The Management Of Lean And Agile Organisation Accounting Essay

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1. Introduction:

Quality and Operation improvement techniques are widely used for the continuous progress of the organisation or business activity. Study and development of these techniques is used for high efficiency, improved productivity, good speed, low operational cost, good services, improved quality etc as a result, it has influenced and adopted by organisations to stay in the competition. The assignment report identifies, the methodologies adopted by organisations and recommends strategies for specific business scenarios in the manufacturing process. Finally this report reviews the understanding of commonly used operations and quality improvement approaches such as Kaizen, Just-in-time, Total Quality Management (TQM) and Six sigma.

2. Lean manufacturing overview:

The process of converting raw materials into a product is called as manufacturing (Kalpakjian, et al 1989).Mass production and lean manufacturing are the two important methodologies used in manufacturing process. According to Womack et al. (1990) lean manufacturing is called "lean" because it reduces and compresses everything compared to mass production process. In 20th century after the World War 2, the Toyota motor company from Japan was first to pioneered the idea of lean manufacturing through Eiji Toyodo, Shingeo sings, Taiichi Ohno, in 1950. It was transition effort from Toyota to find alternative and efficient technique compare to mass manufacturing.

Henry Ford (1913), the founder of ford motor company, invented mass production techniques in automobile industry. Automobile manufacturing is one of the largest manufacturing industries in the world. Japan companies studied production system for Ford and initiated lean manufacturing and started using it efficiently with different approaches such as just in time and central role inventory.

The main objectives of Lean manufacturing according to Subburaj (2005) are:

Reduce lead time.

Eliminate waste.

Standardization of processing.

Improve quality

Eliminate quality defects

In order to reduce the time for the complete process, lean manufacturing compresses total lead time by minimising or eliminating non value added activities (waste) and synchronize value added activity. Hence, this concept can be defined as continuously improving process (Kaizen) which identifies and eliminates waste (Non value-added activities) in a product flow by reducing time. To reduce or synchronize the non value added activity, it is important to identify and eliminate the causes of waste such as poor layout, improper training, poor supplier quality, long set up time etc

Author of this report compared lean production with mass production process with respect to time. Mass production is traditional approach which is defined as combination of single purpose machine and labours used to produce standard good (Batchelor et al 1954).While lean manufacturing is a continuous improvement process which controls waste and reduces lead time of process. The below figure gives basic layout of difference mass production and lean manufacturing process according to Shook (1999)

Fig 1.1: General layout indicating difference between lean manufacturing (John Shook, 1999) and mass manufacturing process

Mass manufacturing process can only set a limited goals for themselves because of waste such as unnecessary motion, excess inventory, waiting, over-production, quality defects, incorrect-processing, unnecessary transport and staff etc on the other hand Lean manufacturing process sets their standard high with less lead time and efficient workers (Jones et al1990). A key difference in lean compared to mass production is that it manufactures product according to customers need and demand (Pull) instead of pushing product in the market. Hence lean manufacturing is widely spread in other industries such as healthcare, food, etc. Based on authors on own experience, food industries such as McDonalds uses lean manufacturing by making food according to customer demands and expectation by completing one complete product at one time. Hence lean manufacturing can be also called as one piece flow. This eliminates waste and reduces general human errors in production of food products such as burgers, wraps etc.

World manufacturers are now trying to use lean manufacturing but they are finding it difficult to apply effectively because lean-production methods on existing mass production cannot be replaced easily. However there are demerits of mass manufacturing with introduction of lean, organisation left with excessive number of workers and plants which results in extra cost (Womack et al 1990).

3. Implementation of lean:

Implementations of lean manufacturing techniques have some barriers to overcome because there is always scope of improvement when there is change in traditional methods. These barriers are as follows:

3.1 Organisational barriers:

Lean implementation has to cope with some unique aspect in organisation such as cultural change. According to Waterhouse and Lewis (2004), cultural change in the organisation is defined as 'A change that differs from other organisational change in terms of values, behaviour, beliefs of the members of the organisation'. Different people in the organisation have different opinion, values, beliefs, so cultural change does affect lean techniques and act as barrier.

It is expensive to implement lean techniques because with introduction of any new method over set method, organisation has to adapt to the change which add to the training and technology cost. Fears of previous change, maintenance, information to customers, working relationship are few of the factors that can prove difficult to overcome. The awareness and need to recognize for the lean implementation in culture proves vital to the workers of the organisation.

3.2 Operational barriers:

Manufacturing companies adapting to the operational lean tools in any type of market demand of product by using methods such as Kanban, statistical quality process, kaizen etc. Toyota motor company used a continuous improvement (kaizen) to lift any types of engine by creating a semi rigid sling which raised the productivity by 80% (Japan human relations association, 1997) .However a rapidly adopting lean technique has the biggest challenges in non industrial environments in its principles and tools and how to operate them effectively and these effect the shop floor operating unit such as functioning of machine, use of labour etc.

