Improving the performance within a Company

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The quest to improve the performance of companies has been made imperative since the beginning of the industrial era with a range of techniques and methodology aimed at improving the efficiency and effectiveness of operational activity. The earliest of performance improvement theorists include Adam Smith(1776), Eli Whitney(1800),Baggage(1832), Taylor(1903), Henry Ford(1913) etc.

There has been competition between companies since the early years and as markets become global and there are no signs that competition will come to an end. This competition has created a greater need for first class improvement methods that can make companies more competitive.

The improvement methods differ from one another; as regards how improvement should be implemented, achieved and maintained as well as what to improve. Some of these improvement methods include Business Process Reengineering (BPR), Total Quality Management (TQM), Benchmarking, etc.

This paper will review the various improvement methods in manufacturing operations; it will examine and discuss the various improvement processes, techniques and methods as well as their origin. This review also seeks to know which of these processes, techniques or methods is best for any particular manufacturing process and what their shortcomings are. However, more emphasis will be on Business Process Reengineering (BPR), Total Quality Management (TQM), Benchmarking, etc.

A number of the methods of operations improvement used in recent times can be traced to the strong development periods during and immediately after the Second World War, mostly in the USA. These methods were imported in to Japan and seriously improved upon as in the case of the Toyota Company (Womack et al., 1996). The Total Preventive Maintenance (TPM) that was developed with the simple concept of Preventive Maintenance (PM) in the USA (Nord et al., 1997) and Total Quality Management (TQM) developed by Juran and Deming (Bergman and Klefsjo, 1995) are significant examples.

The original USA methods TPM and TQM were imported and adapted to Japanese way of working, from this simple basic concepts and approaches, the Toyota Production System (TPS) was synchronized and synthesized and resulted in to various other methods like Kaizen, 5S and benchmarking, together these methods resulted in lean manufacturing.

The introduction and implementation of such methods to the west was and is still not fully successful. The Western companies are still 'traditional' mass production companies (Womack et all., 1996). General Motors which has too many plants, too many managers and too many workers is a classic example. The development and success of these methods in Japan ignited new thinking in the West and that caused the development of improved methods as a competitive contraction against the Japanese movement, examples of the new methods include Business Process Reengineering (BPR), BPR including Kaizen known as Business Process Improvement (BPI) and Theory of Constraints (TOC). These methods all have a peculiar aim and objective; to improve operations process even though they are different in the way they actually set out to achieve their goals.

Improvement methods are similar in some ways; several phases can be identified and also their cyclical nature, but we may not be able to compare them on other factors like the scope of the methods since they all have different research and practice. These methods most times have the primary-Phase which is made up of preparation, planning and goal setting. Examples include the following:

The data collection phase in simulation methods (Johnson and Grunberg, 2001), the problem identification stage in Kaizen (Hawkings, 2001),the commitment/ownership stage of methods like TQM, TPS AND TPM (Jostes and Helms, 1994; Gunasekaran et al., 1998)

After the primary-phase, most methods typically include one or two phases for measurement and implementation such as statistical control in TQM (Gunasekaran et al., 1998), simulation methods with measurement (Johnson and Grunberg, 2001) and process mapping in BPR (Vakola and Rezgui, 2000).The final stage is mostly a form of evaluation and restart of the improvement cycle. A very famous illustration of the cyclical approach is the Deming Wheel as shown in Fig 1 below.

DO

PLAN

ACT

CHECK

Fig1. DEMING'S WHEEL OF IMPROVEMENT. Adopted from Slack at al, 2009

The Deming Wheel starts with a Plan stage; which involves the examination of the present method or problem area to be reviewed. The collection and analysis of data is included in this stage in order to formulate a plan which is intended to improve performance or process. After the planning, the process dovetails into the Do stage, which is implementation stage where the plan is actually carried out in the operation. This stage may also have its own mini Deming wheel as issues of implementation are resolved. The next is the Check stage where the plan implemented is actually evaluated to see if it has resulted in the expected improvement. The final stage of this cycle is the Act, where the change is actually consolidated or standardized if it had been a success. However, if it did not record a success, the lessons learnt are formalized and the cycle starts again. This wheel explains in very simple terms what might appear to be a set of very complex activities, an activity is planned, carried out, outcomes and results are evaluated before the next phase is planned and then the wheel starts again.

