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Development of the Philosophy, Principles and Process of Lean

Discuss about the Simply Intolerant Foods.

Organizations are constantly looking at their financial numbers and left to stone unturned to improve the numbers. At the heart of any organization lies its ability to manage operations. Operations management is one such area, which is the most critical for any organizations. Efficient of management have impact on all the downstream and upstream of the supply chains and helps the organization to improve their supply chain and makes it more agile, adaptable and less vulnerable. Poor operations management however has a huge impact on supply chain and may lead to unsatisfied customer (Hill, 2012). The concept of lean management is a powerful concept that helps the organization in manufacturing sector to optimize their cost of operations. Simply defined, Lean management is an approach to running an organization that supports the concept of continuous improvement, a long-term approach to work that systematically seeks to achieve small, incremental changes in processes in order to improve efficiency and quality. It is important that the internal and external stakeholders should realize the importance of lean management (Goetsch, 2014). For instance, Logistics department is internal customer for manufacturing department. Together, both work for satisfaction of end external customers. External customers are not part of the organization. They may or may not buy from the organization as they have a choice (Kennedy, Plunkett & Haider, 2013). The development of the philosophy, principles and process of lean in the context of its contribution to manufacturing industries and applicability in the food processing industry can be discussed as:

One of the basic or fundamental philosophies of lean management is the focus on waste elimination. With the principles of lean management, organizations may want to reduce the waste so that they can save the cost (Kennedy, Plunkett & Haider, 2013). In manufacturing industry, this cost is associated with inventory holding and and inventory ordering cost. At the same time, it is important that the cost optimization and waste minimization should not happen with any compromise with the quality. Quality customer service is very important think in this world where competition is growing continuously due to globalization (Santos, 2013). Quality service leads to more credibility and better reputation in the market through word of mouth publicity and hence translates into a better sale. 

  • Performance indicators should be identified for manufacturers and suppliers for on-time delivery
  • Contingency time should be built in system to account for any uncertainty in the value chain.

It is important that the organizations should realize the stage of their lifecycle before implementing the lean principles. There are four defined stages in the organizational life cycle: entrepreneurial, collectivity, formalization and elaboration. Of the four stages, the entrepreneurial stage is the most important, as many organizations don’t ever make it out of this phase. When a business is started the owners are wrapped up in creating or selling whatever it is that made their business possible (Laosirihongthong, 2016). As it gets more successful there are more employees and those entrepreneurs have to become managers, a job for which they may or may not be suited. Organization leaders go through many emotional states during the life cycle of their business.  These emotions can lead to the success or failure of their business if they are dealt with properly. It is critical that the basic groundwork for lean management should be established before the entrepreneurial stage. The principles of lean management for SIF can be shown as below:

Implications and Challenges for Implementing Lean at Simply Intolerant Foods

It is also important that the management of SIF should have a long-term plan with lean management. The organization may be required to make some initial investment to implement the lean system. However, the return on investment in long-term should justify the investment. The organization should also integrate the lean management with Information Technology systems like ERP system.

The organization, Simply Intolerant Foods, can definitely use the principles of lean management to establish an effective and efficient culture in the organization. It can be inferred from the case study that SIF follows the make to order strategy due to the nature of their products. Each product is unique and can be manufactured after taking specifications from the customers. It is maintaining configure to order bills of material, which can be configured by the customer while placing their order. Therefore, SIF forecasts at subassembly level and manufacture the critical subassemblies before receiving the order, which then can be used in customer order. Sometimes the forecasts are quite accurate but when they are not accurate, it leads to huge work in process inventory at one hand and increased lead time for other products which don’t have ready subassemblies required for them to get manufactured. With lean management, the organization should also improve its production planning function (Kennedy, Plunkett & Haider, 2013). The inefficiency in production planning department has increased the inventory because production should be scheduled when all the material is available or material is scheduled to reach when it is required in the particular job.

The implementation of lean would also require an element of change management within the organization. It is possible that all the employees of SIF would not support the change to lean production system. Therefore, it is important that the management of SIF should introduce the change in an effective manner. There could also be issues with labor utilization. Lot of time is wasted in transporting material from one workstation to another because of the poor layout, which can be improved (Kennedy, Plunkett & Haider, 2013). The time spent in transportation is a complete waste since it is a non-value adding activity.

SIF is also not effectively utilizing the bottlenecks resources. Bottleneck resources are sometime having huge piles of inventory of jobs in front of them to be processes and sometimes are just sitting idle with no inventory at all (Souza, Sobreiro, Nagana, & Manfrinato, 2013). This is a case of very poor production planning. It is because the company output depends on the output of the bottleneck resource and it cannot be greater than that of bottleneck resource. Therefore, in order to improve the output of the factory, it is very important to leverage the bottleneck resource or to use the bottleneck at its maximum capacity. Machines, which are not bottleneck, can be starved but the machines, which are bottleneck, should be starved at any cost (Dugdale, 2013).