McDonald's Operational barrier:

Figure 1.2: McDonald's barrier showing single machine operator

According to authors own experience McDonalds food restaurant implements lean ( Refer to Section 2).Various type of human operated machine are required for making coffee, shakes , burgers, etc so for every machine an operator is required for production. But it is not possible to generate maximum quantity of product from single machine during busy periods. So for example if customer's demands for five coffees at one go then there is long waiting time for the demand and also high operator stress which gives fatigue to the lean system. Hence lean manufacturing is operational barrier as well as human barrier.

3.3 Human barriers:

As seen in above section (refer to 3.1 &3.2) implementation of lean has some organisational and operational barrier to overcome, since both this barrier is related to human these can be also called an human barriers. But according to Corbet (2007) personal skills, attitude of the worker, efficient managers& leaders can help to reduce these barriers on shop floor. This can be achieved by the engagement and energy of the employees encouraging their ideas, focusing on problem solving methods, and keeping them open to change and flexibility. However malfunction of workers and managers can result to major loss to organisational and hence implementation of lean is considered as barriers in some organisation.

4. Quality Defects and Strategies to overcome:

4.1 Quality Issue:

Quality can be measured or defined with different perspective and it may be different things for different people. However the only common thing about quality is that it is directly related to customer. According to Deming (1987) quality is a need and expectation of customer throughout the life of the product service. The defect or errors that organisation faces in terms of quality of its process or service is called as quality problem(s).This section identifies error in manufacturing process of nozzle produced by Bosch company, India.

4.2 Bosch nozzle processing error:

A friend of author is employee of Bosch, India and hence author used information provided and studied the process of manufacturing nozzle by Bosch, India. Nozzle is one of the vital components in fuel injector. Injector nozzles are mostly used in diesel engines, marine engines, locomotives and automobile industrial equipment. The main function of nozzle is to convert the diesel into diesel vapours and pass it on the piston. Injector nozzles are widely used in American tanks. (Sean Bennet, Modern Diesel technology 2008). The main users of nozzles are Nissan, Mitsubishi and Land Rover while Bosch is one of the leading manufacturers of these nozzles Manufacturing process of this nozzle is carried through several operations after case hardening. After the compete process of pinning, it is found that some metal particles and burr is remained at the orfii. Since inside of the nozzle body function as passage to the fuel, if any chip or burr generated in cutting process remain on the nozzle body, it enters into the contact surface of the valve element and causes malfunction and fuel spillage of the valve element, which result into the loss of product reliability and hence it does affect the quality assurance of Bosch. (Schmidt et al 1997). Furthermore air blowing operation is carried by an operator with the help of cylinder or jet directly attached to compressed air supply. To serve this purpose operator clamps the whole tray full of nozzles and then he reverse it, this gives more fatigue to the operator and does impact the performance of product. Since quality defects are related to dissatisfaction of customer, Bosch started spending too much on manufacturing system of nozzle for improved quality.

4.3 Recommendations of Six sigma approach for Bosch:

Author studied the issue of quality defect and recommended Six sigma tool to improve the quality of nozzle for Bosch. Six sigma is a systematic method of improving the operational performance of an organisation which eliminates defects in quality process. (MJA 2008).Six sigma measures, analyze, improve, and control (MAIC) the manufacturing process of industry (Gordon 2002). Six sigma expands quality metric of the operation; it shows when correction is required and how much adjustment is needed to control manufacturing process. Hence author believes six sigma approach can be effective to the Bosch manufacturing process of nozzle. Bosch is currently an ISO9000 certified firm and use of Six sigma firm compliments the ISO program for continuing to improve the Bosch quality system. According to Gordon 2008 Six sigma not only eliminates the quality defect but also help to find where the error lie (Refer to below figure 1.2). Author believes these can be path breaking to eliminate the processing error of Bosch nozzle.

Figure 2: Use of Six sigma indicating errors adapted from Gordon (2002). Six Sigma quality for business & manufacture

The above figure clearly gives an importance of six sigma for the Bosch, further more there are benefits of six sigma (By Adams et al 2003) is useful for Bosch, and some of these are as follows:

Employment motivation: Bosch can use these benefit to encourage and motivate the nozzle operator which will reduce stress on operator and hence employment will strive for the best for the improved quality.

Control waste: Nozzle which is not manufactured correctly are counted as waste but with the use of six sigma this will reduce waste and hence cost saved can be used for the better quality of nozzle.

Improved management skills: Six sigma corrects the processing error and mistakes in Bosch these will improve management to identify the responsibility of each organisational area.