Although the methods are similar, there are differences in the focus between them. Organizational development for example places more direct focus on human interactions than any other method reviewed here. This is supported by the fact that Organizational development emanates from behaviorists like Lewin in the 1930s (Westlander, 1999). OD is less of continuous technique when compared with TOC and TQM.

These methods have particular backgrounds and are developed /designed to solve specific improvement problems within specific frameworks, while TPM focuses on improving overall equipment efficiency (Jostes and Helms, 1994) and improved machine availability. The theory of constraints focuses on bottlenecks. It emphasizes the importance of improving throughput to a maximum in any bottleneck within a production process (Rahman, 1998). Furthermore, business process reengineering is more of a general improvement method. Its particular approach is to consider radical changes as a way of improving operations Vakola and Rezgui, 2000). This radical change would open up ways for new revolutionary ideas to evolve which will cause a dramatic change in performance when compare with incremental improvements that we often see with the more focused methods. Benchmarking is not really an improvement technique as such, as would be demonstrated later. It seeks to identify areas for improvement and focuses on measuring and comparing business performance. This could be very revealing especially when compared with similar organizations (Harrington, 1998). TQM and lean Manufacturing pays more attention to waste but within a holistic consideration of the big picture (Sui-Pheng and Khoo, 2001., Gunasekaran et al., 1998). Simulation techniques often act as support decision tools for improvement and may be used as direct improvement methods (Johansson and Grunberg, 2001).

After a careful review of the various methods and approaches to improvement, it is evident that TOC can be singled out as the only method that suggests a starting point for improvements. Its suggests the identification of bottleneck as a starting point in manufacturing, pre-supposing that more output is the expected outcome.

PROCESS ANALYSIS

An operation involves processes designed to add value by transforming inputs i.e. materials into useful outputs i.e. a physical product or a service. Processes can impact the performance of a business; therefore process improvement is strongly required to improve a firm's competitiveness (NetMBA.com). The first step to improving a process is to analyze and understand the various activities in the process, their relationships and the value added.

Process analysis generally involve defining the process boundaries that indicate the entry and exit points of the process inputs and outputs respectively, constructing a process flow chart or diagram that shows the various process activities and their relationship with each other, determine the capacity of each step, identifying the step with the lowest capacity, evaluate further limitations and then using the analysis to make operations decisions and improve the process.

The process boundaries are defined by the entry and exit points of inputs and output of the process. Once the boundaries are defined, the process flow diagram is a valuable tool for understanding using graphic elements to show tasks, flows, inventory and storage of information. The figure on the next page is a flow diagram for a simple process having four sequential activities:

Fig2. PROCESS FLOW DIAGRAM (PROCESS FLOWCHART). Adopted from NetMBA.COM, 2010.

The symbols in the process flow diagram are defined as follows:

The rectangles represent tasks and things to do.

Arrows- Represents the flow, the flow of materials and the flow of information as well. The flow of information could be in the form of the slip of paper that follows the material, production orders and instructions etc. Material flow is usually represented by a solid line, while the information flow is represented by dashed lines.

The inverted triangles represent inventory, they are commonly raw material inventory, work in progress inventory and finished goods inventory.

The circle represents the storage of information for example information that may be stored on the computer.

In the process flow diagram, tasks drawn one after the other implies that the tasks are performed sequentially, while tasks drawn parallel are performed simultaneously. In the above process flow diagram raw material or inputs are held in inventory at the beginning and upon completion of the task, the output or finished products are also held in inventory. We must however be careful when constructing a process flow diagram in order to avoid pitfalls that may cause the diagram not represent reality. Assuming that we construct the diagram using information obtained from employees, the employees may not want to open up the rework loops and other generally embarrassing aspects of the process. Similarly, within the illogical aspects of the process flow, employees may tend to show it as it should be and not as it is. Even when they actually show the process as they see it, their understanding and perception may be different from the actual process, they may leave out important activities that they feel and see as insignificant (NetMBA, 2010)

METHODS AND APPROACHES.