Recommendations for the Managing Director for SIF

The company can also face challenges to schedule different jobs in the supply chain network of SIF. Efficient Job scheduling is very important for the organization to control the work in process inventory. Increase work in process inventory is not only a problem in itself but also a root cause of many other issues, which will be, discovered when work in process inventory is reduced (Qrunfleh, 2015). This will help in improving the efficiency of the factory.

It is recommended that the management of SIF should emphasize on understanding the customer needs before taking any steps towards lean management and lean supply chain management. Once customer needs are identified, Pareto chart can be built to priorities the requirements and take actions based on that. The concepts of lean management for SIF should also include the association with different suppliers. Any default on part of supplier or manufactures should attract a penalty, which should be passed on to the customers. It can be in form of cash back, or coupons for discount on next purchase.

It is recommended that SIF should have two different teams of customer management and suppliers or vendor management. SIF would be able to practice lean in true sense only when these two teams can collaborate together and work in an integrated manner. While promising order delivery data, customer facing team promises based on the date which is provided by the manufacturer who in turn takes the date given by the suppliers. There should be some contingency time build into the system for accounting any uncertainties or special events in the value chain. Collaboration among different stakeholders would be the key for SIF to move forward. Collaboration is most likely to be used first since it sets the tone on what is expected of everyone and what the goals and objectives are for a positive working environment. Collaboration also promotes communication and trusts among team members and educates each other on their strengths and weakness, which will build a positive and successful working relationship. Collaboration must be consistent and purposeful, with resources dedicated to its success.

It is also recommended that there should be coordination between all players of supply chain so that appropriate dates should be promised to customers. Factors that contribute to poor customer service are customers are not treated well and no one is ready to listen them and understand their problems. Continuously sending them to different departments and making them explain their problem to multiple people is a high sign of improper customer service. Not only this, even making them wait and unable to provide resolution to their expectation is a sign you will lose business from those customers in the future. The management of SIF should realize that the listening skills are one of the powerful skills to eliminate the waste in the system. The listening skills are the best skill to deal with angry customers and talkative customers. Angry customers want someone who can listen and completely agree with them and ensure them of the best service. Customers get angry or frustrated for a number of reasons. Reasons may be valid or unjustifiable but no matter what, as we are in the business of customer service, we need to provide or help them with appropriate response so that they should continue to do the business with the organization. Our responses can ease the matter or make it worst.  

It is recommended that the key principles of lean management for SIF should also have focus on the use of Information Technology to track down the various operational activities in the organization. Tracking system should be employed and team should receive reminders set up at appropriate times. In long term, the company should have the policy to provide home delivery to end-customers. For instance, they can have express delivery where material should be delivered real fast but at some extra cost.

Incoming materials from suppliers should be properly inspected and only then should be moved into stores if it fits into the criteria. To save this time, customer should define parameters for new suppliers and if they passed, add them into certified supplier lists and should accept those materials without inspection. It should also mention the clause to the supplier that for any poor quality item, there is a penalty. Although supplier may charge high for providing high quality items but it has lot of benefits for the organization (Monczka, Handfield, Guinipero, & Patterson, 2015). For instance, first of all, it will save the huge time in inspecting the incoming material every time. Second, there will be fewer cases of poor quality of end items due to raw material. Third, as there will be less customer returns, it will help the organization to build its reputation. In short, correcting this first step ensures the improvement in all the downstream processes. Poor quality material is the entry point of many problems.

I strongly believe that operations management is one of the most important areas for any organization. Since these days, there is a huge competition between the organizations due to globalization; there is also pricing pressures for the firms to reduce the prices of their products or keeping them near to their competitors. At such competitive prices, quality should also be there to build customer trust and reputation. Thus, in such times cost cutting is very important to increase the profits for the organizations in these tough times and make the products available to customer at a competitive price. Efficient management of operations at shop floor and design of supply chain help the organization to save the huge amount of money (Hill, & Hill, 2012). I have learned that lean management is a powerful concept that could help the organizations to have effective operations management and efficient supply chain management in place. Here, I would discuss the concepts of lean management for Emerson electric company. A brief organizational background can be discussed as:

Emerson electric company is global diversified manufacturing firm headquartered in St. Louis, USA. It manufactures products like regulators, precision instruments for measuring temperature, pressure and density, valves and many other instruments used in different types of industries like Automobile industry, Chemical industry, metal and refining, pulp and paper industry. It has more than 240 manufacturing locations at different locations worldwide to serve the customers globally. It operates in a very competitive industry leaded by giants like ABB, Schneider, and Honeywell. In recent times, it is facing a lot of issues like high rate of product return by the customer, poor-on time delivery, huge increase in work in process inventory, increase in inventory holding costs which is hampering its image worldwide.