Author believes that permanent adoption of Six sigma will improve the performance and will give quality assurance by reducing processing defects of nozzle manufacturing. In addition it will reduce stress on operator which will help employers and management of Bosch. Six sigma will help Bosch commitment to achieve quality goals and it is heavily backed up by statistical tools for problem solving for leading market position.

5 Key approaches followed by Organisation:

Organisation these days always look for the improvement in terms of managing or operating their product or services. There are four key approaches which are widely used by organisation these are as follows:

5.1 Kaizen, JIT, TQM, Six sigma:

Kaizen system:

Kaizen (Japanese word for improvement) is a continuous improvement process which looks after smallest improvement possible in an organisation by eliminating all waste (non-valued activity). The main objective of kaizen is to achieve lean manufacturing through the value stream mapping. It is philosophy that focuses for the perfection and best techniques used for the operation and manufacturing management. However there are some limitations of kaizen, it can only be successful if the members of the organisation are committed to work and willing to the change according to the customers need.

Just in time:

Just in time (JIT) manufacturing is a Japanese management philosophy which supports having the right product at the right time (Cheng 1996) JIT is lean because it eliminates the inventory (counting) in the product flow. Inventory is considered as waste in JIT because according to Cheng 1996 inventory costs transportation, storage space, damage, defects, tangible goods. All these factors are directly related to the cost, hence JIT not only be used for lean but also for reducing the spending cost. Although the objectives of JIT is valid there some potential limitations such as cultural barrier (refer to section 3.1), traditional approach, resistance to change etc affects the benefits of JIT. (Hall 1989)

Total Quality Management:

Total Quality Management (TQM) is a efficient widely followed system for the complete satisfaction of the customer by providing quality for maintenance and development of product from the members of the manufacturing organisation. (Fiegenbaum a.v 1986).

According to Cua et al 2001 TQM is approach which is focus for the involvement of everyone in organisation for the improvement of quality of product or services which are as follows:

Customer involvement

Suppliers involvement

Management involvement

Employee involvement etc

These are used for the feedback, supplier's relationship, committed leadership and functional process of the organisation to improve quality. Although TQM sounds promising there are some shortcomings noted in some companies' quality initiatives. These can be explained with management system in authors Friend Company Sai baba medical institute, where top management don't support to the concept of TQM because so often management decides not fix anything unless it completely broken. Hence author believes that TQM approach will take time to accommodate because not only it relates to company but also the minds of employee.

Six sigma:

Six sigma is a systematic method of improving the operational performance of an organisation which eliminates defects in quality process. (MJA 2008). Six sigma was originated in 1986 from Motorola for reducing errors in process through quality metric. The main objective of six sigma is to implement process that removes the quality defect and inefficiency in operational process. (Refer section 4.3 for example).

According to Seebacher et al (2002),six sigma have some limitations like TQM, it concentrates too much tools, methodologies and statistics rather than management support. However these can be seen in only few organisations, like Bosch many companies have adopted Six sigma effectively.

5.2 Relation between Kaizen, JIT, TQM, Six sigma:

It is necessary to understand the relation between Kaizen, JIT, TQM and Six sigma since directly or indirectly these tools are related to implement lean in the manufacturing processes.. As discussed before, the objectives of lean manufacturing is to reduce lead time in processing, eliminate waste, reducing WIP (Kaizen and JIT), standardization processing and remove quality defects through management, plant layout, etc.(TQM and Six sigma),(Subburaj 2005). Hence it is very clear that Kaizen, JIT, TQM, and Six sigma are inter-related to each other respectively via lean. Also Kaizen, JIT and Six sigma show characteristics of quality and quality is prime factor of TQM author believes that adding Kaizen, JIT and Six sigma will help to cover the all the elements of TQM and hence every single approaches have their importance. Kaizen and JIT can help organisation by reducing waste and time which consequently help in cost savings while TQM and Six sigma will improve quality which will bring more customer and eventually profit to the organisation.

Conclusion:

Operations and quality improvement techniques are essential for organisation to remain in competitive in long term. Application of Lean manufacturing methodology and its approaches and tools helps organisation to improve quality, reduce operational cost, and increase efficiency of product, processes and services. Hence lean manufacturing techniques and its practises have been widely addressed in the research. Implementation of lean has organisational, operational and human barriers to overcome for the successfully strategy of the organisation.

In the case of Bosch Company, it was found that there is processing error in the quality of their product. Hence, it was suggested for this company to adopt Six sigma tool for the improvement of quality and process of the product which allow organisation to solve the issue. Finally the key approaches Kaizen, JIT, TQM, and Six sigma proved significant for organisation as an alternative to manage improve their operations and products with their interrelation for lean manufacturing.

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