There are various change and improvement methods described within the improvement literature, many of them because they are focused - presume that some work has already taken place to discover the problem area, therefore select a tool or technique. This part of the essay will discuss more extensively some of the improvement measures, technique and approaches; taking them one after the other.

OVERALL CONTROL

PROCESS

Integration Losses Layout Measurement Transport Cycle-time

Figure 3 below, suggests a number of factors that could be the target of an improvement project; however all may have some significant effect on performance, productivity and profitability (PPP). A preliminary analysis may involve analysis of waste, cost etc. If a quick analysis is required, a Pareto analysis can be used to decide which factors should be focused on in the improvement project. The nature of the factors selected will largely determine the particular improvement method to be employed or one of the most generic techniques must be used.

ABC Overprod. Total quality Location Finance Administration Subcontracting

Routines Suppliers Customer Outsourcing Planning Cost Articles

Lead-times bottlenecks material flow volumes development inventory

Standardization Modularization

Development design for assembly product variants

Utilisation Scheduling Maintainance Ergonomics Absenteesim New technology

Organization efficiency measurement capacity work methods communication motivation satisfaction

PRODUCT

RESOURCES

FIG 3. PERFORMANCE, PRODUCTIVITY AND PROFITABILITY FACTORS. Adopted from Grunberg 2003.

Benchmarking is the process of comparing and learning from others. It entails comparing the performance measure or process of one entity or organization with other comparable operations (Slack et al, 2009). It goes beyond an organization's setting of performance goals, but investigates other organizations operational practices with a view to using them to compare with its operations. It assumes that, a problem in operation process has been encountered elsewhere in the industry or another department in the organization, it also believes that operation process problems have been discovered and improved upon elsewhere and can actually use those ideas to improve its operation process if their process and ideas are seen to be better. An example could be if the University School of Management might learn something's from a bank about how to market the school more efficiently and effectively, with regards to information dissemination. It essentially encourages creativity in the improvement practice and process. There are various types of benchmarking, they include;

Internal Benchmarking; refers to a comparison between operations or parts of operations that are within the same organization. An example will be a bank comparing the service level between two or more branches. Competitive Benchmarking is the direct comparison of competitors in the same industry. An example of this will be comparing two mobile phone operators, MTN Nigeria with Etisalat Nigeria as they both exist in the same market. Non-competitive benchmarking is comparing against external organizations which do not compete directly in the same market. An example of this is Unilever against Nike. External benchmarking is the comparison of operations and other organization's operations which are part of different organization. An example will be operations in Ford and operations in Vodafone. Performance benchmarking is the comparison between achieved performances of different operations of different organizations within the same framework. In order to achieve success with Benchmarking, an organization must understand very well its own process, because without proper understanding of its own process it may not be able to compare its processes with that of another organization it hopes to benchmark against effectively. It will also need to look critically at the available data and information as these can and will provide a useful insight to the benchmarking process. Slack et al, (2009) asserts that although bench making has become very popular, some business organizations have failed to enjoy the benefits associated to it. This is partly due to some misunderstanding as regards what Benchmarking actually entails. According to Slack et al, it is not a one-off project; it is best practiced as a continuous process of comparison. Secondly, it does not provide solutions; rather it provides idea that may lead to solutions. Thirdly, it involves much more than simply copying or imitating another organization's operation processes but should be used as a learning point.