Emerson electric is facing many problems. It started discovering the problems as increase in customer returns were gradually going up. Once the product is returned, it is diagnosed properly with the help of serial number and lot number of various components and raw materials that are used in manufacturing that product. There were many problems that were coming because of poor quality of raw materials. This means that material supplied by the supplier is directly used for production without being inspected. If it is inspected and caught at the first stage, it would have save a lot of processing time of machines and other costs (Goetsch, & Davis, 2014). Emerson should only use materials directly in production, which is supplied by the certified suppliers. The management of the company realizes that lean management is the solution for the company to move forward. However, the management of Emerson is not able to implement the lean in the system. There are various reasons for this. For example, the leaders of the organization have not got the desired support from employees.

The company has also faced difficulty to manage its inventory that has further added to the complexity in the implementation of lean management system. Not only this, there is huge increase in work in process inventory. There were lot of jobs that were started but were left in between to serve the more important demands or hot orders. This inappropriate scheduling has increased the work in process inventory, which is directly increasing the production costs for the company. There were also cases like when the job has been aborted in between because of non-availability of raw materials.

I can say that one of the core elements of lean management is that the organization should be able to eliminate or at least reduce the waste in the system. However, Emerson is not able to eliminate the waste in the system. I can say that there the resource utilization is not effective in the organization. In fact, there was lot of time getting wasted in non-value adding activity. Sometime, the machine is already setup for processing a job but then another rush order comes and machine has to be setup again. This lead to two things: machines are poorly utilized and labor utilization is also low. Poor utilization of resources is creating problems for the company and hamper the ability of the organization to fulfill customer orders on time even when while order promising the dates were given according to the software in most of the cases that calculates the lead time of all the sub assemblies and components that are required to build the final product. Frequent breakdown of some of the machines is another issue which delays the production and factory lost its capacity. Also, sometime sales team promises the aggressive delivery times to their customers to meet their targets. Although there is ERP software implemented that calculates the lead-time of the order quantity by considering the manufacturing time of making the quantity considering lead-time of all its child components and subassemblies. If any raw material required for all that is not available, it also calculate the buy lead time of the item to calculate the order promising dates however sometime the aggressive dates put pressure on production systems and which lead to increase in work in process inventory (Trenteasaux, Pach, Bekrar, Sallez, Berger, Bonte, & Barbosa, 2013).

I can conclude that there are various benefits of lean management for Emerson. However, the management should have the vision to implement the lean in the system. 

References

Adebanjo, D., Laosirihongthong, T., & Samaranayake, P. (2016). Prioritizing lean supply chain management initiatives in healthcare service operations: a fuzzy AHP approach. Production Planning & Control, 1-14.

Monczka, R. M., Handfield, R. B., Giunipero, L. C., & Patterson, J. L. (2015). Purchasing and supply chain management. Cengage Learning

Hill, A., & Hill, T. (2012). Operations management. Palgrave Macmillan.

Goetsch, D. L., & Davis, S. B. (2014). Quality management for organizational excellence. pearson.

Ruiz-de-Arbulo-Lopez, P., Fortuny-Santos, J., & Cuatrecasas-Arbós, L. (2013). Lean manufacturing: costing the value stream. Industrial Management & Data Systems, 113(5), 647-668.

De Souza, F. B., Sobreiro, V. A., Nagano, M. S., & de Souza Manfrinato, J. W. (2013). When less is better: Insights from the product mix dilemma from the Theory of Constraints perspective. International Journal of Production Research, 51(19), 5839-5852.

Dugdale, D. (2013). The theory of constraints. The Routledge Companion to Cost Management, 145.

Kennedy, I., Plunkett, A. and Haider, J., 2013. Implementation of Lean Principles in a Food Manufacturing Company. In Advances in Sustainable and Competitive Manufacturing Systems (pp. 1579-1590). Springer International Publishing.

Qrunfleh, S., & Tarafdar, M. (2015). Supply chain management practices–IT utilisation alignment: impact on supply chain performance and firm performance. International Journal of Business Information Systems 5, 18(4), 364-389.

Roser, C., Lorentzen, K., & Deuse, J. (2015). Reliable shop floor bottleneck detection for flow lines through process and inventory observations: the bottleneck walk. Logistics Research, 8(1), 1-9.

Trentesaux, D., Pach, C., Bekrar, A., Sallez, Y., Berger, T., Bonte, T., ... & Barbosa, J. (2013). Benchmarking flexible job-shop scheduling and control systems. Control Engineering Practice, 21(9), 1204-1225.

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