The Pennsylvania State University , 2005).
Motivation: Motivation would need the top managers push juniors to do more tasks than their regular routine to bring improvements in the organization. Juniors can be motivated by giving those rewards and recognitions against their contribution towards the improvement of processes. As the continuous improvement plan implementation needs a completed transformation of the culture of the company such that the way people work in the company would also change, increasing the level of motivation in the employees is very essential to get their buy-in (Deloitte, 2014).
Competency: Competency development would include development of the capabilities in the organization to execute the improvement project and processes. Using this approach, the company would be able to build a strong foundation and ensure effective implementation of the continuous improvement plan. The employees may not already be equipped with the right skills to deal with the lean six sigma processes and thus they can be provided with some training programs on the new implementation processes. Trainings can include topics like identification of wastes, understanding of defects, DMAIC phases, 5S lean practice, Six Sigma designing, total quality management, and total productive maintenance ( ILO Publications, 2008).
Implementation: Once the foundation is built, the continuous implementation plan can be executed which would involve implementation of the actual improvemnet sin the company. An environment for implementation would be created through collection and evaluation of the data and using the software tools for executing processed such as project tracking, conducting workshops or training and triggering improvement projects for improvement of the company processes (NHS Quality Improvement, 2011). While new systems and practices are being implemented, there is also a need to monitor and review them to ensure that they produce the desired results for the company (Sarma, 2017).
Six sigma offers a variety of communication tactics that can be used for communicating between the employees working for the company, between employees and the customers of the company, between employees and suppliers, and between internal staff and the stakeholders of the company. These include:
- Personal face to face meetings
- Town hall gatherings(Motorola, 2009)
- Memos from top management to employees
- Presentations by staff during meetings
- Video recording or minutes of the meetings recording on the meetings
- Question and answer sessions
- Posts on intranets
- Six sigma training manual or newsletters
- Phone calls(Jakobsson, 2010)
- Events recognizing achievement of milestones
- Employees survey to get feedback( Office of Planning and Institutional Assessment, 2014)
- Suggestion systems for employees
- Brown bag lunches
Appropriate tactics would be used for each stakeholder group depending on their preferences and requirements.
This report was prepared to explore the case of an engineering equipments manufacturing organization that was facing decline in their revenues because of the customer dissatisfaction that increased complaints from them. The objective was to identify the root causes of the problems in the company and devise a continuous improvement plan to resolve them. Key problems identified included more turnaround time, design and manufacturing process defaults causing errors in products, and inefficient service delivery processes. A continuous improvement plan was suggested which involves centralization of the service delivery system and reduction of process cycle time. This would increase the efficiencies of the organizational processes, reduce errors and defects and thereby improve the level of customer satisfaction.
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