There are arguments pointing at flaws within the Benchmarking approach. First, operations should not wait and rely on others to stimulate their creativity. The argument is that those that search for best practice are actually limiting themselves as the assumed best practice may not actually be the very best as there is always room to improve and generally accepting a particular level of practice as best prevents operations from creativity and breakthrough. There is also another argument that if an operation records success in an organization does not necessarily imply that if adopted and implemented else where that it would record the same level of success. It borders on differences in resources e.g. manpower, machines, skills etc which may vary from company operation to company operations.

The Business process reengineering approach is a radical breakthrough way of tackling improvement process in the business organization. It takes into account various ideas such as waste elimination through process flow charting, fast throughput, customer focused operations etc. It is regarded as the fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in critical, contemporary measures of performance like cost, quality, service and speed (Slack et al, 2009). The bedrock of BPR is the redefinition of process within the operation, to show the business process that highlight the customer needs and satisfaction. The BPR approach underlines operations process that is built around value to the customers rather than activities that perform the operation process.

The principle of BPR includes, putting the decision points where the work is done and not to separate those who do the work from those who control and manage it. Another principle advocates organizations to strive for dramatic improvements in the performance by radical rethinking and redesigning of the process. It encourages organizations to have those who use the output from a process to perform the process, they should check to see whether all internal customers can be their own suppliers instead of depending on another function to supply them (Slack et al., 2009).

This approach has come under some criticism, it is perceived as been to radical and also that it focuses more on work activities with little attention on the people who actually perform the work. It is also viewed as just an excuse to get rid of employees. Companies that want to downsize are using BPR as an excuse, this puts the interest of the shareholders above their long term interests and also the interest of the company's works. This leads to vulnerability of the company as they have lost some very key and experience employee to downsizing, thereby exposing the company to turbulence and draining it of its experience employees.

Continuous improvement is based on the teachings and philosophy of W. Edward Deming (Fitzsimmons and Fitzsimmons, 2008). Deming has been credited with helping the Japanese industry recover from World War 2 and pursue a policy of exporting goods of high quality at affordable prices. The combination of quality and low cost was seen as impossible, because people took generally assumed quality to always been associated with high cost. Continuous improvement as the name implies, advocates an approach that improves performance and assumes a never ending series of small incremental improvement steps that improve operational process. Continuous improvement could be best understood as a journey with no particular end, however it has direction and it is towards customer satisfaction (Haksever et al., 2000). The constant changes in customer needs and expectation as well as competition pushing the standards higher are reasons why there is no end to the journey. An example of this is the continuous improvement in the sale of coach and train tickets in the Uk. The trend has moved from being able to buy travel tickets online to being able to purchase tickets from a machine with cash or debit cards right there at the coach or train station if the travel was initially unplanned. It is also known as 'Kaizen', defined by Masaaki Imai. Masaaki defines Kaizen as improvement; improvement in personal life, home life, social life and work life. When applied to the work place, it means continuous improvement involving everyone- manager and worker alike (Slack et al., 2009). Continuous improvement is not primarily aimed at promoting small improvements but sees small improvements as having one advantage over large ones in that they can be followed relatively painlessly by others. Slack et al (2009) asserts that it is not the size of improvement that is important, but the rate of improvement. It really does not matter the size or weight of improvement, what matters is that there is a constant and continuous improvement in the process.

However, continuous improvement is not totally accepted and welcomed as some employee representatives see it as another management style of exploiting workers. Even more established ideas such as TQM have been defined by its critics as 'management by stress'.

In conclusion, there are many methods available to use in the improvement of operation process and activities, some of these improvement process are generic while others are specific to a given area of work. Most of these process have some fundamental similarities, but what is important in any investigation is to be able to use the most appropriate and relevant method resolve the problem. This involves selecting key factors to be improved, and the select an approach that focuses on those factors. It is also important during improvement process to measure processes and outcomes, again this involves the selection of factors to measure and upon which criteria these factors will be measured.

This essay has reviewed the various improvement processes, approaches and techniques. More importantly, the essay was able to provide a critic of the various methods of operation process improvement with a view to recommend not one or two methods but emphasis that organizations must study, investigate and discover which method(s) that is relevant or suitable to its operational process.

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